Uncertainty lingers across global markets as Trump extends trade deal deadline to Aug 1st

Notes/observations

- EU major bourses and US futures are mixed. Tariff developments seem to have lost shock factor. Market is unable to shake underpinnings of uncertainty, but weight of Trump actions has faded due to similar and frequent threat rhetoric.

- US tariff deadline was extended 3 weeks to Aug 1st, but EU believes July 9th is still possible. Accordingly, Euro currency is firmer on growing optimism EU could secure baseline 10% U.S. tariff for most of its imports after US reportedly to offer EU 10% tariff deal “with caveats”, some exceptions are for aircraft and spirits (following UK framework).

- US dollar lower, weighed on by Trump outlining major tariffs if deals aren't reached: 25% on Japan and South Korea, 30% on South Africa, 40% on Laos and Myanmar; letters sent to 14 countries with more expected. For other currencies, MUFG analyst sees trade-deal deadline extension weighing on JPY currency due to BOJs caution about further interest-rate rises.

- Australia's RBA decision was surprisingly hawkish, holding rates steady instead of cutting. AUD stronger.

- Oil ticks lower as traders weigh U.S. tariffs, OPEC+ supply hikes.

- Asia closed higher with KOSPI outperforming +1.8%. EU indices -0.4% to +0.4%. US futures -0.1% to +0.3%. Gold -0.3%, DXY -0.3%; Commodity: Brent -0.3%, WTI -0.5%; Crypto: BTC -0.6%, ETH -1.1%.

Asia

- RBA left the Cash Rate Target unchanged at 3.85% (not expected) to resume its pause under the current phase of its easing cycle. Decision to keep policy steady was not unanimous (6-3). Judged that it could wait for a little more information to confirm that inflation remained on track to reach 2.5% on a sustainable basis. It noted that monetary policy was well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia. Focused on its mandate to deliver price stability and full employment and would do what it considered necessary to achieve that outcome.

- Japan May Current Account Balance: ¥3.436T v ¥3.006Te; Trade Balance (BOP basis): -¥522.3B v -¥517.2Be.

- Australia Jun NAB Business Confidence: 5 v 2 prior.

Americas

- Canada Fin Min François-Philippe Champagne requested Cabinet members find 'tens of billions of dollars' in spending cuts.

- Brazil Pres Lula stated that the BRICS conference that the world needed to find ways to reduce trade reliance on US dollar.

Trade

- President Trump confirmed letters to key trading partners Japan and South Korea, threatening to essentially raise tariffs from Aug 1st on those two countries back towards the original Liberation Day levels of 25%.

- US offered an agreement to the European Union that would keep a 10 percent baseline tariff on all EU goods, with some exceptions for sensitive sectors such as aircraft and spirits.

- Japan PM Ishiba stated that sought deal with US ASAP; Had not been able to reach agreement because Japan has kept defending what needs to be defended.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.1% at 543, FTSE +0.2% at 8820, DAX +0.3% at 24108, CAC-40 -0.1% at 7712, IBEX-35 +0.1% at 14070, FTSE MIB +0.4% at 3901, SMI -0.4% at 11908, S&P 500 Futures +0.1%].

Market focal points/Key themes: European indices open generally higher but quickly faded the gains to trade mixed in the early part of the session; trade situation in focus with EU reportedly close to deal; among outperforming sectors are materials and financials; sectors inclined to the downside include real estate and consumer discretionary; no major earnings expected in the upcoming Americas session.

Equities

- Consumer discretionary: Entain [ENT.UK] +4.0% (analyst upgrade).

- Energy: GALP [GALP.PT] +2.0% (analyst downgrade).

- Materials: Rio Tinto [RIO.UK] +1.0% (final CEO candidates to present to Board in London this week); Vallourec [VK.FR] +1.5 (secures two contracts in Iraq).

Speakers

- Germany Fin Min Klingbeil noted that economic sentiment had improved.

- RBA Gov Bullock post rate decision press conference noted that it wanted to confirm CPI sustainably on track to 2.5%; Trimmed Mean within target range for only one quarter so far. Have made good progress on inflation but risk some CPI components in Q2 may be above forecast. Noted that Q2 forecast for Trimmed Mean CPI was 0.6% but might be a bit higher. Board believed policy remained a little bit restrictive but not sure. Could not tell where Neutral rate or terminal rate is.

- Japan Trade Negotiator Akazawa held phone call with US Commerce Sec Lutnick and said to have seen progress in the talks. Stressed that Auto sector was the core of Japanese economy and could not tolerate 25% tariffs.

- Iran Foreign Ministry spokesperson Baghaei stated that the govt had not sent any request to meet US officials.

Currencies/fixed income

- USD was on softer ground during a quiet EU morning. President Trump set a 25% tax on goods imported from Japan and South Korea, as well as new tariff rates on a dozen other nations that would go into effect on Aug. 1st. Most analysts believe most Asian countries were willing to make concessions to avoid the harsher measures.

- EUR/USD drifted higher on hopes that the EU would make a trade deal with the US.

- USD/JPY stayed above the 146 level. Dealers noted that the Japan long-end of the curve steepened again.

- AUD currency was firmer after RBA defied widespread expectations of a rate cut with its statement a touch more hawkish than expected.

Economic data

- (SE) Sweden Jun Maklarstatistik Housing Prices: 0.0% v 0.4% prior.

- (NL) Netherlands Jun CPI M/M: 0.0%e v -0.5% prior; Y/Y (final): 3.1% v 3.1% prelim.

- (NL) Netherlands Jun CPI EU Harmonized M/M: 0.0% v 0.0% prelim; Y/Y: 2.8% v 2.8% prelim.

- (NL) Netherlands May Consumer Spending Y/Y: 1.1 v 0.3% prior.

- (DE) Germany May Trade Balance: €18.4B v €17.0Be; Exports M/M: -1.4% v -0.5%e; Imports M/M: -3.8% v 1.3%e.

- (FI) Finland May Preliminary Trade Balance: +€0.2B v -€0.1B prior.

- (HU) Hungary Jun CPI M/M: 0.1% v 0.2%e; Y/Y: 4.6% v 4.6%e.

- (FR) France May Trade Balance: -€7.8B v -€7.6B prior; Current Account Balance: -€B v -€4.1B prior.

- (CZ) Czech Jun Unemployment Rate: 4.2% v 4.2% prior.

- (TW) Taiwan Jun CPI Y/Y: 1.4% v 1.6%e; CPI Core Y/Y: 1.5% v 1.6%e; PPI Y/Y: -5.5% v -4.3% prior.

- (TW) Taiwan Jun Trade Balance: $12.1B v $11.9Be; Exports Y/Y: 33.7% v 27.1%e; Imports Y/Y: 17.3% v 11.5%e.

Fixed income issuance

- (EU) European Union opened book to sell EUR-denominated 2032 and 2045 NGEU bonds via syndicate.

- (NL) Netherlands Debt Agency (DSTA) sold €2.055B vs. €1.75-2.25B indicated range in 3.25% Jan 2044 Green DSL bonds; Avg Yield: 3.176% v 2.976% prior.

- (ES) Spain Debt Agency (Tesoro) sold total €2.804B vs. €2.0-3.0B indicated range in 3-month and 9-month bills.

- (UK) DMO sold £900M in 1.875% Sept 2049 inflation-linked Gilts (UKTi); Real Yield: 3.39%; bid-to-cover: 3.39x.

- (AT) Austria Debt Agency (AFFA) sold total €1.725B vs. €1.725B indicated in 2035 and 2040 RAGB bonds.

Looking ahead

- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to leave Interest Rate unchanged at 6.50%.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:25 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €5.0B in new 2.2% Oct 2030 BOBL.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell combined €2.8B in 3-month and 12-month bills.

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2037, 2040 and 2053 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €7.957B with 37 bids recd).

- 06:00 (US) Jun NFIB Small Business Optimism: 98.7e v 98.8 prior.

- 06:00 (IE) Ireland Q1 Final GDP Q/Q: No est v 9.7% prelim; Y/Y: No est v 22.2% prelim.

- 06:00 (IE) Ireland Q1 Final Current Account Balance: No est v €6.6B prelim.

- 06:00 (IL) Israel May Chain Store Sales Y/Y: No est v +1.9% prior.

- 06:30 (TR) Turkey to sell floating rate bonds.

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- (RO) Romania Central Bank (NBR) Interest Rate Decision.

- 08:00 (CL) Chile Jun CPI M/M: -0.2%e v +0.2% prior; Y/Y: 4.4%e v 4.4% prior.

- 08:00 (BR) Brazil May Retail Sales M/M: +0.3%e v -0.4% prior; Y/Y: 2.6%e v 4.8% prior.

- 08:00 (BR) Brazil May Broad Retail Sales M/M: +1.0%e v -1.9% prior; Y/Y: 2.1%e v 0.8% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 10:00 (CA) Canada Jun Ivey Purchasing Managers Index: No est v 48.9 prior; PMI (unadj): No est v 53.8 prior.

- 10:00 (DE) ECB’s Nagel (Germany).

- 11:30 (US) Treasury to sell -Week Bills.

- 13:00 (US) Treasury to sell 3-Year Notes.

- 15:00 (US) May Consumer Credit: $10.5Be v $17.9B prior.

- 15:00 (AR) Argentina May Industrial Production Y/Y: No est v 8.5% prior; Construction Activity Y/Y: No est v 25.9% prior.

- 16:30 (US) Weekly API Crude Oil Inventories.

- 19:00 (AU) RBA’s Hauser.

- 19:50 (JP) Japan Jun M2 Money Stock Y/Y: No est v 0.6% prior; M3 Money Supply Y/Y: No est v 0.2% prior.

- 21:30 (CN) China Jun CPI Y/Y: -0.1%e v -0.1% prior; PPI Y/Y: -3.2%e v -3.3% prior.

- 22:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate (OCR) unchanged at 3.25%.

- 23:30 (JP) Japan to Sell 6-Month Bills.

- 23:45 (TH) Thailand Jun Consumer Confidence: No est v 54.2 prior; Economic Confidence: No est v 48.1 prior.