US stocks extended on gains amid rate cut hopes - Newsquawk Asia-Pac Market Open

US stocks were higher on Wednesday and small caps continued to surge with outperformance in the Russell 2000 spurred by more dovish rate cut bets, which were bolstered by Treasury Secretary Bessent advocating for a 50bp move in September and with money markets now fully pricing in a 25bp rate cut in September. Meanwhile, Bessent announced that there are 11 candidates for Fed Chair, all of whom have now been named, although some suggested the interviewing of a wide range of candidates is a tactic to put pressure on the Fed as a lot of the candidates who have been interviewed are calling for lower rates and/or are critical of the Fed.
USD weakened against peers and was weighed on by lower US yields as markets now fully price in a 25bps rate cut at the September Fed meeting. The US calendar was void of tier-1 data releases, while the three main topics throughout the day included the candidates for the new Fed chair, Trump's meeting with European leaders/Ukrainian President Zelensky ahead of the meeting with Putin on Friday, and commentary surrounding the economy/monetary policy from Fed's Goolsbee and US Treasury Secretary Bessent in which the former noted the Fed meetings coming up are live.
Looking ahead, highlights include UK RICS House Price Balance, Australian Job Data, Supply from Australia.

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LOOKING AHEAD

Highlights include UK RICS House Price Balance, Australian Job Data, Supply from Australia.
Click for the Newsquawk Week Ahead.

US TRADE

US stocks were higher on Wednesday and small caps continued to surge with outperformance in the Russell 2000 spurred by more dovish rate cut bets, which were bolstered by Treasury Secretary Bessent advocating for a 50bp move in September and with money markets now fully pricing in a 25bp rate cut in September. Meanwhile, Bessent announced that there are 11 candidates for Fed Chair, all of whom have now been named, although some suggested the interviewing of a wide range of candidates is a tactic to put pressure on the Fed as a lot of the candidates who have been interviewed are calling for lower rates and/or are critical of the Fed.
SPX +0.32% at 6,467, NDX +0.04% at 23,849, DJI +1.04% at 44,922, RUT +1.98% at 2,328.
Click here for a detailed summary.

TARIFFS/TRADE

US government's announcement on pharma sector probe and tariffs unlikely for a few weeks, according to Reuters citing sources that said they expect the Trump admin to announce the results of its national security investigation into semiconductors first, followed by the pharma announcement, putting it a few weeks away.
Brazilian President Lula said they are not announcing reciprocity measures and want to avoid worsening relations with the US, while they are open to negotiating ethanol trade with the US.
Brazil’s government unveiled a package to aid Cos. affected by US tariffs at an event in Brasilia, while Brazil’s VP said the government will extend the programme that returns part of the exported value to all companies that ship to the US and is to extend deadline for exporters to defer tax payments under drawback scheme for one year. Furthermore, he stated that the plan will also include government purchases.

NOTABLE HEADLINES

US President Trump said interest rates should be three or four points lower, while he will name a new Chairman early and it is down to three or four names. It was separately reported that President Trump is considering Jefferies' (JEF) David Zervos, Blackrock's (BLK) Rick Rieder, and former Fed governor Larry Lindsey for Fed chair, according to CNBC citing sources.
Fed's Goolsbee (2025 voter) said economists are unanimous in the view that the Fed must be independent from political interference. Goolsbee added that tariffs are a stagflationary shock and he is uneasy about the view of tariffs as a one-time shock that creates only transitory inflation. Furthermore, he commented that Fed meetings coming up are live, but added that he doesn’t like precommitting on rates.
Fed's Bostic (2027 voter) said he still sees one rate cut in 2025 as appropriate and that one cut is predicated on the labour market staying solid. Bostic said it feels like they have the luxury today to wait to make a policy adjustment because the labour market remains strong, while he noted that small businesses are feeling much more stress than larger businesses.
Former Fed official Bullard said a 50bps rate cut in September sounds 'panicky' and stated that rates could be 100bps lower before talking about neutral territory. Bullard added do not want to be aggressive as you might get burned by the data and the US does not have as good economic data as it appears.

FX

USD weakened against peers and was weighed on by lower US yields as markets now fully price in a 25bps rate cut at the September Fed meeting. The US calendar was void of tier-1 data releases, while the three main topics throughout the day included the candidates for the new Fed chair, Trump's meeting with European leaders/Ukrainian President Zelensky ahead of the meeting with Putin on Friday, and commentary surrounding the economy/monetary policy from Fed's Goolsbee and US Treasury Secretary Bessent in which the former noted the Fed meetings coming up are live.
EUR benefited from the softer dollar and reclaimed the 1.1700 status but with further upside capped amid quiet newsflow from the bloc, aside from the call between Trump and European leaders, while participants look ahead to EU GDP data on Thursday.
GBP saw early strength and gained a firm footing at the 1.3500 handle but then plateaued with participants eyeing the looming UK GDP data.
JPY strengthened in the European morning and languished firmly beneath the 148.00 handle as US yields softened amid Fed rate cut bets.
BoC Minutes stated that ahead of the July meeting, some members felt the bank may already have provided enough support for the economy, but others felt further monetary policy support would likely be needed. BoC Minutes noted the Governing Council felt that the fundamental rewiring of the global trading system could be inflationary for some time, while the Governing Council agreed on the need to wait for more clarity before drawing firm conclusions.

FIXED INCOME

T-notes caught a bid as money markets now fully priced a 25bps rate cut in September and follows recent calls by Treasury Secretary Bessent for a 50bps Fed rate cut, while there were also comments from US President Trump that interest rates should be three or four points lower.

COMMODITIES

Oil prices declined with lows seen after bearish headline crude inventory data while eyes remain on the Trump/Putin meeting.
US EIA Weekly Crude Stocks w/e 3.036M vs. Exp. -0.275M (Prev. -3.029M).
Russia is to spread out oil cuts to compensate OPEC+ through to 2025, while Moscow aims to curb output by around 85k BPD each month from July through to November, and by 9k barrels a day in December, according to Bloomberg.
IEA OMR lowered 2025 and 2026 demand growth forecasts and trimmed the 2025 oil demand growth forecast to 680k BPD (prev. 700k BPD), while it trimmed the 2026 forecast to 700k BPD (prev. 720k BPD) and said the oil market is to face a record supply glut next year.
US DoE announces actions to secure American critical minerals and materials supply chain in which it intends to issue notices of funding opportunities totalling nearly USD 1bln to secure the American critical minerals and materials supply chain.

GEOPOLITICAL

MIDDLE EAST

Israeli Military Chief of Staff approved a "main concept" for an attack plan in the Gaza Strip.
Foreign Ministers of France, UK, and Germany wrote a letter saying the snapback mechanism on Iran could be triggered if no satisfactory solution is found by the end of August.

RUSSIA-UKRAINE

Russian President Putin reportedly appears ready to test new nuclear-armed, nuclear-powered cruise missiles even as he prepares for talks with US President Trump, according to US researchers and Western security sources cited by Reuters.
Ukraine reportedly ordered an evacuation of residents from 10 towns in Donetsk due to a 'Russian advance'", according to Al Arabiya.
Ukrainian President Zelensky said there should be no talks without Ukraine and there should be a meeting of the three leaders, while Zelensky urged more sanctions on Russia and hopes a ceasefire will be the main topic at the Alaska talks.
US President Trump held a call with European leaders and Ukrainian President Zelensky which he said was a very good call and "rate it a 10", while he added he is going to meet with Russian President Putin, then will call Zelensky and European leaders. Trump said there is a good chance of a second meeting and he would like to do a second meeting with Putin almost immediately which would include Zelensky if the first meeting goes okay, but there may not be a second meeting if he feels it is inappropriate or if he does not get the answers he wants. Furthermore, he said the first meeting is finding out what they are doing and a second meeting will be more productive, as well as noted that Russia will face consequences if the war is not stopped.
US President Trump discussed with European leaders possible locations for a meeting between Zelensky, Trump and Putin after the Alaska summit, while locations include cities in Europe and the Middle East, according to Reuters citing sources. It was separately reported that President Trump told European leaders and Ukrainian President Zelensky that conceding territory will be necessary, according to Axios.
Joint statement from co-chairs of "Coalition of the Willing" virtual meeting noted that Ukraine must have robust and credible security guarantees to effectively defend its sovereignty and territorial integrity.
UK PM Starmer said they have military plans ready that could be used if there is a ceasefire and they have to combine active diplomacy with military support to Ukraine and pressure on Russia, while he added that talks about a ceasefire have to sit alongside a credible security guarantee.
Germany said it will fund a USD 500mln package of military equipment and munitions for Ukraine sourced from the US, according to a NATO statement.
Polish PM Tusk said cannot allow the biggest powers to decide the fate of smaller countries without their participation and Russia wants to link a reduction in NATO troops in Poland to the talks about Ukraine, while he added It will be easier for Poland's opponents to "play us" if we are not united.

ASIA-PAC