US stocks gained following the US-Japan trade deal, while the US and EU are said to be closing in on a deal - Newsquawk Asia-Pac Market Open

US stocks were bid and bonds were hit on Wednesday as the focus centred on trade updates following the announcement of a US-Japan trade deal in which Japan will pay a 15% tariff on imports to the US, which is down from the previous 25%, while reports also noted that the US and the EU were closing in on a trade deal with a 15% tariff rate, albeit this is yet to be officially confirmed and White House Trade Adviser Navarro said to take the reports with a grain of salt.
USD softened on the day with pressure seen against higher-beta FX as risk appetite increased in response to the announced US-Japan trade deal. Furthermore, US President Trump continued his criticism of Fed Chair Powell and reiterated his call for lower rates, while the data calendar was light, although Existing Homes Sales retreated by more than expected.
Looking ahead, highlights include South Korean GDP, Australian & Japanese Flash PMIs, Comments from RBA Governor Bullock.

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LOOKING AHEAD

Highlights include South Korean GDP, Australian & Japanese Flash PMIs, Comments from RBA Governor Bullock.
Click for the Newsquawk Week Ahead.

US TRADE

US stocks were bid and bonds were hit on Wednesday as the focus centred on trade updates following the announcement of a US-Japan trade deal in which Japan will pay a 15% tariff on imports to the US, which is down from the previous 25%, while reports also noted that the US and the EU were closing in on a trade deal with a 15% tariff rate, albeit this is yet to be officially confirmed and White House Trade Adviser Navarro said to take the reports with a grain of salt.
SPX +0.78% at 6,359, NDX +0.43% at 23,162, DJI +1.14% at 45,010, RUT +1.53% at 2,283.
Click here for a detailed summary.

TARIFFS/TRADE

US President Trump posted "I will always give up Tariff points if I can get major countries to OPEN THEIR MARKETS TO THE USA" adds "ALWAYS, ZERO TARIFFS TO AMERICA!!!. Trump also posted "I WILL ONLY LOWER TARIFFS IF A COUNTRY AGREES TO OPEN ITS MARKET. IF NOT, MUCH HIGHER TARIFFS! Japan’s Markets are now OPEN (for first time ever!). USA BUSINESSES WILL BOOM!"
US Treasury Secretary Bessent said Japan got the 15% rate because they were willing to offer an innovative financing mechanism and will be all new capital, while he added that the 15% for Japanese autos is a different kind of deal. Bessent also said that talks with Brussels are better than they had been and he called reports of EU relation tariffs a negotiation tactic, as well as warned that any escalation in trade problems will hit the EU worse. Furthermore, he said they are in a very good place with China right now and are back on track with China negotiations, while he seemingly suggested they could do a rolling 90-day deadline when asked about a deadline with China.
White House said the US-Japan investment deal will focus partly on semiconductor design and fabrication, natural gas, and new shipbuilding yards. Furthermore, Japan will immediately increase imports of US rice by 75%, with a major expansion of import quotas and will purchase USD 8bln in US goods, including corn, soybeans, fertiliser, bioethanol, and sustainable aviation fuel.
White House official said regarding the Japanese deal, that tariffs on drugs and chips will be negotiated separately and will not be worse than those of other trading partners.
US federal prosecutors are laying groundwork to criminally charge companies and individuals that try to evade US tariffs, according to Bloomberg.
German Chancellor Merz said he is hearing there may be a decision on trade with the US.
EU and US are heading for a potential trade deal with a 15% US baseline tariff on EU goods, while a potential EU-US deal could include exemptions for some EU goods, according to Reuters citing EU diplomats. EU member states are set to vote on EUR 93bln of counter-tariffs on US goods on Thursday and a broad majority of EU members would support using the anti-coercion instrument in the event of no US trade deal and US tariffs of 30%. Furthermore, FT also reported that the US and the EU close in on a 15% tariff deal which would waive tariffs on some products, including aircraft, spirits and medical devices. However, it was separately reported that US White House Trade Adviser Navarro said would take it with a grain of salt and the EU putting out news on trade deals is aspirational when asked about the FT report of the US & EU closing in on a 15% tariff deal.
Chinese Commerce Ministry confirmed Chinese Vice Premier He Lifeng is to hold talks with the US with He to visit Sweden between July 27th-30th.

NOTABLE HEADLINES

US President Trump posted "Housing in our Country is lagging because Jerome “Too Late” Powell refuses to lower Interest Rates. Families are being hurt because Interest Rates are too high, and even our Country is having to pay a higher Rate than it should be because of “Too Late.” Our Rate should be three points lower than they are, saving us $1 Trillion per year (as a Country). This stubborn guy at the Fed just doesn’t get it — Never did, and never will. The Board should act, but they don’t have the Courage to do so!"
US Treasury Secretary Bessent said they could see 1-2 rate cuts this year and noted that he has breakfast with Fed Chair Powell almost every week.
DoJ told US President Trump in May that his name is among many in the Epstein files, according to WSJ.
White House said it will remove onerous AI development regulations and will promote a rapid buildout of AI data centres, while the Commerce Department is to conduct a study on Chinese AI models' alignment with CCP rhetoric and censorship policies.

DATA RECAP

US Existing Home Sales % Chg (Jun) -2.7% (Prev. 0.8%, Rev. 1.0%)
US Existing Home Sales (Jun) 3.93M vs. Exp. 4.0M (Prev. 4.03M, Rev. 4.04M)

FX

USD softened on the day with pressure seen against higher-beta FX as risk appetite increased in response to the announced US-Japan trade deal. Furthermore, US President Trump continued his criticism of Fed Chair Powell and reiterated his call for lower rates, while the data calendar was light, although Existing Homes Sales retreated by more than expected.
EUR Eked mild gains but with the upside capped amid conflicting reports on the US-EU trade talks as reports initially noted that the US and the EU are closing in on a 15% tariff deal, including some exemptions but with the bloc to vote on a possible EUR 93bln package of countermeasures on Thursday, although White House Trade Advisor Navarro later said he would take the reports of a nearing trade deal with a grain of salt and said the EU putting out news on trade deals is aspirational.
GBP gained a firmer footing on the 1.3500 handle amid outperformance in its cyclical peers following the recent announcement of US trade deals.
JPY was marginally firmer against the dollar with some support seen in the Japanese currency after PM Ishiba denied reports about his resignation.

FIXED INCOME

T-notes were pressured in response to the US-Japan trade deal and a touted EU deal.

COMMODITIES

Oil prices were choppy but ultimately lower with the wider focus on US trade deals, as tariff woes continue to remain ahead of the August 1st deadline.
US EIA Weekly Crude Stocks -3.169M vs. Exp. -1.565M (Prev. -3.859M)
Dubai set the official crude differential to GME Oman for October at USD 0.25/bbl discount.
Drone strikes have knocked out 200k BPD of oil production in Iraqi Kurdistan, according to Amwaj News.
Oil loadings at Russia's Black Sea terminals Novorossiysk and Yuzhnaya Ozereevka have been suspended over paperwork related to new regulations for tanker access, according to two sources.

GEOPOLITICAL

MIDDLE EAST

Israel’s President told soldiers in Gaza that there were not "intense negotiations" and hopes that they will soon hear good news.
Israeli Defence Minister Katz said if the hostages are not released soon, the gates of hell will open, according to Jerusalem Post.
Al-Arabiya sources said Hamas's initial approval has been made, and today the final response will be positive, according to Al Arabiya.
Iran's top nuclear negotiator said Friday's E3 talks are very important and the best solution to prevent the snapback is not its extension, it's through diplomacy, but if a snapback triggered, "Iran will not stay idle". It was separately reported that Tehran's nuclear negotiator Gharibabadi said Iran is willing to return to the negotiating table with the US, "the sooner the better" but must be convinced the talks aren't a cover for further military action, according to Axios.
Iran said it intercepted a US destroyer in the Gulf of Oman, while it added that the vessel backed down and withdrew.

RUSSIA-UKRAINE

Heads of delegations of Russia and Ukraine held a bilateral meeting in Istanbul, while Russia and Ukraine agreed to exchange more prisoners including military and civilians.
Ukraine's Umerov said Ukraine proposed a leaders' meeting with Russia at the end of August. Furthermore, Russia's Medinsky said all humanitarian agreements have been fulfilled and proposed to Ukraine establishing three working groups to work online, as well as proposed to consider declaring a number of short ceasefires.
Russian military planes were detected flying near the coast of Alaska on Tuesday, marking the latest in a string of sightings in recent months, according to CBS citing the North American Aerospace Defense Command.
White House said US President Trump wants to reserve the authority to make decisions on Russia sanctions himself.

ASIA-PAC