US stocks mostly edged higher with attention on Fed speak and jobless claims - Newsquawk Asia-Pac Market Open

• US stocks finished mostly in the green but with gains capped and underperformance was seen in the Nasdaq which was weighed on by pressure in heavy-cap stocks ex. TSLA, while sectors were predominantly higher with Consumer Discretionary leading the gains, but Communication and Tech lagged. Elsewhere, T-notes saw two-way price action in response to falling claims data and dovish Fed speak in which Waller reiterated arguments on why a July cut could be appropriate although Musalem took a different view and noted he is not seeing a tremendous amount of restrictiveness from policy, while Fed's Daly said it is time to think about adjusting the interest rate and sees two cuts as a likely outcome but is thinking about rate cuts during the fall.
• USD ultimately strengthened despite the varied performance against major peers in the aftermath of this week's tariff updates, while data was mixed as Initial Jobless Claims declined but Continued Claims were higher and there were several Fed speakers but had little influence on FX markets heading to a quiet calendar for the US on Friday and next week's key releases including CPI, PPI, Retail Sales, and the beginning of US earnings season.
• Looking ahead, highlights include New Zealand PMI & Malaysia Industrial Production, Supply from Australia.

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LOOKING AHEAD

• Highlights include New Zealand PMI & Malaysia Industrial Production, Supply from Australia.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks finished mostly in the green but with gains capped and underperformance was seen in the Nasdaq which was weighed on by pressure in heavy-cap stocks ex. TSLA, while sectors were predominantly higher with Consumer Discretionary leading the gains, but Communication and Tech lagged. Elsewhere, T-notes saw two-way price action in response to falling claims data and dovish Fed speak in which Waller reiterated arguments on why a July cut could be appropriate although Musalem took a different view and noted he is not seeing a tremendous amount of restrictiveness from policy, while Fed's Daly said it is time to think about adjusting the interest rate and sees two cuts as a likely outcome but is thinking about rate cuts during the fall.
• SPX +0.27% at 6,280, NDX -0.16% at 22,829, DJI +0.43% at 44,651, RUT +0.48% at 2,263.
• Click here for a detailed summary.

TARIFFS/TRADE

• US Secretary of State Rubio said the US wants to increase cooperation with ASEAN.
• EU's von der Leyen said they are working non-stop to find a US agreement and to keep tariffs as low as possible.
• Former Brazilian President Bolsonaro may reportedly request US President Trump cancel Brazil tariffs, via CNN Brasil.
• China's Foreign Ministry said regarding US President Trump's potential 50% copper tariff that they oppose politicising economic and trade issues.
• Vietnam is said to be preparing new rules and penalties to crack down on trade fraud and illegal transshipments.
• South Korea’s Trade Minister said more time is needed for US trade talks and that the US expresses interest in cooperation on chips and shipbuilding.
• Indian trade official said an Indian trade delegation is to visit the US soon for further trade talks.

NOTABLE HEADLINES

• Fed's Musalem (2025 voter) said the economy is in a good place, while the labour market is at/near full employment and there is some upside risk to inflation.
• Fed’s Waller (voter) said the Fed likely has some ways to go in shrinking the size of its holdings and a hypothetical USD 5.8tln balance sheet might be right level to aim for vs. current USD 6.7tln, while USD 2.7tln in reserves might be right level to aim for vs. current USD 3.3tln. Waller said the Fed can lower rates because the short-term rate is still "pretty restrictive" and he thinks rates are 1.5 pp above a long-run, steady state neutral, while he added "We’re just too tight" but acknowledged he is in the minority on this.
• Fed's Daly (2027 voter) said the economy is in a good place with growth and jobs solid and inflation is easing, while she added the Fed has the ability to restore price stability gently given the state of the economy and monetary policy is still restrictive. Daly said it is time to think about adjusting the interest rate and she sees two cuts as a likely outcome for the Fed, but noted to cut rates, they need a continuation of current data trends and is thinking about rate cuts in the fall.
• Fed seeks comment on proposed changes to how it supervises large banks and would adjust supervisory framework to make it easier for large banks to be considered "well managed" and not subject to activity restrictions.
• US President Trump posted about the strength in US stocks, crypto, NVIDA (NVDA) since the tariffs, while he called for the Fed to cut rates "to reflect this strength" and said there is "no inflation".
• US State Department braces for mass layoffs as soon as Friday, according to Semafor.

DATA RECAP

• US Initial Jobless Claims 227k vs. Exp. 235k (Prev. 233k, Rev. 232k)
• US Continued Jobless Claims 1.965M vs. Exp. 1.974M (Prev. 1.964M, Rev. 1.955M)

FX

• USD ultimately strengthened despite the varied performance against major peers in the aftermath of this week's tariff updates, while data was mixed as Initial Jobless Claims declined but Continued Claims were higher and there were several Fed speakers but had little influence on FX markets heading to a quiet calendar for the US on Friday and next week's key releases including CPI, PPI, Retail Sales, and the beginning of US earnings season.
• EUR softened against the dollar and returned to sub-1.1700 albeit on a lack of headline-driven newsflow and as trade uncertainty lingers.
• GBP retreated beneath the 1.3600 handle but is well off intraday lows with participants now looking ahead to UK GDP, Industrial Production and Manufacturing Output data.
• JPY was ultimately little changed after gradually recovering from the early weakness and in the absence of any fresh major pertinent catalysts for Japan.

FIXED INCOME

• T-notes saw two-way price action after falling jobless claims and dovish Fed speak from Waller and Daly.

COMMODITIES

• Oil prices crude complex saw losses on Thursday and sold off throughout the US session to settle at lows, while the pressure was largely a function of broader macro themes, as opposed to anything headline specific, with the themes at play being ongoing trade angst and hopes of a Gaza ceasefire.
• OPEC+ is reportedly discussing pausing the output hike from October, according to delegates cited by Bloomberg.
• OPEC cut its world oil demand forecast for 2026-2029 and noted peak demand is not on the horizon.
• UAE Energy Minister said the country can go to a higher oil production capacity for years after 2027 and can do 6mln BPD after 2027.

GEOPOLITICAL

MIDDLE EAST

• Israeli PM Netanyahu said If the Iranian nuclear threat is not removed in 60 days of negotiations, it will be done in another way, according to Sky News Arabia.
• Israel’s Defence Minister said Israel will strike again in Iran if it is threatened by Tehran.
• Israeli official said some of Iran’s enriched uranium survived attacks, according to the NYT.
• Iran's President said in the case of repeated aggression, the response will be "more decisive and regrettable".
• Yemen's Houthis said they attacked Ben Gurion airport in Israel.

RUSSIA-UKRAINE

• Russia’s Kremlin said it awaits a signal from Ukraine about a third round of talks and responded "do not think so" when asked if the peace process has stalled.
• US Secretary of State Rubio said President Trump is disappointed there has not been more flexibility from the Russian side over Ukraine, while he added the US needs to see a roadmap moving forward on how the Ukraine conflict can conclude.
• Ukrainian President Zelensky said Germany is ready to pay for two patriot systems and Norway is ready to pay for one.
• German Chancellor Merz said Russian state assets will remain frozen and used as a guarantee for loans to Ukraine.
• European Commission is expected to propose a floating Russian oil price cap as part of the 18th sanctions package, according to EU sources cited by Reuters.
• A drone was said to have landed in the territory of Lithuania from Belarus, which could be a jammed and diverted drone from a Russian assault against Ukraine, or could be a separate provocation, while few details are available, according to a Lithuanian journalist on X.

ASIA-PAC

NOTABLE HEADLINES

• BoJ Osaka Branch Manager said there is no big impact from US tariffs seen on Kansai Western Japan's economy for now and wage hike momentum is likely to be sustained.

EU/UK

NOTABLE HEADLINES

• European Commission President von der Leyen survived a no-confidence vote in the EU Parliament, as expected.

DATA RECAP

• German CPI Final MM (Jun) 0.0% vs. Exp. 0.0% (prev. 0.0%)
• German CPI Final YY (Jun) 2.0% vs. Exp. 2.0% (Prev. 2.0%)
• German HICP Final MM (Jun) 0.1% vs. Exp. 0.1% (Prev. 0.1%)
• German HICP Final YY (Jun) 2.0% vs. Exp. 2.0% (Prev. 2.0%)