US stocks pared early weakness despite the latest tariff threats - Newsquawk Asia-Pac Market Open

• US stocks closed with slight gains on Monday after gradually paring the weakness overnight in response to Trump's 30% tariff letters to the EU and Mexico. Sectors were mixed as communications and financial stocks outperformed but Energy and Materials lagged, while the underperformance in Energy tracked the move lower in crude prices after US President Trump announced a 100% tariff on Russia, and secondary sanctions on nations that buy Russian oil if a peace deal is not agreed to within 50 days. This allows time for negotiations and averts any imminent action from the US against Russia, which in turn, weighed heavily on the energy complex.
• USD mildly strengthened following the latest tariff updates including the 30% tariff threats on the EU and Mexico from over the weekend with trade rhetoric and geopolitics remaining in focus throughout the day as President Trump announced a 100% tariff on Russia if no peace deal with Ukraine is reached within 50 days. Nonetheless, the 50-day delay provides time for negotiations and was not as extreme as the more immediate response the market was expecting on Friday, while attention stateside turns to incoming CPI.
• Looking ahead, highlights include Australian Westpac Consumer Sentiment, Chinese GDP, Industrial Production, Retail Sales & House Prices, Supply from Australia & Japan.

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LOOKING AHEAD

• Highlights include Australian Westpac Consumer Sentiment, Chinese GDP, Industrial Production, Retail Sales & House Prices, Supply from Australia & Japan.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks closed with slight gains on Monday after gradually paring the weakness overnight in response to Trump's 30% tariff letters to the EU and Mexico. Sectors were mixed as communications and financial stocks outperformed but Energy and Materials lagged, while the underperformance in Energy tracked the move lower in crude prices after US President Trump announced a 100% tariff on Russia, and secondary sanctions on nations that buy Russian oil if a peace deal is not agreed to within 50 days. This allows time for negotiations and averts any imminent action from the US against Russia, which in turn, weighed heavily on the energy complex.
• SPX +0.14% at 6,269, NDX +0.33% at 22,856, DJI +0.20% at 44,460, RUT +0.67% at 2,250.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said the US has been ripped off on trade and military by friend and foe for decades; "It has come at a cost of TRILLIONS OF DOLLARS, and it is just not sustainable any longer - And never was!"
• US President Trump said he will talk to countries on tariffs and is open to trade talks including with Europe, while he added the EU is coming over to discuss trade.
• US Commerce Secretary Lutnick and USTR Greer are set to meet with GOP members of Ways & Means this week to talk about the latest trade negotiations, according to Punchbowl and Politico.
• EU Trade Chief Sefcovic said regarding trade talks with the US that it takes two hands to clap and it was clear from ministers that the EU would need to go for rebalancing measures if US talks fail.
• Mexican President Sheinbaum discussed the US 30% tariff threat in which she stated that Mexico has done its part in the fight against Fentanyl and the US must do its part. Furthermore, she said Mexico also has a plan for tariffs and hopes they can reach an agreement between now and August 1st.
• Brazilian government is considering negotiation scenarios, according to CNN Brasil citing sources whereby one of the scenarios would be a request to postpone the imposition of the new tariff that takes effect on August 1st for 60 or 90 days, while Brazil should also discuss reducing the tariff from 50% to 30% and creating export quotas for at least coffee and oranges.
• Japanese PM Ishiba and trade negotiator Akazawa are to meet with US Treasury Secretary Bessent during his trip to Japan, while the meeting is being considered for July 18 in Tokyo, according to Yomiuri.
• Indian team is reportedly already in the US to negotiate the first phase of the trade deal, according to Reuters citing a government source. It was later reported that India and the US finalised an interim trade pact with GM crops rejected with tariffs rationalised, according to Times Now.

NOTABLE HEADLINES

• Fed's Hammack (2026 voter) said she sees an economy that is really healthy and goes into every Fed meeting with an openly independent state of mind, while she added that inflation has made progress toward the Fed's target but it is still too high. Hammack also stated that they are pretty close to where the neutral rate is and she does not see an imminent need to cut rates.
• US President Trump reiterated criticisms of high interest rates in the US and said the Fed should lower rates to less than 1%.
• White House economic adviser Hassett is rising in the race for next Fed chair, according to the Washington Post.

FX

• USD mildly strengthened following the latest tariff updates including the 30% tariff threats on the EU and Mexico from over the weekend with trade rhetoric and geopolitics remaining in focus throughout the day as President Trump announced a 100% tariff on Russia if no peace deal with Ukraine is reached within 50 days. Nonetheless, the 50-day delay provides time for negotiations and was not as extreme as the more immediate response the market was expecting on Friday, while attention stateside turns to incoming CPI.
• EUR softened against the dollar and pulled back after failing to breach resistance at the 1.1700 level, while there was a source reported that the ECB is to discuss a more negative scenario next week than previously envisaged in June after Trump's latest tariff threat, although any ECB rate cut discussion remains pushed back to September.
• GBP declined in tandem with the underperformance in other cyclical peers, while participants look ahead to Chancellor Reeves's Mansion House speech on Tuesday where she is set to 'rip up' red tape in financial services and announce a pensions savings review.
• JPY resumed its weakening trend which saw USD/JPY gradually edge closer to 148.00 territory.

FIXED INCOME

• T-notes settled with marginal gains after a range-bound and choppy session ahead of the looming US CPI report.

COMMODITIES

• Oil prices retreated with pressure seen after US President Trump gave Russia 50 days to agree to a peace deal with Ukraine, or face tariffs.
• US President Trump and Senator McCormick (R) will use an Energy Innovation Summit on Tuesday to announce USD 70bln in AI/energy investment for Pennsylvania, according to Axios.

GEOPOLITICAL

MIDDLE EAST

• US President Trump said they are doing well on Gaza and thinks they will have something fairly soon.
• Iranian Foreign Ministry spokesperson said Tehran will respond to the return of UN sanctions after the snapback mechanism, while there is no date or location for US/Iran nuclear talks and they will not restart US talks unless they are certain that talks would work.
• Iran's National Security Committee member said military protocols on the Strait of Hormuz have been finalised but there is no decision yet to close it, according to state media.

RUSSIA-UKRAINE

• US President Trump said he is very unhappy with Russia and will impose very severe tariffs if there is no peace deal in 50 days with the tariff to be 100%, while President Trump also said that they made a deal to send weapons to Ukraine.
• US President Trump said he felt they had a deal on Ukraine about four times, while he added that Patriot batteries will be sent within days and will start arriving soon.
• US Senate Majority Leader Thune signalled the push for an imminent Russia sanctions vote will wait until President Trump gives the go-ahead and said the bill will be ready “at a minute’s notice", according to CNN's Raju.
• Ukrainian President Zelensky said he met with US envoy Kellogg in Kyiv discussed air defence weapons purchase with Europe and sanctions on Russia.

ASIA-PAC

NOTABLE HEADLINES

• PBoC Deputy Governor Zou Lan said they will continue to implement an appropriately loose monetary policy and will support efforts taken to attain the FY growth target. Furthermore, they are to better use various structural tools to provide support to key sectors and will improve the market-based rate regime.

EU/UK

NOTABLE HEADLINES

• BoE Governor Bailey stated in a letter to G20 finance ministers and central bank governors that they have seen further economic and geopolitical risks crystallise and global debt vulnerabilities remain high. Bailey added that uncertainty continues to weigh on growth expectations and they need to remain vigilant to the risk of disruptive market moves.
• UK Chancellor Reeves is to announce a pensions savings review on Tuesday with Reeves poised to force firms to pay more into staff pensions and announce a shake-up to boost retirement saving.
• ECB is to discuss a more negative scenario next week than previously envisaged in June after Trump's latest tariff threat, according to Reuters citing sources. However, the ECB is still seen as holding rates at the July 24th meeting as policymakers are reluctant to act on a threat alone and any ECB rate cut discussion remains pushed back to September.
• EU proposes a budget shake-up to shift billions of farm and development funds to eastern states, with Brussels to unveil a new way to allocate over EUR 750bln of EU farming and development funds, shifting the common budget to favour newer member states and those bordering Russia, according to FT citing a leaked proposal.