US stocks retreated amid trade frictions with President Trump sending out tariff letters - Newsquawk Asia-Pac Market Open

• US stocks declined amid trade tensions between the US and its trading partners with President Trump sending letters to over a dozen countries announcing tariff levels ranging from 25% to 40%, while the tariff levels on the countries were relatively similar to the tariff levels announced on "Liberation Day". Furthermore, Trump warned against any retaliation but also signed an Executive Order to delay the tariff deadline to August 1st.
• USD strengthened as trade dominated headlines amid US President Trump's letters to 14 countries so far including Japan, South Korea, Kazakhstan, Indonesia, Myanmar, Malaysia, Laos, South Africa, Thailand, Serbia, Bangladesh, Bosnia, Cambodia and Tunisia, with tariff levels ranging from 25% to 40%. The key differences in the trade letters when compared to "Liberation Day", are the emerging theme of discontent from the US administration on transhipped goods, threatening countries that evade a higher tariff via transhipped goods with that higher tariff. Furthermore, Trump warned countries against retaliation and threatened to add any tariff increase by countries to the tariff levels they had just received.
• Looking ahead, highlights include Japanese Current Account, Australian NAB Business Surveys, RBA Rate Decision & Press Conference, Supply from Japan.

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LOOKING AHEAD

• Highlights include Japanese Current Account, Australian NAB Business Surveys, RBA Rate Decision & Press Conference, Supply from Japan.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks declined amid trade tensions between the US and its trading partners with President Trump sending letters to over a dozen countries announcing tariff levels ranging from 25% to 40%, while the tariff levels on the countries were relatively similar to the tariff levels announced on "Liberation Day". Furthermore, Trump warned against any retaliation but also signed an Executive Order to delay the tariff deadline to August 1st.
• SPX -0.79% at 6,230, NDX -0.79% at 22,686, DJI -0.94% at 44,406, RUT -1.55% at 2,214.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump’s letter to Japan stated that from 1st August, the US will charge Japan a tariff of only 25% on any and all Japanese products sent to the US, separate from all sectoral tariffs and goods transshipped to evade a higher tariff will be subject to that higher tariff. Trump warned "If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added onto the 25% that we charge." Furthermore, he stated "If you wish to open your heretofore closed Trading Markets to the United States, and eliminate your Tariff, and Non Tariff, Policies and Trade Barriers, we will, perhaps, consider an adjustment to this letter."
• US President Trump’s letter to South Korea stated that starting on August 1st, the US will charge South Korea a tariff of 25% on any and all Korean products sent into the US, separate from all sectoral tariffs. Furthermore, he warned that "If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added onto the 25% that we charge."
• US President Trump’s letters announced to charge Malaysia, Tunisia and Kazakhstan tariffs of 25%, South Africa and Bosnia tariffs of 30%, Indonesia a tariff of 32%, Serbia and Bangladesh tariffs of 35%, Cambodia and Thailand tariffs of 36%, Laos and Myanmar tariffs of 40%. It was separately reported that the EU will not be receiving a letter setting out higher tariffs from the US, according to Reuters citing EU sources.
• White House Press Secretary earlier said US President Trump’s Executive Order tonight will be with respect to pushing back the trade deadline to August 1st from July 9th and there will be additional letters beyond the 12 countries. Furthermore, she said they are close on other trade deals, while it was also reported that a White House official said tariffs won't stack.
• US Treasury Secretary Bessent said he said there will be several trade announcements in the next 48 hours and they received a lot of new offers last night. Bessent said the "mailbox was full" with lots of new offers/proposals and it will be a busy few days, while he added that President Trump said they will not be going back to the reciprocal rate until August 1st. Furthermore, Bessent said he will meet his Chinese counterpart in the next few weeks, as well as noted that Geneva and London meetings were good and will discuss if they can go beyond trade in talks.
• White House Trade Adviser Navarro said negotiations are proceeding well and responded that he is happy with the progress they have made when asked about the 90 deals in 90 days comment.
• US will not impose a new 10% tariff against a BRICS member immediately if 'anti-American' policy actions are taken. according to a Reuters source.
• EU Commission President von der Leyen said Europe must show strength in trade negotiations with the US.
• EU spokesperson said the bloc will continue to work on the July 9th deadline in US tariff trade talks and that the EU has made good progress in talks on an agreement in principle. In relevant news, the EU is looking into a possible deal on cars to offset US car exports against imports, according to Reuters citing EU sources.

NOTABLE HEADLINES

• A joint NY and SF Fed paper cited still ongoing risk of near-zero interest rates and noted uncertainty keeps the risk of very low rates alive, while it added the Fed has more space to cut rates now without hitting the zero fed funds rate.
• US Treasury Secretary Bessent said there is not a tax collection problem, there is a spending problem, while he added the important figure is debt/GDP and he intends to bring this down.

FX

• USD strengthened as trade dominated headlines amid US President Trump's letters to 14 countries so far including Japan, South Korea, Kazakhstan, Indonesia, Myanmar, Malaysia, Laos, South Africa, Thailand, Serbia, Bangladesh, Bosnia, Cambodia and Tunisia, with tariff levels ranging from 25% to 40%. The key differences in the trade letters when compared to "Liberation Day", are the emerging theme of discontent from the US administration on transhipped goods, threatening countries that evade a higher tariff via transhipped goods with that higher tariff. Furthermore, Trump warned countries against retaliation and threatened to add any tariff increase by countries to the tariff levels they had just received.
• EUR suffered amid the dollar strength and tested the 1.1700 level to the downside with the single currency not helped by trade uncertainty, while it was reported that the EU will not be receiving a letter setting out higher tariffs from the US.
• GBP traded both sides of the 1.3600 level but fared much better than cyclical peers which underperformed amid the downbeat risk tone.
• JPY weakened throughout the day following recent soft wages data and advances in the dollar which lifted USD/JPY to north of 146.00.

FIXED INCOME

• T-notes were lower and the curve steepened ahead of supply, Trump trade letters and FOMC Minutes this week.

COMMODITIES

• Oil prices gained despite the bearish OPEC+ news, as Saudi OSPs and tariff updates supported.
• OPEC+ "will likely" approve another output increase of around 550k BPD for September, while a September hike would complete the return of 2.17mln BPD in voluntary output cuts and would also accommodate a 300k BPD production quota rise for the UAE.
• Russia's crude production stayed below OPEC+ target in June as Russian producers pumped 9.022mln BPD in June, according to Bloomberg.
• US Treasury announced it issued a Venezuelan-related general license authorising offloading of LPG through September 5th if loaded on a vessel on or before July 7th.

GEOPOLITICAL

MIDDLE EAST

• White House said US Envoy Witkoff to travel to Doha later this week for a Gaza ceasefire.
• Israeli delegation's refusal of provision for free and safe entry of aid to Gaza is the main obstacle in ceasefire talks and prevents progress, according to Reuters citing Palestinian sources.
• Israeli officials think US President Trump could give them the green light to attack Iran again if the Iranians try to move enriched uranium or restore enrichment facilities, according to Axios.
• Iran’s President said he is of the belief that they could very much easily resolve their differences with the United States through dialogue and talks.
• Russian Foreign Minister Lavrov said Russia is to supply Iran with enriched uranium at a level sufficient for a peaceful nuclear program, according to Al Jazeera.

RUSSIA-UKRAINE

• Ukrainian President Zelensky vowed to replace Kyiv's ambassador to Washington who was criticised by Trump allies in a move expected to come alongside a major wartime cabinet reshuffle, according to FT.
• Ukraine's military said it hit a chemical plant in the Moscow region.

ASIA-PAC

NOTABLE HEADLINES

• China mulls doubling the China Southbound bond connect programme to as much as USD 139bln, which would be a major step in its efforts to loosen restrictions on financial flows, according to Bloomberg.
• PBoC surveyed financial institutions about their views on recent USD weakness, while it did not explicitly state the purpose of the survey, but one source said they interpreted it as a sign authorities are concerned about sharp CNY appreciation, according to Reuters sources.
• TikTok's owner has plans to move US users to a new version of CapCut, the popular video-editing APP, according to Business Insider.

EU/UK

NOTABLE HEADLINES

• UK PM Starmer's spokesman did not rule out a wealth tax, but noted the Chancellor has said in the past that "we're not going to be bringing in a wealth tax”.
• ECB said risks to Euro area financial stability have increased due to a sharp rise in global geopolitical uncertainty and the likelihood of more negative scenarios materialising has increased, while the Governing Council called on national macroprudential authorities to maintain the current resilience of the banking system.
• ECB's Centeno said he "does not know if 25bps will do the trick" and that risks remain tilted to the downside, while he added that the current stance will remain restrictive at 2% if output does not recover, according to Econostream's X.
• ECB's Nagel said regarding the German economy, that growth at the start of the year was stronger than anticipated and "the German economy faces significant headwinds in the short term. Nevertheless, there are grounds for cautious optimism as we look to the future."

DATA RECAP

• EU Retail Sales MM (May) -0.7% vs. Exp. -0.7% (Prev. 0.1%, Rev. 0.3%)
• EU Retail Sales YY (May) 1.8% vs. Exp. 1.2% (Prev. 2.3%, Rev. 2.7%)
• EU Sentix Index (Jul) 4.5 vs. Exp. 1.1 (Prev. 0.2)