US stocks tracked the gains in European peers but with the upside capped amid the second batch of Trump tariff letters - Newsquawk Asia-Pac Market Open

• US stocks edged higher to track the gains in their European counterparts despite peaking around the US open, with a second wind seen in the latter half of trade. The sectors were predominantly in the green and were led by Utilities, Communication and Technology, with NVIDIA (NVDA) responsible for some of the upside after it became the first company in history to hit the USD 4tln market cap intraday.
• USD was little changed and traded mixed against its major counterparts amid a lack of tier-1 data and as Trump trade letters continued to roll out with strong gains seen in USD against BRL late in the session after US President Trump announced a 50% tariff rate for Brazil and to initiate a Section 301 investigation on Brazil due to its "continued attacks on the Digital Trade activities of American Companies". Furthermore, attention was also on the latest FOMC Minutes which proved to be a non-event and spurred little reaction across asset classes.
• Looking ahead, highlights include Japanese PPI, BoK Rate Decision, Supply from Australia & Japan.

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LOOKING AHEAD

• Highlights include Japanese PPI, BoK Rate Decision, Supply from Australia & Japan.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks edged higher to track the gains in their European counterparts despite peaking around the US open, with a second wind seen in the latter half of trade. The sectors were predominantly in the green and were led by Utilities, Communication and Technology, with NVIDIA (NVDA) responsible for some of the upside after it became the first company in history to hit the USD 4tln market cap intraday.
• SPX +0.61% at 6,263, NDX +0.72% at 22,865, DJI +0.49% at 44,458, RUT +1.07% at 2,252.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump announced tariff rates for seven countries including the Philippines which was set at 20%, while the tariff rates for Brunei and Moldova were set at 25%, and the tariff rates for Algeria, Iraq, Libya and Sri Lanka were set at 30%.
• US President Trump said they will have more tariffs coming out on Wednesday and the Brazil number will come out either Wednesday night or Thursday morning, while he later announced a 50% tariff on Brazil and to initiate a Section 301 investigation on Brazil due to its "continued attacks on the Digital Trade activities of American Companies".
• White House Trade Advisor Navarro said markets view trade letters as part of negotiations, according to FBN.
• European Commission President von der Leyen said the EU is getting ready for all scenarios in terms of a EU-US deal and talks will be firm, working closely with US counterparts to get an agreement. It was also reported that the EU Commission is aiming to reach a US trade deal before August 1st and potentially even in the coming days.
• EU Trade Commissioner Sefcovic told the EU Parliament that the priority is a negotiated solution with the US and they have made good progress on the text of an agreement in principle. Sefcovic added that talks continue remotely every day with the US and he hopes to reach a satisfactory result in the coming days.
• EU spokesperson said "My understanding is we are not going to receive a letter" from the US, according to Guardian's O'Carroll.
• Chinese Foreign Ministry said regarding trade concerns from the EU, that it hopes the EU can look at bilateral economic and trade relations comprehensively and positively.

FOMC MINUTES

• FOMC Minutes stated that most saw some reduction in the Fed funds rate this year as appropriate and a couple said they would be open to considering a cut as soon as July if data evolved as they expected. However, some saw the most likely appropriate path would involve no rate cuts in 2025, while those participants cited recent elevated inflation readings, elevated business and consumer inflation expectations, and ongoing economic resilience. Furthermore, several said the current Fed funds rate may not be far above its neutral rate and all participants viewed it as appropriate to maintain the Fed funds rate at the current target range.

NOTABLE HEADLINES

• US President Trump said "Our Fed Rate is AT LEAST 3 Points too high. “Too Late” is costing the U.S. 360 Billion Dollars a Point, PER YEAR, in refinancing costs." Trump added "No Inflation, COMPANIES POURING INTO AMERICA. “The hottest Country in the World!” LOWER THE RATE!!!", while he also said they should have the lowest interest rates.

DATA RECAP

• US Wholesale Inventories MM (May) -0.3% vs. Exp. -0.3% (Prev. -0.3%)
• US Wholesale Sales MM (May) -0.3% (Prev. 0.1%)

FX

• USD was little changed and traded mixed against its major counterparts amid a lack of tier-1 data and as Trump trade letters continued to roll out with strong gains seen in USD against BRL late in the session after US President Trump announced a 50% tariff rate for Brazil and to initiate a Section 301 investigation on Brazil due to its "continued attacks on the Digital Trade activities of American Companies". Furthermore, attention was also on the latest FOMC Minutes which proved to be a non-event and spurred little reaction across asset classes.
• EUR slightly softened amid recent mixed comments on trade including from an EU spokesperson who stated their understanding is they are not going to receive a letter from the US.
• GBP was choppy and traded both sides of the 1.3600 level against the dollar amid a lack of major catalysts, although reports noted that UK PM Starmer is standing by the election pledge not to raise income tax, national insurance, or VAT.
• JPY gradually strengthened throughout the day to recoup some of this week’s losses following a pullback in USD/JPY from 147.00 territory.

FIXED INCOME

• T-notes caught a bid on likely short-covering and more Trump tariffs.

COMMODITIES

• Oil prices settled flat in a choppy session amid EIA data, Senator Thune comments on Russia sanctions, and Gaza ceasefire hopes.
• US EIA Weekly Crude Stocks w/e 7.07M vs. Exp. -2.071M (Prev. 3.845M).
• Iran set the July Iranian Light Crude price to Asia at Oman/Dubai plus USD 1.55/bbl (prev. plus USD 1.80/bbl in June).
• Kazakhstan said it plans to keep oil output at current levels until year-end, according to Interfax.

GEOPOLITICAL

MIDDLE EAST

• Israeli PM Netanyahu told Fox Business that there is a good chance of a 60-day ceasefire and the return of half of the hostages, according to Al Arabiya.
• Israel’s Foreign Minister said that if a temporary ceasefire is achieved, they will negotiate on a permanent ceasefire.
• Hamas said it has agreed to release ten hostages under Gaza ceasefire talk efforts, while points still being negotiated are the flow of aid, withdrawal of Israel from the Gaza Strip and 'genuine guarantees' for a permanent ceasefire.
• US President Trump said regarding a Gaza ceasefire that they have a chance this week or next week and there is a very good chance of a settlement this week on Gaza.
• A secret White House meeting between US Envoy Witkoff, Israel's Dermer, and a Qatari envoy on Tuesday led to significant progress in the negotiations over the Gaza hostage and ceasefire deal, according to Axios' Ravid.

RUSSIA-UKRAINE

• Ukrainian President Zelensky said he had a "substantive" conversation with US Special Envoy Kellogg.
• US President Trump said they will take a look at sending another patriot system to Ukraine and he is not happy about what's going on in Ukraine.
• US House Speaker Johnson reiterated he is in favour of Congress putting new sanctions on Russia, according to Punchbowl.
• US Senator Thune (R) said "Russia sanctions bill could be ready for a floor vote this month", according to Bloomberg's Wasson.

ASIA-PAC

NOTABLE HEADLINES

• China's State Council issued a notice on stepping up support for employment and will support enterprises in stabilising jobs, while it will expand the scope of social insurance subsidies and is to further enrich the policy toolkit in order to stabilise employment.
• Chinese Vice Premier He Lifeng said the Chinese economy has demonstrated strong resilience and growth potential despite the constantly changing external environment.
• US Agriculture Secretary Rollins said an announcement is coming soon on "clawing back" Chinese-owned farmland in the US and all options are on the table.
• TikTok is preparing a US app with a separate algorithm and codebase, according to Reuters citing sources. TikTok's new US app is preparing to operate separately from the rest of the world, while some ByteDance employees in the US will likely continue to work on US TikTok on an outsourced basis.

EU/UK

NOTABLE HEADLINES

• UK PM Starmer stands by election pledge not to raise income tax, national insurance, or VAT.
• UK Chancellor Reeves is to launch a permanent mortgage guarantee scheme, according to the FT.
• BoE Financial Stability Report maintained the CCyB at 2% and stated that uncertainty around the global risk outlook remains materially elevated compared to the time of the November FSR. It also noted risks of sharp falls in risky asset prices, abrupt shifts in asset allocation and a more prolonged breakdown in historical correlations remain high.
• US President Trump is to visit Britain in the coming weeks, according to Sky News.
• ECB's Lane said "...monetary policy decisions incorporate not only the most likely path for inflation and the economy but also surrounding risks and uncertainty, including through the appropriate use of scenario and sensitivity analyses." Lane added that "Especially under current conditions of high uncertainty, it is essential to remain data dependent and take a meeting-by-meeting approach in making monetary policy decisions, with no pre-commitment to any particular future rate path."
• ECB's de Guindos said let's hope that the exchange rate stabilises and doesn't have any additional negative impact.
• ECB's Nagel said the ECB should neither plan nor rule out further cuts.