US stocks ultimately gained in choppy trade amid cooler PPI data and Fed independence concerns - Newsquawk Asia-Pac Market Open

• US stocks ultimately finished in the green on what was a choppy session amid cooler-than-expected PPI data and mixed messages about Fed Chair Powell's future, with volatility triggered by several reports that US President Trump is looking to fire Fed Chair Powell and had drafted a letter, which Trump later refuted. Nonetheless, the major indices all closed higher and the Russell 2000 outperformed to atone for the prior day's weakness, while sectors mostly gained with outperformance in Health Care, Real Estate and Financials, while Energy, Communications and Consumer Discretionary lagged.
• USD was pressured amid the growing concern over the Fed's independence from the Trump administration as reports suggested Trump could fire Fed Chair Powell soon and had drafted a letter to fire Powell which he was said to have shown to House Republicans during a meeting on Tuesday. However, the dollar then rebounded off lows after Trump refuted the report and stated he is not talking about firing Powell and had not drafted a letter, while attention was also on data releases in which PPI figures printed cooler-than-expected.
• Looking ahead, highlights include New Zealand Food Price Index, Japanese Trade Data, Singapore Non-Oil Exports, Australian Jobs Data, Supply from Japan.

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LOOKING AHEAD

• Highlights include New Zealand Food Price Index, Japanese Trade Data, Singapore Non-Oil Exports, Australian Jobs Data, Supply from Japan.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks ultimately finished in the green on what was a choppy session amid cooler-than-expected PPI data and mixed messages about Fed Chair Powell's future, with volatility triggered by several reports that US President Trump is looking to fire Fed Chair Powell and had drafted a letter, which Trump later refuted. Nonetheless, the major indices all closed higher and the Russell 2000 outperformed to atone for the prior day's weakness, while sectors mostly gained with outperformance in Health Care, Real Estate and Financials, while Energy, Communications and Consumer Discretionary lagged.
• SPX +0.32% at 6,264, NDX +0.10% at 22,908, DJI +0.53% at 44,255, RUT +0.99% at 2.227.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said China has been helping with fentanyl. Trump separately commented that another deal with India may be coming up, and they have some pretty good deals to announce, while he added they will probably live by the letter with Japan.
• European Commission spokesperson said trade chief Sefcovic was en route to the US for tariff negotiations and will talk with US Commerce Secretary Lutnick and USTR Greer.
• EU members still favour talks before the August 1st Trump deadline, according to Bloomberg. An increasing number of EU states want the bloc to deploy its anti-coercion instrument, although several members want a more cautious approach, and the preference remains for a negotiated outcome.
• German Finance Minister said US President Trump's tariffs threaten the American economy at least as much as they do to the companies in Europe.
• Canada is to lower tariff-rate quota levels from 100% to 50% of 2024 volumes for steel products from non-free trade agreement countries.

NOTABLE HEADLINES

• US President Trump reportedly drafted a letter to fire Fed Chair Powell and showed off a draft of the letter during a meeting with roughly a dozen House Republicans on Tuesday night, polling them as to whether he should do it and indicating that he likely would, according to sources.
• US President Trump said they are not planning on doing anything regarding Fed Chair Powell and get to make a change in 8 months, while Trump stated he is not talking about firing Fed Chair Powell and it is highly unlikely that he will fire Powell unless there is fraud. Furthermore, Trump stated that the Fed board is not doing its job and noted that he has not drafted a letter.
• US President Trump renewed criticism on Fed Chair Powell who he said is too late and is doing a terrible job, but added he is not planning on doing anything. Trump also said that reports of him firing Fed Chair Powell are not true and he commented that Powell has spent far too much money on Fed building renovations.
• US Senate GOP Banking committee member Tillis said firing a Fed chair over an economic decision would undermine US credibility and if the Fed Chair is fired, "you're going to see a pretty immediate response and we've got to avoid that".
• US President Trump's flip-flopping on firing Fed Chair Powell reflects divisions in the administration over his authority, according to FBN's Gasparino citing sources.
• Fed's Barr (Voter) said relaxing banking rules could create vulnerabilities.
• Fed's Bostic (2027 voter) said he tries not to focus on news reports about the Fed, but on things that actually matter and stated that they may be at an inflection point on inflation, and the most recent CPI suggests inflation pressures are building. Bostic commented he currently would wait on cutting rates, while he added that businesses said this is not a textbook tariff situation and are using different strategies for changing prices. Furthermore, he said it may be into 2026 before the full impact of tariffs on inflation is clear, as well as noted that inflation is not at the Fed's target and the Fed needs to preserve its credibility by meeting that goal.
• Fed Beige Book stated economic activity increased slightly from late May through early July and five Districts reported slight or modest gains, five had flat activity, and the remaining two Districts noted modest declines in activity (prev. half of Districts reported at least slight declines in activity). Furthermore, it stated that uncertainty remained elevated, contributing to ongoing caution by businesses.

DATA RECAP

• US PPI Final Demand MM (Jun) 0.0% vs. Exp. 0.2% (Prev. 0.1%, Rev. 0.3%)
• US PPI Final Demand YY (Jun) 2.3% vs. Exp. 2.5% (Prev. 2.6%, Rev. 2.7%)
• US PPI exFood/Energy MM (Jun) 0.0% vs. Exp. 0.2% (Prev. 0.1%, Rev. 0.4%)
• US PPI exFood/Energy YY (Jun) 2.6% vs. Exp. 2.7% (Prev. 3.0%)
• US Industrial Production MM (Jun) 0.3% vs. Exp. 0.1% (Prev. -0.2%)
• US Manufacturing Output MM (Jun) 0.1% (Prev. 0.1%, Rev. 0.3%)
• US Capacity Utilisation SA (Jun) 77.6% vs. Exp. 77.4% (Prev. 77.4%, Rev. 77.5%)

FX

• USD was pressured amid the growing concern over the Fed's independence from the Trump administration as reports suggested Trump could fire Fed Chair Powell soon and had drafted a letter to fire Powell which he was said to have shown to House Republicans during a meeting on Tuesday. However, the dollar then rebounded off lows after Trump refuted the report and stated he is not talking about firing Powell and had not drafted a letter, while attention was also on data releases in which PPI figures printed cooler-than-expected.
• EUR benefited from the early dollar weakness and briefly reclaimed the 1.1700 handle before paring some of its gains on the Powell-related headlines.
• GBP strengthened on the back of the softer buck, while there was brief early tailwinds as participants digested UK inflation data.
• JPY recouped some of its recent losses and USD/JPY briefly tested the 147.00 level to the downside as the dollar slumped on concerns of a potential firing of Fed Chair Powell which was later refuted.

FIXED INCOME

• T-notes settled higher and the curve steepened following cooler-than-expected PPI data and mixed messaging about Powell's future.

COMMODITIES

• Oil prices were choppy with an initial sell-off in the morning before paring during the US session to settle only slightly lower, while the rebound coincided with geopolitical tensions as Israel conducted strikes on southern Syria despite the US push for a ceasefire and a drone attack also hit Iraq's Kurdistan oil field.
• US EIA Weekly Crude Stocks -3.859M vs. Exp. -0.552M (Prev. 7.07M).

GEOPOLITICAL

MIDDLE EAST

• Reports noted "massive strikes" on Syria's Defence Ministry in Damascus and an Israeli airstrike hit the western suburb of Syria's Damascus.
• Israeli military said it continued to strike against military targets in southern Syria and Israeli Defence Minister Katz said "The warnings in Damascus are over—now painful strikes will follow."
• US Secretary of State Rubio said they are very concerned about Israeli strikes in Syria and are talking to all relevant sides and want the fighting to stop, while a separate report also noted that the US is putting pressure on Israel to halt its strikes on Syria.
• Iran’s Supreme Leader said Iran is ready to respond to any renewed military attack and is capable of giving a bigger blow to its adversaries than seen in the Iran-Israel war, while he added that the US is an accomplice to Israel's crimes.

RUSSIA-UKRAINE

• Ukraine's Foreign Minister said Kyiv is ready for further peace talks with Moscow, but did not specify a date.
• EU diplomats said EU countries' ambassadors failed to approve a new sanctions package on Russia and Slovakia continues to oppose new EU sanctions on Russia.

ASIA-PAC

NOTABLE HEADLINES

• China's Cabinet meeting stated they listened to a report on competition in the EV industry and China is to deepen the implementation of special initiatives to boost consumption. Furthermore, China is to systematically remove unreasonable restrictions that hinder household spending, as well as optimise policies for trade-in of consumer goods and better meet residents' consumption needs, according to CCTV.
• Senior diplomats from South Korea, Japan and the US are to hold talks in Japan this week, according to Yonhap.

EU/UK

NOTABLE HEADLINES

• BoE's Mann said her view is that it is going to take some effort to get inflation down and without supply-side growth, demand is a sugar high, which does not end well. Furthermore, she said that views differ on the MPC about where demand conditions really are and how that is playing out in the labour market, according to Business News Wales.
• Portugal is set to replace Centeno as central bank governor, according to Bloomberg.
• EU proposed a draft budget of EUR 1.98tln for 2028-2034 as part of the EU Multiannual Financial Framework (MFF), according to Bloomberg.
• EU's von der Leyen said a new EU budget proposal for 2028-2034 will see member contributions remain constant and proposes a step change in direct revenue for the EU budget, while she said the new EU budget will include a EUR 400bln crisis mechanism.

DATA RECAP

• UK CPI MM (Jun) 0.3% vs. Exp. 0.2% (Prev. 0.2%)
• UK CPI YY (Jun) 3.6% vs. Exp. 3.4% (Prev. 3.4%)
• UK Core CPI MM (Jun) 0.4% vs. Exp. 0.2% (Prev. 0.2%)
• UK Core CPI YY (Jun) 3.7% vs. Exp. 3.5% (Prev. 3.5%)