USD down, equities up, as market bets aggressively on Fed rate cut next month

EU mid-market update: US dollar down, equities up, as market bets aggressively on Fed rate cut next month; Would be first of 2025; Coreweave down premarket after profit guidance.

Notes/observations

- Europe rolls on higher, following US session that celebrated July inflation reading, firming up Sept rate cut expectations for the Fed after Treasury Sec Bessent called Fed to cut 50bps and a couple usually-hawkish Fed members made pretty dovish remarks yesterday. CME futures see a 96% chance of a 25bps cut on Sept 17th; Still no chance priced in for 50bps rate cut step.

- Overnight from Asia and EU, sparse macro news. Thailand rate decision before new govt-appointed dovish Gov sworn in resulted into pressured rate cut and might become a preview of what is coming for FOMC. German and Spain final CPI readings were all in line.

- No change of dynamic in trade or geopolitical tensions. 2 days now until Putin/Trump meeting. White House sentiment has shifted slightly towards the meeting being a more of a ‘listening exercise’, toning down expectations of a deal. Analysts attribute this to backlash from EU leaders and Zelenskiy about un-solicited negotiations including land swaps. Merz and Zelenskiy to hold press conference later today after virtual summit with Trump and JD Vance.

- Weaker USD from US CPI is causing movement in FX space, Euro firms up, approaching closer to ECB concerned level of 1.20, while sterling also advances close to 1.36

- Japan’s five-year JGB auction saw the weakest bid-to-cover ratio since March 2020 at 2.96x (vs 3.54x prior) with average yield rising to 1.056%, after extreme illiquidity during the Obon holiday left the 10-year JGB completely untraded all day on Tuesday.

- CRWV guided Q3 op income below est during earnings call ahead of lock-up expiration tomorrow but raised FY25 revenue outlook as AI infrastructure demand - especially for inference - continues to far outstrip supply, with power and GPU constraints driving a major year-end capacity ramp and the planned Core Scientific acquisition set to add 1.3GW capacity and $500M in annual savings.

- Earnings pivots to tail end of season, but couple of key names remain, like Nvidia on Aug 27th and Walmart next week.

- Bullish IPO, valued at $5B, is set to debut today; General Motors to participate in J.P. Morgan 2025 Auto Conference at 10:15 AM ET and may update on tariff impact.

- Asia closed higher with Hang Seng outperforming +2.6%. EU indices +0.1-0.8%. US futures +0.2-1.1%. Gold +0.3%, DXY -0.4%; Commodity: Brent -0.4%, WTI -0.5%; Crypto: BTC +1.4%, ETH +8.0%.

Asia

- Thailand Central Bank (BOT) cut benchmark interest rate by 25bps to 1.50%; as expected; decision was unanimous.

- China PBOC Official: Will guide financial institutions to increase credit issuance to service consumption sector.

- China MOFCOM Official: Reiterates service consumption will help expand domestic demand and employment.

- India PM Modi 'likely' to visit the US in Sept for UN Meeting, expected to hold talks with US President Trump.

- IEA Monthly Oil Report (OMR): June observed global oil inventories rose to ~4-year high; Cut demand, rose supply forecasts.

Europe

- Germany Econ Min: Inflation likely to remain stable over rest of year.

- Germany Defense Ministry: Targeting 8,300 drone systems by 2029.

- UK Govt reportedly to impose inheritance tax on pension pots before retirement age; £1.5B annual revenue expected by 2029.

Americas

- US Treasury Sec Bessent: Want to find a Fed Chair candidate that can 'revamp' the Fed; FOMC should think about a 50bps cut in Sept - Fox Business interview.

- Interior Sec Burgum: Pres Trump will shut down Russia oil earnings; We are going after Russia's oil customers - media interview.

- President Trump to sign executive orders on Wed at 4 pm ET.

- Mexico has transferred some imprisoned drug cartel members to US custody - WSJ.

Conflicts/tensions

- Reportedly US embeds trackers in AI chip shipments to catch diversions to China; Trackers found in Dell, Super Micro shipments containing Nvidia, AMD chips - press

- Ukraine Pres Zelenskiy to visit Berlin later today for mutual US phone talks - German press.

- China Commerce Ministry (MOFCOM): Sanction UAB Urbo Bankas and AB Mano Bankas in EU in response to EU targeting two Chinese banks; Urges EU to correct wrong doings.

- IDF Chief approves main framework for upcoming Gaza operations - press.

Trade

- Japan Chief Trade Negotiator Akazawa: 'Not bad' if US President Trump executive order comes by mid-Sept; US cannot get investment help, if promises are not kept.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.46% at 550.44, FTSE +0.13% at 9,159.95, DAX +0.81% at 24,244.68, CAC-40 +0.40% at 7,784.78, IBEX-35 +0.79% at 14,997.00, FTSE MIB +0.45% at 42,124.00, SMI +0.16% at 11,903.21, S&P 500 Futures +0.52%].

Market Focal Points/Key Themes: European indices open generally higher and remained upbeat through the early part of the session; markets seen optimistic after US CPI showed less impact from tariffs than feared; among sectors leading the way higher are technology and utilities; lagging sectors include energy and industrials; Sapiens to be acquired by Advent; reportedly BNP Paribas in talks to acquire MBG’s leasing unit; no major earnings expected in the upcoming Americas session; Cisco after the close.

Equities

- Consumer discretionary: TUI [TUI1.DE] +3.5% (earnings; bookings and UK market share update), Persimmon [PSN.UK] -3.5% (earnings), Evolution [EVO.SE] -9.0% (current and former executives of Evolution were secretly filmed describing how its casino games ran in some banned markets), Shoe Zone [SHOE.UK] -19.0% (outlook cut).

- Energy: Vestas Wind Systems [VWS.DK] +0.5% (earnings).

- Industrials: Brenntag [BNR.DE] -1.5% (earnings; outlook cut).

- Technology: ASML [ASML.NL] +2.0% (CoreWeave earnings), Nordic Semiconductor [NOD.NO] +16.0% (earnings).

- Utilities: E.ON [EOAN.DE] +1.0% (earnings).

Speakers

-Fed’s Barkin (non-voter for 2025): Inflation will be more moderate than people think; Consumers are feeling somewhat stretched; Consumers being more choosy could dampen the inflationary effects of tariffs - WSJ interview.

Economic data

-(SE) Sweden July PES Unemployment Rate: 4.0% v 3.8% prior.

-(JP) Japan July Preliminary Machine Tool Orders Y/Y: +3.6% v -0.5% prior.

-(DE) GERMANY JULY FINAL CPI M/M: 0.3% V 0.3%E; Y/Y: 2.0% V 2.0%E; CPI EU Harmonized M/M: 0.4% v 0.4%e; Y/Y: 1.8% v 1.8%e.

-(DE) Germany July Wholesale Price Index M/M: -0.1% v +0.2% prior; Y/Y: 0.5% v 0.9% prior.

-(KR) South Korea Jul Bank Lending to Households Total (KRW): 1,164.2T v 1,161.5T prior.

-(NO) Norway Q3 Consumer Confidence: -3.6 v -9.1 prior.

-(ES) Spain July Final CPI M/M: -0.1% v -0.1%e; Y/Y: 2.7% v 2.7%e; CPI EU Harmonized M/M: % v -0.4% prelim; Y/Y: 2.7% v 2.7% prelim; CPI Core M/M: -0.2% v 0.5% prior; Y/Y: 2.3% v 2.3% prelim.

- (CZ) Czech June Current Account Balance (CZK): -68.8B v -20.9Be.

- (PL) Poland Q2 Preliminary GDP Q/Q: 0.8% v 0.9%e; Y/Y: 3.4% v 3.4%e.

Fixed income issuance

-India sells total INR210B vs. INR210B indicated in 3-month, 6-month and 12-month bills.

-Sweden sells total SEK6.0B vs. SEK6.0B indicated in 2031 and 2035 Bonds.

Looking ahead

- 05:30 (DE) Germany to sell €5.0B in Aug 2035 bonds.

- 05:30 (GR) Greece Debt Agency (PDMA) to sell Bills.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (RU) Russia to sell OFZ Bonds.

- 13:00 (US) Treasury to sell 10-Year Notes.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)

- 06:00 (FI) Finland to sell RFGB Bonds

- 06:00 (RO) Romania to sell RON500M in 7.1% July 2034 bonds.

-06:00 (PT) Portugal Q2 Unemployment Rate: No est v 6.6% prior.

- 06:30 (TR) Tukey to sell bonds (2 tranches).

- 06:30 (EU) ESM to sell €B in 6-month Bills.

- 07:00 (US) MBA Mortgage Applications w/e Aug 8th: No est v 3.1% prior.

- 07:00 (ZA) South Africa Jun Retail Sales M/M: No est v 0.1% prior; Y/Y: No est v 4.2% prior.

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:00 (HU) Hungarian Central Bank (MNB) July Minutes.

- 08:00 (BR) Brazil Jun Retail Sales M/M: No est v -0.2% prior; Y/Y: No est v 2.1% prior; Broad Retail Sales M/M: No est v 0.3% prior; Y/Y: No est v 1.1% prior.

- 08:00 (PL) Poland Jun Current Account: No est v -€1.7B prior; Trade Balance: No est v -€1.4B prior; Exports: No est v €28.2B prior; Imports: No est v €29.6B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (CL) Chile Central Bank (BCCh) July Minutes.

-11:30 (US) Treasury to sell 6-Week Bills.

- 12:00 (RU) Russia Q2 Advance GDP Y/Y: No est v 1.4% prior.

- 12:00 (RU) Russia July CPI M/M: No est v 0.2% prior; Y/Y: No est v 9.4% prior; Core CPI M/M: No est v 0.4% prior; Y/Y: No est v 8.7% prior.

-15:00 (AR) Argentina July National CPI M/M: No est v 1.6% prior; Y/Y: No est v 39.4% prior.

-15:00 (AR) Argentina Jun Wages M/M: No est v 3.0% prior.

-17:00 (KR) South Korea July Export Price Index M/M: No est v -1.1% prior; Y/Y: No est v -4.5% prior; Import Price Index M/M: No est v -0.6% prior; Y/Y: No est v -6.2% prior.

- 19:01 (UK) July RICS House Price Balance: No est v -7% prior.

-21:30 (AU) Australia July Employment Change: No est v +2.0K prior; Unemployment Rate: No est v 4.3% prior; Full Time Employment Change: No est v -38.2K prior; Part Time Employment Change: No est v +40.2K prior; Participation Rate: No est v 67.1% prior.

- 22:30 (HK) Hong Kong to sell combined HK$2.5B in 1-year and 5-year Bonds.

- 23:35 (JP) Japan to sell 5-Year JGB Bonds.