Whipsaw on Trump threat of firing Fed Chair Powell

EU mid-market update: Whipsaw on Trump threat of firing Fed Chair Powell; TSMC raised outlook; US retail sales and Netflix earnings in focus.

Notes/observations

- Volatility over last day attributed to Trump potentially firing Fed Chair Powell as details of a letter emerged, but Trump later denied these rumors, causing reversal. USD initially spiked lower, as frontrunners to replace Powell are considered less competent, but as mentioned, move faded back. Crypto specifically holds high attention, with Trump supporting crypto legislation with the GENIUS Act.

- UK jobs report was bearish for UK economy, with unemployment at 4-year high 4.7%, while jobless claims rose and avg earnings was in line at 5.0%.

- This morning, TSMC Q2 results were impressive, but guidance was the real strong point, significantly above estimates for Q3 as well as raised FY25 outlook citing “stronger than three months ago” data-center, server and sovereign AI orders. EasyJet shares dived as forward-looking commentary in Q3 results sees headwinds.

- Ahead is all about US Retail Sales, and earnings from Netflix after close. Will see Elevance, PepsiCo, Abbott Labs, GE Aerospace before market open.

- Asia closed higher with ASX200 outperforming +0.9%. EU indices +0.4-0.9%. US futures -0.1% to +0.1%. Gold -0.6%, DXY +0.4%; Commodity: Brent -0.3%, WTI -0.1%; Crypto: BTC -0.5%, ETH +9.5%.

Asia

- Japan Jun Trade Balance: ¥153.1B v ¥353.9Be; Exports Y/Y: -0.5% v +0.5%e; Imports Y/Y: +0.2% v -1.1%e.

- Australia July Consumer Inflation Expectation: 4.7% v 5.0% prior.

- Australia Jun Employment Change: +2.0K v +20.0Ke; Unemployment Rate: 4.3% v 4.1.

- Singapore Jun Non-Oil Domestic Exports Y/Y: 13.0% v 4.9%e.

- New Zealand Jun Food Prices M/M: 1.2% v v 0.5% prior.

Americas

- Fed Releases Beige Book: Prices increased across Districts, with seven characterizing price growth as moderate and five characterizing it as modest, mostly similar to the previous report. In all twelve Districts, businesses reported experiencing modest to pronounced input cost pressures related to tariffs, especially for raw materials used in manufacturing and construction.

- Fed's Williams (voter) noted that the current ‘modestly restrictive’ monetary policy is appropriate. A lower dollar will likely add inflationary pressure; Reluctant to support lowering interest rates ahead of next meeting.

Fed's Bostic (non-voter for 2025 & 2026) reiterated the wait and see position. Wanted the data to guide us. Might be 2026 before seeing the full effect of tariffs.
- House Speaker Johnson affirmed that the GOP “has a deal” to advance the stalled crypto bills.

- Pres Trump denied drafting a letter to fire Powell, but did talk about the concept with GOP lawmakers; highly unlikely to fire Powell, unless there fraud with the Fed renovation.

- Bill to codify some DOGE cuts said to have enough votes to pass Senate.

Trade

- President Trump stated that would probably put 10-15% tariff rate on 105 countries; Tariffs on Aug 1 would be 'very substantial'.

- UK said to be pushing US to drop a key "sticking point" in the steel deal.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.66% at 545.40, FTSE +0.40% at 8,962.04, DAX +0.60% at 24,221.44, CAC-40 +0.86% at 7,788.28, IBEX-35 +0.45% at 13,972.50, FTSE MIB +0.37% at 39,910.00, SMI +0.53% at 11,967.19, S&P 500 Futures +0.09%].

Market focal points/key themes: European indices open higher across the board and remained upbeat through the early part of the session; potential for lower tariff rates in ‘letters’ seen helping risk appetite; among sectors leading the way higher are industrials and technology; lagging sectors include utilities and health care; Grieg Seafood sells its Finnmark and Canada operations to Cermaq; Viaplay acquires remaining interest in Allente from Telenor; focus on US retail sales data coming out later in the day; earnings expected in the upcoming American session include Netflix, Vinci, Pepsico and BHP.

Equities

- Consumer discretionary: Swatch [UHR.CH] +2.5% (earnings), easyJet [EZJ.UK] -7.5% (earnings), Ocado [OCDO.UK] +13.5% (earnings).

- Energy: SSE [SSE.UK] +0.5% (trading update).

- Healthcare: Novartis [NOVN.CH] -1.0% (earnings; buyback; new CFO) - Industrials: ABB [ABBN.CH] +3% (earnings), Volvo Cars [VOLCAB.SE] +10.5% (earnings), Volvo AB [VOLVA.SE] +0.5% (earnings) - Technology: ASML [ASML.NL] +2.0% (TSMC raised FY25 outlook), Wise [WISE.UK] -7.5% (earnings).

- Telecom: Publicis [PUB.FR] +1.5% (earnings).

Speakers

- EU reportedly preparing list of potential tariffs on US services. The list would come on top of a proposal for retaliation against €72bn of annual US imports that EU countries are already discussing and which includes tariffs on Boeing aircraft, cars and bourbon.

- Japan Bank Lobby Chair Hanzawa commented that JGB yield rise reflected election uncertainty.

Currencies/fixed income

- USD stayed steady and holding onto recent gains during the session.

- GBP/USD drifted lower again as more UK data helped to build the case for more BOE rate cuts. Dealers noted that the slowdown in May’s private sector pay growth and signs of further cooling in jobs demand leave little doubt slack is building in the labor market.

- EUR/USD staying below the 1.16 level as focus was turning to next week ECB meeting. Euro Zone Jun final CPI was unrevised at the 2.0% target. Markets expected ECB to enter a pause period in its current easing cycle.

- Yen currency remains hampered by the upcoming Upper House elections this weekend as the LDP appeared to possibly lose its majority. USD/JPY at 148.80 during the session.

- 10-year German Bund yield at 2.70% and 10-year Gilt yield at 4.66%. 10-year Treasury yield: 4.47%.

Economic data

- (NL) Netherlands Jun Unemployment Rate: 3.8% v 3.8% prior.

- (UK) Jun Jobless Claims Change: +25.9K v +15.3K prior; Claimant Count Rate:4.5 % v 4.5% prior.

- (UK) May Average Weekly Earnings 3M/Y: 5.0% v 5.0%e; Weekly Earnings (ex-bonus) 3M/Y: 5.0% v 4.9%e.

- (UK) May ILO Unemployment Rate: 4.7% v 4.6%e; Employment Change 3M/3M: +134K v +46Ke.

- (CH) Swiss Jun Trade Balance (CHF): 5.8B v 4.0B prior; Real Exports M/M: +6.1% v -8.1% prior; Real Imports M/M: 0.7% v 0.6% prior; Swiss Watch Exports Y/Y: -5.6% v -9.4% prior.

- (AT) Austria Jun Final CPI M/M: 0.5% v 0.5% prelim; Y/Y: 3.3% v 3.3% prelim.

- (HK) Hong Kong Jun Unemployment Rate: 3.5% v 3.6%.

- (EU) Euro Zone Jun Final CPI Y/Y: 2.0% v 2.0% advance; CPI Core Y/Y: 2.3% v 2.3% advance; CPI M/M: 0.3% v 0.3% advance.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.684B vs. €5.-6.0B indicated in 2030, 2035 and 2048 SPGB bonds.

- (FR) France Debt Agency (AFT) sold total €11.999B vs. €10.0-12.0B indicated range in 2028, 2030 and 2031 Bonds.

- (UK) DMO sold £4.75B in 4.375% Mar 2030 Gilts; Avg Yield: 4.078% v 4.060% prior; bid-to-cover: 3.12x v 3.26x prior; Tail: 0.2bps v 0.4bps prior.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 05:50 (FR) France Debt Agency (AFT) to sell €1.0-1.5B in inflation-linked Bonds (Oatei).

- 06:00 (IE) Ireland May Trade Balance: No est v €10.9B prior.

- 06:00 (PT) Portugal Jun PPI M/M: No est v -0.1% prior; Y/Y: No est v -3.1% prior.

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 12-month Bills.

- 06:00 (RO) Romania to sell RON400M in 7.65% 2031 Bonds.

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 07:00 (CA) Canada July CFIB Business Barometer: No est v 47.3 prior.

- 07:00 (BR) Brazil July FGV Inflation IGP-10 M/M: -1.5%e v -1.0% prior; Y/Y: No est v 5.6% prior.

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

- 08:30 (US) Jun Advance Retail Sales M/M: +0.1%e v -0.9% prior; Retail Sales (ex-auto) M/M: 0.3%e v -0.3% prior; Retail Sales (ex-auto/gasJ 0.3%e v -0.1% prior; Retail Sales (Control Group) 0.3%e v 0.4% prior.

- 08:30 (US) Jun Import Price Index M/M: 0.3%e v 0.0% prior; Y/Y: 0.3%e v 0.2% prior; Import Price Index (ex-petroleum) M/M: 0.2%e v 0.2% prior.

- 08:30 (US) Jun Export Price Index M/M: -0.1%e v -0.9% prior; Y/Y: No est v 1.7% prior.

- 08:30 (US) Initial Jobless Claims: 234Ke v 227K prior; Continuing Claims: 1.97Me v 1.965M prior.

- 08:30 (US) July Philadelphia Fed Business Outlook: -1.0e v -4.0 prior.

- 08:30 (CA) Canada May Int'l Securities Transactions (CAD): No est v -9.4B prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e July 11th: No est v $690.6B prior.

- 10:00 (US) May Business Inventories: 0.0%e v 0.0% prior.

- 10:00 (US) July NAHB Housing Market Index: 33e v 32 prior.

- 10:00 (US) Fed’s Kugler.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

-12:00 (CA) Canada to sell 2-year Bonds.

- 12:45 (US) Fed’s Daly.

- 13:30 (US) Fed’s Cook.

- 15:00 (AR) Argentina Jun Trade Balance: $0.7Be v $0.6B prior.

- 16:00 (US) May Total Net TIC Flows: No est v -$14.2B prior; Net Long-term TIC Flows: No est v -$7.8B prior.

- 18:30 (US) Fed’s Waller.

- 19:30 (JP) Japan Jun National CPI Y/Y: 3.3%e v 3.5% prior; CPI (ex-fresh food)/Y: 3,4%e v 3.7% prior; CPI (ex-fresh food/energy) Y/Y: % v 3.3% prior.

- 22:00 (KR) South Korea to sell KRW1.2T in 1-year Bonds.

- 23:30 (JP) Japan to sell 3-Month Bills.