Trump slams a 35% tariff on Canada – Awaiting EU trade framework

EU mid-market update: Have we seen this movie before? Trump slams a 35% tariff on Canada; Awaiting EU trade framework; Report on Air India's Boeing crash could be released today.

Notes/observations

- Focus pivots back to trade after Trump announced 35% tariff on Canada overnight, from Aug 1st. Noted all remaining countries are going to pay 15-20% tariffs. Expecting details of EU letter to be released soon. US futures dived on news, finally reacting to trade developments because of the details disclosed, as opposed to common threat rhetoric spun by Trump; Bitcoin reached another all-time high overnight.

- Europe is also red as details about EU trade deal or tariffs in Trump’s letter are yet to be made public. Analysts are expecting a similar framework to UK, with a 10% baseline tariff and some industry exceptions like aviation.

- FTSE100 is outperforming (but still red) after UK GDP data was ‘disappointing’, increasing expectations for BOE rate cuts in 2025. Sterling (GBP) is lower, and gilts are little changed.

- Bank of America's strategists said that client feedback suggests “no one” is worried about the economy or equity valuations.

- TTN’s Risk Radar: Over the next week, markets will digest the US’s new EU tariff announcement; the House’s return July 14–18 with Crypto Week hearings and Trump’s Russia announcement on July 14; June CPI alongside major bank earnings on July 15; ASML’s results on July 16, OpenAI’s potential browser release, followed by the Senate’s rescissions vote deadline on July 18 and Japan’s Upper House elections on July 20.

- Asia closed mixed with Nifty50 underperforming -0.8%. EU indices -0.4% to -1.2%. US futures -0.5%. Gold +0.3%, DXY +0.2%; Commodity: Brent 0.0%, WTI 0.0%; Crypto: BTC +6.2%, ETH +7.9%.

Asia

- New Zealand Jun Manufacturing PMI: 48.8 v 47.4 prior (2nd month of contraction).

- South Korea July 1-10th Exports Y/Y: 9.5% v 5.4% prior; Imports Y/Y: 1.8% v 11.5% prior; Chip exports +12.8% y/y.

- China PBOC Advisor said to urge $209B stimulus to counter US tariffs.

Global conflict/tensions

- Pres Trump reiterated his disappointed in Russia, to see what happens over next couple of weeks.

- Pres Trump said to be planning to sell weapons to NATO allies with the understanding to send them to Ukraine.

- EU said expected to propose floating price cap on Russian oil as part of 18th Russia sanctions package.

Americas

- Fed's Gooslbee stated that did not understand arguments the Fed should cut rates to make govt debt cheaper, mandate was on jobs and prices.

- White House NEC Dir Hassett: New Fed Chairman could take a close look at the size of the agency; Trump was concerned with a lack of transparency at the Fed.

Trade

- President Trump tariff letter to Canada threatened to impose 35% tariffs on goods, starting Aug 1st; cites tariff letter. Trump stated during an interview that Canada charged 'extraordinary' tariffs on US dairy farmers. Would consider changes to 35% tariff if Canada worked with US to stop Fentanyl flows.

- Canada PM Carney stated that was committed to work with the US on trade talks to revised deadline of Aug 1st.

- US Official: US set to keep tariff exemption for USMCA good.

Energy

- Energy Intel's Bakr: According to 3 OPEC+ delegates there have been no talks related to a possible pause of the increments, all options are on the table for now.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.72% at 548.92, FTSE -0.30% at 8,948.84, DAX -0.97% at 24,236.01, CAC-40 -0.82% at 7,837.60, IBEX-35 -0.46% at 14,074.33, FTSE MIB -1.14% at 40,067.00, SMI -1.12% at 11,988.51, S&P 500 Futures -0.53%].

Market focal points/key themes: European indices open lower across the board; ramping up of trade tensions seen as weighing on risk appetite; among better performing sectors are energy and financials; sectors pulling to the downside include consumer discretionary and health care; oil & gas subsector supported on reports of increased China demand; Flutter to buy Boyd’s stake in FanDuel; no major corporate events expected in the upcoming US session.

Equities

- Consumer discretionary: Norwegian Air Shuttle [NAS.NO] +7.5% (Q2 results beats estimates, to pay first ever dividend; bookings color from the call).

- Energy: bp [BP.UK] +2.5% (prelim Q2 production higher) - Financials: DNB Bank [DNB.NO] -7.5% (Q2 results misses estimates), Gjensidige [GJF.NO] +5.5% (Q2 results).

- Industrials: Dassault Aviation [AM.FR] +2.0% (Trump: We are sending weapons to NATO, and NATO is going to be giving those weapons to Ukraine and NATO will pay 100% for those weapons), Stellantis [STLA.NL] -2.5% (pending US letter on EU tariff rate), Aker Solutions [AKSO.NO] -10.5% (earnings).

Speakers

- ECB's Schnabel (Germany) Policy is in a good place with the bar for another rate cut being high. No risk of a sustained inflation undershoot.

- ECB Panetta (Italy): ECB was in a good place to carefully weigh next moves . Should cut more if weak growth weighed on prices.

- IEA Monthly Oil Report cut the 2025 global oil demand growth from 724K bpd to 704K bpd and cut 2026 global oil demand growth from 739K bpd to 722K bpd. IEA raised the 2025 global oil supply growth from 1.8M bpd to 2.1M bpd and raised the 2026 global oil supply growth from 1.1K bpd to 1.3M bpd.

Currencies/fixed income

- USD continued a firm tone into the last session of the trading week. Trade concerns remained the focal point as President Trump sent letters to trading partners about the new tariffs they would face if a trade deal was not reached by August 1st.

- Disappointing UK GDP reading for May sent the GBP currency lower. Dealer now believing a August interest-rate cut by the Bank of England now looked inevitable as the country suffered a contraction. Other UK data in the session were soft as well. GBP/USD at 1.3535 by mid-session.

- EUR/USD stayed below the 1.17 level throughout the session. ECB members continued to tout that policy was in a good place at this time.
USD/JPY hovering around the 147 level.

- 10-year German Bund yield at 2.73% and 10-year Gilt yield at 4.61%. 10-year Treasury yield: 4.38%.

Economic data

- (NL) Netherlands May Trade Balance: €10.5B v €9.3B prior; Exports Y/Y: 0.5% v 0.5% prior; Imports Y/Y: -0.7% v +0.5% prior.

- (FI) Finland May Current Account Balance: +€0.2B v -€0.2B prior.

- (UK) May Monthly GDP M/M: -0.1% v +0.1%e; GDP 3M/3M: 0.5% v 0.4%e.

- (UK) May Industrial Production M/M: -0.9% v -0.1%e; Y/Y: -0.3% v 0.2%e.

- (UK) May Manufacturing Production M/M: -1.0% v -0.1%e; Y/Y: 0.3% v 0.4%e.

- (UK) May Construction Output M/M: -0.6% v +0.2%e; Y/Y: 1.2% v 1.6%e.

- (UK) May Index of Services M/M: 0.1% v 0.1%e; 3M/3M: 0.4% v 0.4%e.

- (UK) May Visible Trade Balance: -£21.7B v -£21.0Be; Overall Trade Balance: -£5.7B v -£4.6Be.

- (DE) Germany Jun Wholesale Price Index M/M: +0.2% v -0.3% prior; Y/Y: 0.9% v 0.4% prior.

- (NO) Norway Q2 House Price Index Q/Q: -0.6% v +2.5% prior.

- (RO) Romania Jun CPI M/M: 0.5% v 0.4%e; Y/Y: 5.7% v 5.5%e.

- (FR) France Jun Final CPI M/M: 0.4% v 0.3% prelim; Y/Y: 1.0% v 0.9% prelim.

- (FR) France Jun Final CPI EU Harmonized M/M: 0.4% v 0.4% prelim; Y/Y: 0.9% v 0.8% prelim; CPI Index (ex-tobacco): 120.23 v 120.19e.

- (CH) Swiss Jun SECO Consumer Confidence: -32.2 v -35.0e.

- (TR) Turkey May Current Account Balance: -$0.7B v -$0.9Be.

- (TR) Turkey May Retail Sales Y/Y: 17.7% v 11.7% prior.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 81.5K v 84.6K tons prior.

- (TH) Thailand May Foreign Reserves w/e July 4th: $262.8B v $261.5B prior.

- (RU) Russia Narrow Money Supply w/e July 4th (RUB): 18.35T v18.26 T prior.

Fixed income issuance

- (IN) India sold total INR250B vs. INR250B indicated in 2032 and 2074 bonds.

- (IT) Italy Debt Agency (Tesoro) sold total €8.75B vs. €7.50-8.75B indicated range in 3-year, 7-year and 15-year BTP bonds.

- Sold €3.5B vs. €3.25-3.5B indicated range in new 2.35% Jan 2029 BTP bonds; Avg Yield: 2.47%; bid-to-cover: 1.49x v 1.52x (no prior history).

- Sold €3.5B vs. €3.0-3.5B indicated range in 3.25% July 2032 BTP bonds; Avg Yield: 3.17% v 3.02% prior; bid-to-cover: 1.49x v 1.48x prior.

- Sold €1.75B vs. €1.25-1.75B indicated range in 3.85% Oct 2040 BTP; Avg Yield: 4.03%; bid-to-cover: 1.67x (syndicated on Feb 11th 2025).

Looking ahead

- (DE) Germany May Current Account Balance: No est v €23.5B prior.

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2038, 2043 and 2050 Bonds.

- 06:00 (UK) DMO to sell £5.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £3.0B respectively).

- 07:30 (IN) India Forex Reserve w/e July 4th: No est v $702.8B prior.

- 07:30 (IT) ECB's Cipollone (Italy).

- 08:00 (BR) Brazil May IBGE Services Volume M/M: 0.2%e v 0.2% prior; Y/Y: 3.4%e v 1.8% prior.

- 08:00 (MX) Mexico May Industrial Production M/M: -0.1%e v +0.1% prior; Y/Y: -1.9%e v -4.0% prior; Manufacturing Production Y/Y: -0.2%e v -2.6% prior.

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

- 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming issuance.

- 08:00 (IN) India announces upcoming bill issuance (held on Wed).

- 08:30 (CA) Canada Jun Net Change in Employment: 0.0Ke v 8.8K prior; Unemployment Rate: 7.1%e v 7.0% prior; Full Time Employment Change: No est v 57.7K prior; Part Time Employment Change: No est v -48.8K prior; Participation Rate: 65.3%e v 65.3% prior; Hourly Wage Rate: 3.5%e v 3.5% prior

- 08:30 (CA) Canada May Building Permits M/M: -1.7%e v -6.6% prior.

- 09:00 (RU) Russia Q2 Preliminary Current Account Balance: $11.9Be v $16.7B prior.

- 09:00 (IT) Bank of Italy (BOI) Quarterly Economic Bulletin.

- 12:00 (RU) Russia Jun CPI M/M: 0.2%e v 0.4% prior; Y/Y: 9.4%e v 9.9% prior.

- 12:00 (RU) Russia Jun Core CPI M/M: No est v 0.6% prior; Y/Y: No est v 8.9% prior.

- 12:00 USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report.

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- 13:00 (US) Fed's Goolsbee.

- 14:00 (US) Jun Federal Budget Balance: -$40.0Be v -$316.0B prior.

- 16:00 (EU) Potential sovereign ratings after close (Fitch on Germany).