US trade deals with Japan and EU look no closer than Friday, as Aug 1st deadline approaches

EU mid-market update: US trade deals with Japan and EU look no closer than Friday, as Aug 1st deadline approaches; Japan PM Ishiba pledges to stay despite LDP no longer holds majority in both houses 1st time in 70 years.

Notes/observations

- No tangible change to trade narrative but situation turns more complex over weekend, after Pres Trump late Friday advocated for a minimum 15-20% tariff on EU imports, while also declining to lower the 25% sectoral tariffs. The EU had been positioning for a 10% baseline. Meanwhile, Trump’s recent threat of 30% tariffs on the EU from August 1st if no agreement is reached still stands.

- Japan exit polls suggest ruling LDP coalition will lose Upper House majority, complicating ability to pass fiscal policy and trade deals (such as with US). PM Ishiba vowed to continue governance despite it is the 1st time LDP does not have majority in both houses of Japanese parliament since 1955; In 1989, 1998 and 2007, losses in the Upper House swiftly produced Japan PM resignations and leadership contests, with focus now to be on Aug 1st's Diet session.

- Focus continues on earnings; In the EU, Stellantis is lower after surprise H1 loss in prelim results. Ryanair soared higher after substantial beat in Q1 results alongside optimistic forward-looking commentary on bookings, fares and growth; Noted uncertainty remains.

- In FX, US dollar has turned over to challenge the bull trend seen since early July. A Trump truth social post on weekend said “Not going to let US$ slide, cites threats to BRICS nation with 10% tariffs; Reiterates that losing US$ reserve status would be losing a world war”.

- Press reports over Walmart’s 50% price hikes and Nvidia’s H20 production struggles due to tariffs and export bans may signal rising tariff-driven inflation. Supply chain disruptions and regulatory uncertainty push firms to pass costs to consumers, risking a sustained inflationary trend.

- Asia closed mixed with ASX200 underperforming -2.0%. EU indices -0.8% to +0.3%. US futures +0.3%. Gold +0.5%, DXY -0.2%; Commodity: Brent -0.6%, WTI -0.5%; Crypto: BTC +0.9%, ETH +1.9%.

Asia

- Japan's LDP ruling coalition lost Upper House majority for 1st time since 1955.

- New Zealand Q2 CPI Q/Q: 0.5% v 0.6%e, Y/Y: 2.7% v 2.8%e.

- South Korea July Exports 20 Days Y/Y: -2.2% v +8.3% prior; Imports 20 Days Y/Y: -4.3% v +5.3% prior.

- China PBOC Monthly Loan Prime Rate (LPR) Setting: left both 1-year and 5-year LPR Rate unchanged at 3.00% and 3.50% respectively (as expected).

- Japan PM Ishiba reiterated that would continue to govern in coalition with Komeito; Not considering personnel changes at this point; Received very severe judgment in election.

- Japan said to plan to convene extraordinary Diet session on Fri, Aug 1st.

Europe

- UK July Rightmove House Prices M/M: -1.2% v -0.3% prior; Y/Y: 0.1% v 0.8% prior. - Revised 2025 house price growth forecast loser from 4% to 2%.

Americas

- Treasury Sec Bessent reportedly advised Pres Trump not to fire Fed Chair Powell, noting that the Fed is already indicating it will cut rates later this year.

- Fitch affirmed Canada sovereign rating at AA+; Outlook Stable.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.01% at 547.08, FTSE +0.04% at 8,995.48, DAX +0.01% at 24,289.51, CAC-40 -0.21% at 7,806.55, IBEX-35 -0.28% at 13,954.34, FTSE MIB -0.86% at 39,964.00, SMI -0.01% at 11,970.32, S&P 500 Futures +0.26%.

Market Focal Points/Key Themes: European indices open mixed and took on a negative bias as the session wore on; developments in the US-EU trade negotiations in focus; among sectors managing gains are materials and real estate; sectors inclined to the downside include industrials and utilities; earnings expected in the upcoming Americas session includes Verizon, Cleveland-Cliffs and NXP Semi.

Equities

- Consumer discretionary: Ryanair [RYA.IE] +6.5% (earnings) - Healthcare: Roche [ROG.CH] -1.0% (trial results

- Energy: Galp Energia [GALP.PT] +2.5% (earnings; raised outlook), BP plc [BP.UK] +1.0% (new Chair) - Financials: LSE [LSEG.UK] -0.5% (said to be exploring the practicalities of launching 24 hour trading).

- Industrials: Stellantis [STLA.FR] -1.5% (prelim results; EU Commission is working on a plan to prohibit car-rental firms and large corporations from buying non-electric vehicles for their fleets from 2030), Volkswagen [VOW3.DE] -0.5% (EU envoys set to meet as early as this week to formulate a plan for measures to respond to a possible no-deal scenario with US Pres Trump after Trump reportedly raised tariff demands in EU trade talks to 15-20%), BELIMO [BEAN.CH] +4.5% (earnings; price increase).

Speakers

- ECB said to be 'in a good place' at this time with inflation. Could face prospect of inflation settling below target if tariffs increased and also could face threat that stronger Euro currency dampened inflation.

Currencies/fixed income

- USD was softer in quiet EU session with no major data release.

- EUR/USD at 1.1640 with focus on Thurs ECB rate decision. More press reports circulated that ECB was 'in a good place' at this time with inflation and likely to keep policy steady.

- USD/JPY probed below the 148 level as the Japanese Upper House election saw the ruling LDP lose its majority for the 1st time since 1955. Yen helped by comments from PM Ishiba that he would remain in position and loom to work with opposition parties.

- 10-year German Bund yield at 2.65% and 10-year Gilt yield at 4.64%. 10-year Treasury yield: 4.38%.

Economic data

- (TR) Turkey Central Bank (TCMB) May Inflation Expectation Survey: Expected Inflation Next 12 Months 23.4% v 24.6% prior.

- (CH) Swiss Jun M3 Money Supply Y/Y:4.3 % v 3.5% prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 475.3B v 464.1B prior; Domestic Sight Deposits: 444.8B v 434.9B prior.

- (PL) Poland Jun Sold Industrial Output M/M: -1.1% v +0.3%e; Y/Y: -0.1% v +1.4%e.

- (PL) Poland Jun Construction Output Y/Y: +2.2% v -1.2%e.

- (PL) Poland Jun Employment M/M: 0.0% v 0.0%e; Y/Y: -0.8% v -0.8%e.

- (PL) Poland Jun Average Gross Wages M/M: 2.4% v 1.9%e; Y/Y: 9.0% v 8.6%e.

- (PL) Poland Jun PPI M/M: 0.2% v 0.3%e; Y/Y: -1.8% v -1.7%e.

- (IL) Israel July 12-month CPI Forecast: 2.3% v 2.5% prior.

- (HK) Hong Kong Jun CPI Composite Y/Y: 1.4% v 1.7%e.

Fixed income issuance

- None seen.

Looking ahead

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

- 05:30 (DE) Germany to sell combined €5.0B in 3-month and 9-month BuBills.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell up to €4.0B in 3-month bills (2 tranches).

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (IL) Israel to sell combined ILS2.05B in 2027, 2029, 2031, 2035 and 2051 bonds.

- 06:00 (IL) Israel Jun Unemployment Rate: No est v 3.1% prior.

- 06:00 (RO) Romania to sell RON400M in 6.7% Feb 2032 Bonds.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 07:30 (IN) India Jun Eight Infrastructure (Key) Industries: No est v 0.7% prior.

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

- 08:30 (CA) Canada Jun Industrial Product Price M/M: +0.1%e v -0.5% prior; Raw Materials Price Index M/M: 0.0%e v -0.4% prior.

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 09:00 (FR) France Debt Agency (AFT) to sell €5.8-7.2B in 3-month, 6-month and 12-month bills.

- 10:00 (US) Jun Leading Index: -0.3%e v -0.1% prior.

- 10:30 (CA) Canada Q2 Overall Business Outlook Survey: No est v -2.1 prior; Business Outlook Future Sales: No est v 13 prior.

- 11:00 (CO) Colombia May Trade Balance: -$1.4Be v -$1.4B prior; Total Imports: $6.1Be v $5.8B prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 15:00 (AR) Argentina May Economic Activity Index (Monthly GDP) M/M: 0.1%e v 1.9% prior; Y/Y: No est v 7.7% prior.

- 16:00 (US) Weekly Crop Progress Report.

- 17:00 (KR) South Korea Jun PPI Y/Y: No est v 0.3% prior.

- 18:45 (NZ) New Zealand Jun Trade Balance (NZD): No est v 1.2B prior; Exports: No est v 7.68B prior; Imports: No est v 6.44B prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 86.5 prior.

- 21:30 (AU) Australia RBA July Minutes.

- 22:00 (KR) South Korea to sell KRW500B in 20-year Bond.

- 23:00 (TH) Thailand Central Bank to sell THB60B in 3-month bills.