• US President Trump announced a 35% tariff for Canada and flagged a potential 20% blanket tariffs for other countries; US is set to keep the tariff exemption for USMCA goods, according to a US official.
• Brazil's President Lula said the main thing is the reciprocity law, and if US charges 50%, they will charge him 50%.
• US President Trump noted the EU will receive a letter notifying them of new tariff rates by Friday.
• APAC stocks were ultimately mixed; European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 0.2% after the cash market finished with losses of 0.1%.
• Looking ahead, highlights include German WPI, UK GDP Estimate, Canadian Jobs, IEA OMR, Fitch on Germany, DBRS on Sweden, Speakers including ECB's Panetta & Cipollone.

SNAPSHOT

• Click for the Newsquawk Week Ahead.

US TRADE

EQUITIES

• US stocks finished mostly in the green but with gains capped and underperformance was seen in the Nasdaq which was weighed on by pressure in heavy-cap stocks, while sectors were predominantly higher with Consumer Discretionary leading the gains, but Communication and Tech lagged.
• Elsewhere, T-notes saw two-way price action after falling claims data and dovish Fed speak in which Waller reiterated arguments on why a July cut could be appropriate although Musalem took a different view and noted he is not seeing a tremendous amount of restrictiveness from policy, while Daly said it is time to think about adjusting the interest rate and sees two cuts as a likely outcome but is thinking about rate cuts during the fall.
• SPX +0.27% at 6,280, NDX -0.16% at 22,829, DJI +0.43% at 44,651, RUT +0.48% at 2,263.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump posted the tariff letter to Canada charging a 35% tariff on Canadian goods sent to the US starting August 1st separate from sectoral tariffs. US President Trump also said "we're just going to say all of the remaining countries are going to pay, whether it is 20% or 15%." He also noted the EU will receive a letter notifying them of new tariff rates by Friday.
• US President Trump is set to keep the tariff exemption for USMCA goods, according to a US official.
• White House Trade Advisor Navarro said the US will raise trillions from tariff revenue.
• Canadian PM Carney said throughout the current trade negotiations with the US, the Canadian government has steadfastly defended its workers and businesses, while it will continue to do so as it works towards the revised deadline of August 1st.
• Canadian tribunal finds steel dumping from China, South Korea, Turkey and Vietnam harming the domestic industry and finds reasonable indication that the subsidising of steel strapping from China is causing injury to the domestic industry.
• Brazil's President Lula said regarding US tariffs that they can appeal to the WTO and propose international investigations and demand explanations, but added the main thing is the reciprocity law, and if US charges 50%, they will charge the US 50%. It was separately reported that the proposed tariff of 50% on Brazil would halt the flow of Brazilian coffee to the US, according to Reuters citing trade sources.
• Chinese Foreign Minister Wang said China is ready to create new growth points with Thailand such as digital economy, artificial intelligence, cross-border e-commerce, and green development, while he noted regarding US tariffs, that he believes Thailand and ASEAN countries will safeguard their respective legitimate interests and resist unilateralism and bullying. Furthermore, he believes Southeast Asian countries have the ability to cope with a complex situation, stick to their principled positions, and safeguard their own interests and the common interests of all parties.
• South Korea trade officials said the US is very reserved about including sectoral tariffs in a trade deal and has demanded that South Korea join efforts to curb China.

NOTABLE HEADLINES

• Fed’s Waller (voter) said the Fed likely has some ways to go in shrinking the size of its holdings and a hypothetical USD 5.8tln balance sheet might be right level to aim for vs. current USD 6.7tln, while USD 2.7tln in reserves might be the right level to aim for vs. current USD 3.3tln. Waller said the Fed can lower rates because the short-term rate is still "pretty restrictive" and he thinks rates are 1.5 ppts above a long-run, steady state neutral, while he added "We’re just too tight" but acknowledged he is in the minority on this.
• Fed's Goolsbee (2025 voter) said the hard data on the economy was looking solid before April 2 Liberation Day tariffs but since then there has been potential disruption and ambiguity that the Fed needs to resolve, while he does not understand arguments the Fed should cut rates to make government debt cheaper and noted the mandate is on jobs and prices.
• Fed's Daly (2027 voter) said the economy is in a good place with growth and jobs solid and inflation is easing, while she added the Fed has the ability to restore price stability gently given the state of the economy and monetary policy is still restrictive. Daly said it is time to think about adjusting the interest rate and she sees two cuts as a likely outcome for the Fed, but noted to cut rates, they need a continuation of current data trends and is thinking about rate cuts in the fall.
• Fed seeks comment on proposed changes to how it supervises large banks and would adjust supervisory framework to make it easier for large banks to be considered "well managed" and not subject to activity restrictions.
• US diplomats are said to be bracing for cuts to the State Department workforce, with dismissal notices expected as soon as Friday, according to NBC sources. "The layoffs are part of a mass reorganisation of the federal agency, including the dissolution or merging of more than 300 bureaus and offices and a 15% reduction in employees."

APAC TRADE

EQUITIES

• APAC stocks were ultimately mixed as the initial impetus from the mostly positive lead from Wall St, where the S&P 500 notched a fresh record high, was dampened by the latest tariff updates after President Trump announced a 35% tariff for Canada and flagged a potential 20% blanket tariffs for other countries.
• ASX 200 failed to sustain its early momentum as gains in the mining, materials and resources sectors were offset by underperformance in real estate, consumer discretionary and tech, while there was a surge in Johns Lyng Group after it agreed to a takeover from a private equity group.
• Nikkei 225 was choppy as tailwinds from a weaker currency were counterbalanced by ongoing trade uncertainty.
• Hang Seng and Shanghai Comp were on the front foot despite the lack of obvious bullish catalysts although US Secretary of State Rubio and Chinese Foreign Minister Wang Yi are set to meet today in Malaysia at the sidelines of ASEAN.
• US equity futures declined following US President Trump's tariff letter announcement for Canada.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 0.2% after the cash market finished with losses of 0.1%.

FX

• DXY strengthened following US President Trump's latest tariff letter in which he announced a 35% tariff for Canadian goods sent to the US from August 1st which pressured CAD, while he also commented that they are just going to say all of the remaining countries are going to pay, whether it is 20% or 15%, and suggested the EU will receive a letter by Friday.
• EUR/USD retreated beneath the 1.1700 handle amid trade uncertainty and as Trump's tariff letter to the EU looms.
• GBP/USD languished at a sub-1.3600 territory amid a lack of pertinent drivers and with participants now looking ahead to UK GDP, Industrial Production and Manufacturing Output data.
• USD/JPY resumed its recent advances to reclaim the 147.00 level to the upside as the dollar was lifted by Trump's latest tariff salvo in which he also flagged a potential 20% blanket tariff for other countries.
• Antipodeans pared some of the recent advances but with downside limited amid the mixed risk appetite and following the PBoC's firmer yuan reference rate setting.
• PBoC set USD/CNY mid-point at 7.1475 vs exp. 7.1771 (Prev. 7.1510)

FIXED INCOME

• 10yr UST futures lacked conviction after yesterday's indecisive performance owing to falling jobless claims and Fed speak.
• Bund futures languished beneath the 130.00 level following recent declines but are off the lows amid cautiousness as participants await US President Trump's tariff letter to the EU.
• 10yr JGB futures remained lacklustre amid the indecisive risk sentiment in Japan and a quiet calendar.

COMMODITIES

• Crude futures attempted to nurse losses after declining yesterday amid ongoing trade angst and hopes of a Gaza ceasefire.
• Saudi crude oil supply to China is set to rise to about 51mln bbls in August which would be the highest since 2023, according to sources cited by Reuters.
• Spot gold edged higher amid trade-related uncertainty but with upside capped by a firmer dollar.
• Copper futures were rangebound amid the mixed risk tone and tariff-related headwinds.
• Chile Codelco May copper production rose 16.5% Y/Y to 130.1k tonnes, while Escondida copper production rose 24.4% Y/Y to 132k tonnes and Collahuasi copper production fell 16.9% Y/Y in May to 38.4k tonnes.

CRYPTO

• Bitcoin mildly extended to fresh record highs above the USD 116k level.

NOTABLE ASIA-PAC HEADLINES

• US Secretary of State Rubio is to meet with Chinese Foreign Minister Wang today in Malaysia at 15:00 local time (08.00BST/03:00EDT).

GEOPOLITICS

MIDDLE EAST

• Israeli PM Netanyahu said he hopes they can complete a deal within a few days, while he stated that Iran is now behind several years and they will get peace soon with Arab neighbours, according to an interview with Newsmax.
• Israeli army said a rocket was fired from southern Syria and landed near the Golan, according to Al Arabiya.
• Israeli official said some of Iran’s enriched uranium survived attacks, according to the NYT.

RUSSIA-UKRAINE

• US President Trump said he is disappointed in Russia, but will see what happens over the next couple of weeks and thinks he’ll have a major statement to make on Russia on Monday. Trump said the US is sending weapons to NATO which it is going to give to Ukraine and NATO is paying 100%, while he expects the Senate to pass the sanctions measure and said they’re going to pass a very major and very biting sanctions bill, but it is up to the President whether or not to exercise it.
• Ukrainian President Zelensky said Germany is ready to pay for two patriot systems and Norway is ready to pay for one.
• European Commission is expected to propose a floating Russian oil price cap as part of the 18th sanctions package, according to EU sources cited by Reuters.

EU/UK

NOTABLE HEADLINES

• UK PM Starmer accepted the invitation to visit US President Trump during his trip to Scotland this month.
• UK Chancellor Reeves is considering recommendations by the IMF that are said to aim to reduce pressure for frequent fiscal policy changes, according to FT.