• US President Trump sent trade letters to the EU and Mexico announcing 30% tariffs from August 1st (separate from sectoral tariffs).
• The EU is planning to "step up engagement" with other nations impacted by US President Trump's tariffs, according to Bloomberg sources.
• APAC stocks were mostly positive but with some cautiousness seen following US President Trump's tariff letters, while the region also reflected on mixed Chinese trade data.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 future down 0.6% after the cash market closed with losses of 1.0% on Friday.
• DXY is marginally firmer, EUR/USD is only slightly softer despite Trump's tariff announcement, other majors are contained.
• Looking ahead, highlights include US President Trump's Comments on Russia, ECB’s Cipollone, supply from the EU.

SNAPSHOT

US TRADE

EQUITIES

• US stocks finished in the red on Friday but well off their intraday lows as attention remained on the recent tariff-related updates and as participants awaited Trump's tariff letter to the EU, while the inflationary fear aspect of higher tariffs pressured T-notes which were sold across the curve and yields bear steepened.
• SPX -0.33% at 6,260, NDX -0.21% at 22,781, DJI -0.63% at 44,372, RUT -1.26% at 2,235.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump sent trade letters to the EU and Mexico announcing 30% tariffs from August 1st which would be separate from sectoral tariffs.
• US President Trump commented that the EU is talking to the US and wants to open up their countries, while he added that South Korea is seeking a trade deal.
• White House Economic Adviser Hassett said President Trump has seen some outlines of proposed trade deals and thinks they need to do better, while he added that these tariffs are real if Trump gets proposals that he doesn’t think are good enough.
• Mexican President Sheinbaum believes they will reach an agreement with the US before tariffs go into effect on August 1st, while she stated that Mexico’s sovereignty is not negotiable It was also reported that Mexico’s Economy Ministry said Mexico is negotiating and the working group with the US will aim for an alternative before August 1st to protect companies and employees.
• European Commission President von der Leyen said imposing 30% tariffs on EU exports would disrupt the essential transatlantic supply chains, while they remain ready to continue working towards an agreement by August 1st and will take all necessary steps to safeguard EU interests including the adoption of proportionate countermeasures if required. Furthermore, she said they will extend the suspension of their countermeasures to US tariffs until early August and noted they have always been clear that they prefer a negotiated solution with the US which remains the case.
• The EU is planning to "step up engagement" with other nations impacted by US President Trump's tariffs, according to Bloomberg sources. Nations include Canada and Japan and could lead to potential coordination.
• French President Macron said France fully supports the European Commission in the negotiations and shares the same very strong disapproval of the announcement of horizontal tariffs of 30% on EU exports.
• German Chancellor Merz said US tariffs of 30% would hit the German export industry to the core and they want to use the time until August 1st, while he stated that tariff letters were also US negotiating positions.
• German Economy Minister Habeck said the EU must pragmatically negotiate a tariff solution with the US that focuses on the main points of conflict and stated that new US tariffs would hit European exporters hard. Habeck also commented that new US tariffs would have a strong impact on the economy and consumers in Europe and the US.
• German Finance Minister Klingbeil said Trump’s tariff policies threaten the US economy at least as much as European companies, as well as stated that the tariff conflict must end and nobody needs new threats or provocations. Furthermore, he said the EU needs to continue serious and targeted negotiations with the US but must take decisive countermeasures if a fair negotiated solution is not successful.
• German trade industry association said the newly announced tariffs are part of US President Trump’s negotiating strategy and Europe must not be impressed by Trump’s announcements but must seek a solution in talks on an equal footing.
• Italian Foreign Minister Tajani says if a deal is not attained with the US, then the EU has a list of tariffs prepared against US goods worth EUR 21blnIn the face of US tariffs, the ECB should consider a new QE programme and rate reductions.
• European Commission was reported on Friday to have dropped plans to levy a tax on digital companies, a move that hands victory to US President Trump and US tech giants like Apple (AAPL) and Meta (META), according to Politico.
• EU was reported on Friday to plan a new tax on big companies to boost the EU budget in which an annual charge would hit groups with a net turnover of EUR 50mln or more, according to a leaked European Commission proposal cited by FT.
• Chinese Foreign Minister Wang said China and ASEAN agreed to submit a free trade zone pact in October for approval and signing, while they agreed on a five-year action plan with all-round cooperation in over 40 fields and will complete a consultation on the ‘code of conduct in the South China Sea’ within 2026.

NOTABLE HEADLINES

• Fed's Goolsbee (2025 voter) said on Friday that the latest tariff threats could delay rate cuts and could spark fresh concerns about inflation, which might force the Fed to maintain its wait-and-see posture until the central bank gets more clarity, according to WSJ.
• US President Trump said it would be a good thing if Fed Chair Powell quits and said that Powell should resign immediately, while he repeated criticism that Powell is too late.
• White House Economic Adviser Hassett said the Fed has a lot to answer for on renovation cost overruns and if there is cause to fire Fed Chair Powell, President Trump has the authority to do so.
• UK's King Charles will host US President Trump for a state visit from September 17th to 19th.
• NVIDIA (NVDA) CEO Jensen Huang is to hold a media briefing in Beijing on July 16th.

APAC TRADE

EQUITIES

• APAC stocks were mostly positive but with some cautiousness seen following US President Trump's latest tariff letters in which he announced to impose 30% tariffs on the EU and Mexico from August 1st, while the region also reflected on somewhat mixed Chinese trade data.
• ASX 200 was rangebound as gains in mining, resources and materials offset the weakness in the consumer, industrial, financial and tech sectors, while data showed imports missed estimates for Australia's largest trading partner.
• Nikkei 225 initially retreated amid tariff uncertainty although the losses were gradually pared as sentiment overnight somewhat improved and Machinery Orders topped forecasts.
• Hang Seng and Shanghai Comp kept afloat amid the latest trade data in which exports topped forecasts and imports missed but returned to growth, while there were some encouraging comments from the meeting between US Secretary of State Rubio and Chinese Foreign Minister Wang last Friday which was described as constructive and with the odds said to be high for a future meeting between US President Trump and Chinese President Xi.
• US equity futures (ES -0.4%, NQ -0.4%) were pressured after the latest US tariff announcement and with demand subdued ahead of upcoming key events including US CPI data and the start of earnings season.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 0.6% after the cash market closed with losses of 1.0% on Friday.

FX

• DXY was little changed ahead of key releases later in the week including the US CPI data and as the focus remained on US President Trump's tariff updates after he announced to impose 30% tariffs on the EU and Mexico starting on August 1st, while Trump also reiterated his criticism that Fed Chair Powell is too late and said it would be a good thing if Powell quits.
• EUR/USD initially weakened as participants reacted to Trump's tariff letter to Europe but gradually pared losses amid a potential 'TACO' trade and given that the EU extended the suspension of their countermeasures to US tariffs until early August, while Trump later commented that the EU is talking to the US and wants to open up their countries.
• GBP/USD remained lacklustre after recent selling pressure which dragged the pair to a sub-1.3500 level.
• USD/JPY was choppy with early headwinds amid tariff concerns and stronger-than-expected machinery orders.
• Antipodeans softened amid the ongoing uncertainty and as participants digested Chinese trade data.
• PBoC set USD/CNY mid-point at 7.1491 vs exp. 7.1744 (Prev. 7.1475)

FIXED INCOME

• 10yr UST futures were rangebound with price action contained after last week's selling pressure and ahead of key releases this week including US CPI, PPI and Retail Sales.
• Bund futures got some slight reprieve from the prior week's declines as tariffs remained in focus.
• 10yr JGB futures retreated as yields rose in the aftermath of the better-than-expected Machinery Orders data.

COMMODITIES

• Crude futures were rangebound after last Friday's advances and with a lack of major energy-specific catalysts from over the weekend, while participants await President Trump's announcement concerning Russia/Ukraine.
• Iraq set August Basrah Medium Crude official selling price to Asia at plus USD 1.35/bbl vs Oman/Dubai, while it set OSP to Europe at minus USD 0.55 vs Dated Brent and set the OSP to North and South America at minus USD 1.15 vs ASCI.
• Spot gold initially climbed at the reopen owing to trade concerns following President Trump's tariff letters to the EU and Mexico, although the precious metal eventually gave back most of its gains with a potential TACO trade in play.
• Copper futures lacked demand amid tariff-related headwinds and mixed Chinese trade data.
• Australia's PM Albanese said they need to work together with China to address global excess steel capacity.

CRYPTO

• Bitcoin extended on its bull run and climbed above the USD 120k level to print a fresh record high.

NOTABLE ASIA-PAC HEADLINES

• BoJ is likely to increase its inflation forecast for fiscal 2025 but maintain consumer inflation forecasts for fiscal 2026 and 2027, according to sources cited by Reuters.
• Japan and the EU are seeking to develop a joint satellite network, according to Nikkei.

DATA RECAP

• Chinese Trade Balance (USD)(Jun) 114.8B vs. Exp. 109.0B (Prev. 103.2B)
• Chinese Exports YY (USD)(Jun) 5.8% vs. Exp. 5.0% (Prev. 4.8%)
• Chinese Imports YY (USD)(Jun) 1.1% vs. Exp. 1.3% (Prev. -3.4%)
• Chinese Trade Balance (CNY)(Jun) 826.0B (Prev. 743.6B)
• Chinese Exports YY (CNY)(Jun) 7.2% (Prev. 6.3%)
• Chinese Imports YY (CNY)(Jun) 2.3% (Prev. -2.1%)
• Japanese Machinery Orders MM (May) -0.6% vs. Exp. -1.5% (Prev. -9.1%)
• Japanese Machinery Orders YY (May) 4.4% vs. Exp. 3.4% (Prev. 6.6%)
• Singapore GDP QQ (Q2 A) 1.4% vs Exp. 0.6% (Prev. -2.6%)
• Singapore GDP YY (Q2 A) 4.3% vs Exp. 3.5% (Prev. 3.9%)

GEOPOLITICS

MIDDLE EAST

• Israeli official said talks in Doha are ongoing with Hamas for a ceasefire and hostage deal but noted Hamas is sticking to positions that do not allow mediators to advance an agreement.
• US envoy to the Middle East Witkoff said he is hopeful on Gaza ceasefire negotiations and was said to meet senior Qataris in New Jersey on Sunday.
• Iranian Foreign Minister Araghchi said they are carefully assessing options for talks with the US.

RUSSIA-UKRAINE

• US President Trump is considering greenlighting new funding for Ukraine to send a message to Russia, according to CBS. It was separately reported that President Trump is to announce an "aggressive" Ukraine weapons plan on Monday to arm Ukraine which is expected to include offensive weapons, according to Axios.
• EU envoys are nearing an agreement on lower Russian oil price cap, according to Reuters.
• Ukraine’s SBU intelligence agency accused Russia’s FSB of being behind the murder of an SBU Colonel in Kyiv last week and said agents responsible for the murder were killed during an operation to apprehend them.
• IAEA team at Ukraine’s Zaporizhzhia nuclear plant reported hearing hundreds of rounds of small arms fire on Saturday night.
• Russia’s Defence Ministry said Russian forces took control of Myrne and Mykolaivka in eastern Ukraine.
• North Korean leader Kim reaffirmed unconditional support for Moscow’s actions in the Ukraine war during a meeting with Russian Foreign Minister Lavrov, while North Korea and Russia pledged cooperation to safeguard each other’s territorial integrity. Furthermore, Russia expressed firm opposition to any attempt to undermine North Korea’s national security and sovereignty, while it was also stated that Moscow wants to further strengthen the strategic partnership.

OTHER

• North Korea warned it stands ready to take military action against threats from the US, Japan and South Korea following recent joint air drills involving a strategic US bomber, according to KCNA.

EU/UK

NOTABLE HEADLINES

• Japan and the EU are seeking to develop a joint satellite network, according to Nikkei.
• UK Chancellor Reeves is to hail fiscal ‘stability’ and City risk-taking in her Mansion House speech on Tuesday and will insist she has a grip on the UK economy and will not let borrowing run out of control, according to FT. CityAM also reports that she is to leave cash Isas untouched.
• BoE Governor Bailey says the MPC is prepared to make larger rate reductions if the jobs market shows signs of a pronounced slowdown, according to The Times.
• Netherlands rationed electricity to ease power grid stresses as thousands of businesses and households waited to connect to the Dutch grid, while officials and companies said lengthy waits for connections were holding up economic growth and could force businesses to rethink their investment plans, according to FT.
• Fitch affirmed Germany at AAA; Outlook Stable.