Futures Rally Pauses At All Time High With Mag7 Earnings On Deck
US equity futures are trading flat, erasing an earlier loss following record highs in both the S&P and Nasdaq while the small cap Russell 2000 sits 8.5% below its ATH. As of 8:00am ET, S&P futures are unchanged while Nasdaq futures are down 0.1% as investors brace for corporate news on how tariffs are filtering through to their earnings. In pre-market trading Mag7 names are mixed with AAPL, GOOG, and META higher and NVDA pulling semis lower. Cyclicals are weaker with Industrials outperforming. Treasuries and the dollar steadied before an 830am speech from Fed Chair Jerome Powell in which he is not expected to discuss monetary policy. Powell has faced relentless criticism from the Trump administration, mostly over decisions to hold interest rates steady so far in 2025. The yield curve is seeing a slight twist steeper with 10s and 30s +1bp; USD is modestly lower after yesterday seeing its largest daily decline since June 12. Commodities are weaker with Energy/precious lower, base metals higher, and Ags mixed. Today’s macro data focus is on regional Fed activity indicators.
In premarket trading, Mag7 stocks are mixed (Alphabet +0.4%, Meta +0.3%, Apple +0.2%, Amazon +0.09%, Microsoft is little changed, Tesla -0.2%, Nvidia -0.6%). Here are some other notable premarket movers:
- Calix (CALX) rises 3% after the communication software company reported second-quarter results that beat expectations and gave an outlook that is seen as strong.
- Circle Internet Group (CRCL) falls 2% after the stablecoin issuer was downgraded to sell from neutral at Compass Point Research & Trading LLC as it sees more competition for Circle now that the US stablecoin bill has passed.
- CSX (CSX) rises 4% after Semafor reported that Berkshire Hathaway-owned BNSF is working with Goldman Sachs to explore a takeover of a rival. It wasn’t immediately clear whether BNSF has its eye on Norfolk Southern or CSX, report says.
- Danaher (DHR) slips 1% after the company reported operating loss in its life sciences unit for the second quarter, surprising analysts who’d forecasted a profit.
- D.R. Horton (DHI) gains 6% after the homebuilder narrowed its revenue forecast for the full year.
- General Motors Co. (GM) falls 3% after second-quarter profit fell as President Donald Trump’s tariffs on foreign-made vehicles and parts chopped $1.1 billion from adjusted earnings.
- Medpace (MEDP) gains 44% after the clinical research company raised its sales and profit guidance.
- Norwegian Cruise Line Holdings Ltd. (NCLH) climbs 1% after receiving a bullish initiation from TD Cowen, which added the cruise operator to its top picks ahead of the the Florida-based company’s earnings next week.
- NXP Semiconductors (NXPI) falls 6% after the chipmaker issued a third-quarter revenue forecast that missed some bullish analysts’ estimates.
- Sarepta Therapeutics (SRPT) falls 2%, on course to extend losses into a third session, as Barclays downgrades the stock to equal-weight from overweight. Separately, the drugmaker said it will temporarily pause shipments of Elevidys, its gene therapy to treat Duchenne muscular dystrophy, reversing its prior stance.
- Sherwin-Williams (SHW) drops 3% after the paint company cut its adjusted earnings per share guidance for the full year.
- Shopify’s US-listed shares (SHOP) fall 2.7% after Loop Capital Markets cut its recommendation on the stock to hold from buy, citing valuation concerns.
In earnings, NXP Semiconductors gave a less bullish third-quarter forecast than some investors had anticipated, while Steel Dynamics second-quarter adjusted EPS missed.
A record-breaking stock rally has powered on in the face of growing uncertainty over trade negotiations ahead of the Aug 1 tariff deadline. But with valuations stretched, the strong second-quarter earnings season is failing to illicit much of a reaction from investors so far, as they wait for more concrete information on the tariff fallout.
“Of course we see beats, but that won’t tell us a huge amount about where we are going forward,” JP Morgan Asset Management Global Market Strategist Hugh Gimber told Bloomberg TV. “That’s where we are spending our energy on this earnings season, trying to gauge where the hit from tariffs will come through.”
After hitting a series of all-time highs, the S&P 500 is trading around 22 times expected 12-month profits. The S&P 500 hasn’t posted a 1% up or down day since late June. Reports from megacaps Tesla Inc. and Alphabet Inc. are due Wednesday.
Wall Street giants such as Invesco, Fidelity and JPMorgan Asset Management are leaning harder into the rally in risk assets. The high-octane wager is that while Trump is threatening to disrupt the economic order anew, he will step back from the brink.
The 50 global companies with the highest US sales exposure are now expected to post average earnings growth of 10% this year, down nearly 400 basis points from estimates at the start of the year, according to BI strategists. The 50 firms with the least US exposure have seen upward estimate revisions. Elsewhere, Goldman Sachs traders said chip stocks are the most crowded pocket of tech, if not the market, on AI enthusiasm.
On the trade front, President Donald Trump may issue more unilateral tariff letters before the tariff deadline, White House Press Secretary Karoline Leavitt said. More trade deals may also be reached before the deadline, she added. Philippine President Ferdinand Marcos Jr. will be the latest foreign leader eager to make a deal before the deadline when he visits Trump in the Oval Office later Tuesday. A team of US officials will visit India in the second half of August to hold talks on a bilateral trade deal, the Financial Express reported Tuesday.
Firms such as Invesco Ltd., Fidelity International Ltd. and JPMorgan Asset Management are leaning harder into the rally in risk assets. The high-octane wager is that while Trump is threatening to disrupt the economic order anew, he will step back from the brink.
European stocks are in the red amid a mixed batch of earnings as investors await the results of trade negotiations between Brussels and Washington. The Stoxx 600 is down 0.5%. Chemical and tech shares are lagging, while utilities and miners are gaining. Among individual stocks, Akzo Nobel falls after cutting its profit forecast for the year. Here are the biggest movers:
- Norsk Hydro gains as much as 4.3%, the most since April, after reporting a solid set of second-quarter figures, according to analysts, with weakness in the Aluminum Metal arm offset by strength elsewhere, with a significant beat in its Energy division.
- Compass Group gains as much as 8.9% after the catering and support services company lifted its full-year guidance and announced the acquisition of Dutch caterer Vermaat.
- Centrica shares gain as much as 6.8%, most in five months, after the energy company agreed to take a 15% stake in the UK’s Sizewell C nuclear power plant.
- GB Group shares rise as much as 4.8%, after the cybersecurity company reassured investors with in-line trading during the first quarter following disappointing annual results back in June.
- Greencore Group shares jump as much as 9.3%, trading at their highest level since January 2020, after the food manufacturer lifted its profit outlook for the year.
- Akzo Nobel shares fall as much as 5.3%, the most since early April, with Morgan Stanley analysts calling it a “disappointing set of results” with pricing/mix coming in below their expectations.
- Lindt & Spruengli shares fall as much as 5.8%, after the chocolate maker reported weaker-than-expected volume growth and first-half earnings missed estimates amid soaring cocoa prices.
- Givaudan shares drop as much as 7.2%, the most in over three months, after like-for like sales missed in the second quarter.
- Sartorius shares drop as much as 7.9%, the most since April 7, after the German lab equipment maker reported results for the second quarter.
- Kier drops as much as 8.6%, snapping a run of four straight gains, after the UK construction company announced that CEO Andrew Davies will retire at the end of October.
- Asker Healthcare falls as much as 6.4%, the most since April, after reporting its first earnings since its listing on Stockholm in March.
- Alfa Laval shares fall as much as 5.3%, the most since April, after the Swedish industrial group reported earnings.
- TietoEVRY falls as much as 8.4%, the most since February, after the Finnish software and services firm reported “another soft quarter,” according to Morgan Stanley.
A key Asian stock benchmark erased a gain and dipped, weighed down by losses in South Korean and Taiwanese chipmaker shares. The MSCI Asia Pacific Index fell as much as 0.5%, set for its first decline in four sessions. Taiwan Semiconductor Manufacturing and Samsung Electronics were the biggest drags. Lenders in Australia weighed down the index further ahead of the earnings season. South Korean stocks retreated from near an all-time high ahead of this week’s tariff talks with the US and upcoming earnings releases. Japanese shares had a volatile session as investors weighed policy implications from the ruling Liberal Democratic Party’s historic setback in Sunday’s elections. Prime Minister Shigeru Ishiba’s plan to remain in his role alleviated some worry of a sudden upheaval, though uncertainty has risen over the stability of his government. Among other nations hoping for positive trade talks, Malaysia is said to be seeking a milder US tariff rate of 20%, while Philippine President Ferdinand Marcos Jr. plans to meet with President Donald Trump later Tuesday. Elsewhere, Thailand is set to name its new central bank chief on Tuesday, ending a months-long search.
In FX, the dollar kicked off the day stronger but has seen that fade. The Bloomberg Dollar Spot Index is now down for the day after having yesterday seeing its largest daily decline since June 12. The New Zealand dollar is the worst G-10 performer after seeing first quarterly decline in exports for two years, and the yen continues its wild gyrations as markets are in denial over the coming fiscal easing tsunami that will send the currency tumbling.
In rates, Treasuries are under slight pressure as US trading day begins, after Monday’s rally sent yields across tenors to lowest levels in more than a week. 10- to 30-year yields are higher by 1bp-2bp with shorter-maturity tenors little changed; the 10-year near 4.39% is back above the 200-day moving average level it dipped below Monday and hasn’t closed below since July 2. Potential catalysts are in short supply as the US economic calendar is light and Fed policymakers are in self-imposed external communications blackout ahead of their July 29-30 meeting, however Chair Powell is slated to give welcoming remarks at a regulatory conference in Washington at 8:30am, and Governor Michelle Bowman, the Fed’s vice chair for supervision, is slated to appear on CNBC at 7:30am. UK bonds are falling after the country’s budget deficit hit the highest since April 2021. The yield on 10-year gilt bonds is up four basis points, lagging comparable Treasuries and bunds, where their respective yields are each up by a basis points.
Oil is falling, with tariff worries and supply concerns the culprits. Brent futures down 1.1% and below $69/barrel. Gold weaker, down around $8 to about $3,388/oz.
In commodities, oil fell for a third session, and gold slipped. Iron ore headed toward the highest in nearly five months as traders eyed China’s prospective supply-side reforms for the steel industry and plans for a massive dam project
The US economic data calendar includes July Philadelphia Fed non-manufacturing activity (8:30am) and July Richmond Fed manufacturing index and business conditions (10am). Fed officials are in external communications blackout ahead of their July 30 rate decision, anticipated to be no change in the fed funds target range of 4.25%-4.5%
Market Snapshot
- S&P 500 mini -0.1%
- Nasdaq 100 mini -0.3%
- Russell 2000 mini -0.1%
- Stoxx Europe 600 -0.4%
- DAX -0.8%, CAC 40 -0.5%
- 10-year Treasury yield +1 basis point at 4.39%
- VIX +0.3 points at 16.95
- Bloomberg Dollar Index little changed at 1200.52
- euro little changed at $1.1701
- WTI crude -1.1% at $66.47/barrel
Top Overnight News
- Scott Bessent called for a review of the Fed’s HQ renovation, urging the central bank to also scrutinize its non-monetary policy operations. He warned of “significant mission creep.” BBG
- SoftBank and OpenAI's $500bln AI project struggles to get off the ground with the Stargate venture, introduced at a White House event earlier this year, now setting a more modest goal of building a small data centre by year-end: WSJ.
- Trump’s targeting of trade loopholes would threaten 70% of China’s US exports and more than 2.1% of GDP. BBG
- The prospects of an interim trade deal between India and the United States before Washington's August 1 deadline have dimmed, as talks remain deadlocked over tariff cuts on key agricultural and dairy products. RTRS
- A growing number of European Union member states, including Germany, are considering using wide-ranging "anti-coercion" measures targeting U.S. services if the EU cannot reach a trade deal with U.S. President Donald Trump
- Japan’s chief trade negotiator Ryosei Akazawa spoke with Howard Lutnick for two hours yesterday to discuss a tariff agreement. BBG
- Bank of Japan officials see little need to shift their policy stance of gradually raising interest rates in the wake of Prime Minister Shigeru Ishiba’s latest election setback. BBG
- France urges Brussels to take a more confrontational approach to trade talks w/Washington. Politico
- The UK borrowed billions more than forecast in June as a surge in debt-interest payments sent the budget deficit to £20.7 billion. BBG
- GM’s second-quarter profit fell as Trump’s tariffs chopped $1.1 billion from earnings. Shares retreated -285 bps premarket. Goldman thinks positioning was longer and thinks expectations were for lower tariff impact. Details: EPS beat ($2.53x vs. $2.34 cons) on Q2 net sales of $47bn (slightly above $46bn cons). BBG
Trade/Tariffs
- Canadian PM Carney issued a statement following a meeting with US Senators and stated they discussed work to strengthen continental defence and security, as well as Canada’s successes in dismantling illegal drug smuggling and securing the border.
- Canada's Minister of Intergovernmental Affairs Leblanc will be in Washington this week for trade discussions.
- Japan's tariff negotiator Akazawa and US Commerce Secretary Lutnick met for over two hours in Washington on Monday and held frank talks to seek agreement benefiting both Japan and the US, while Japan will continue to seek common ground on tariff issues with the US, according to the Japanese government.
- South Korean Finance Minister Koo said he will hold trade talks with his US counterpart on July 25th, while Koo added that the Foreign Minister and Industry Minister will conduct meetings with US counterparts as soon as possible.
- India and US mini trade deal is ruled out before August 1st, according to CNBC TV18, citing sources.
- India-US trade deal prospects are dim ahead of the August 1st deadline, sides remain deadlocked over ags and dairy products, according to Reuters sources.
- Malaysia has been asked by the US to extend tax exemptions for US EVs, while Malaysia is seeking a 20% US levy, but is said to be resisting EV and ownership demands, according to Bloomberg.
- "Chinese experts warned that if the US attempts to weaponize trade talks and tariffs...Beijing will not yield to the pressure. Such moves would also risk undermining the trade negotiation mechanism between the two countries", via Global Times.
A more detailed look at global markets courtesy of Newsquawk
APAC stocks traded mixed after failing to sustain the early upward momentum seen at the open following the fresh record intraday highs on Wall St and with two-way price action seen in Japan following the ruling coalition's upper house election loss. ASX 200 was rangebound as strength in the mining, materials, resources and healthcare sectors offset the losses in financials, energy and industrials, while the RBA Minutes from the July meeting provided very little to shift the dial but continued to signal future cuts ahead. Nikkei 225 initially surged to above the 40,000 level as participants returned from the long weekend, but then wiped out its gains and then some, as participants second-guessed the ramifications of the ruling coalition's upper house election setback. Hang Seng and Shanghai Comp kept afloat in rangebound trade amid a lack of major fresh catalysts and after the Hong Kong benchmark breached the 25,000 level.
Top Asian News
- Japanese Finance Minister Kato said it was a tough upper house election result for the LDP and the government will take the outcome of the upper house elections seriously, while he added that the government has repeated that sales tax cuts are not appropriate.
- RBA Minutes from the July meeting stated the Board agreed further rate cuts are warranted over time, while the focus was on the timing and extent of easing. The Minutes stated that the Board considered whether to leave rates at 3.85% or to cut by 25bps and a majority agreed it was prudent to await confirmation on inflation slowdown before easing, while the majority felt cutting rates three times in four meetings would not be cautious and gradual. The case for no change cited some data as inflation had been slightly firmer than expected, the job market had also not loosened as expected and there was less risk of a severe global downturn. Furthermore, members agreed monetary policy was modestly restrictive, though financial conditions had eased and it was difficult to know how far rates can fall before policy is no longer restrictive, so prudence is needed.
- BoJ is likely to leave its benchmark rate unchanged next week, according to Bloomberg sources; sees little impact from election on rate stance; watching for trade talk impact before any hikes; sees upward price risks if there is large fiscal loosening.
- China's Forex Regulator says overseas investors in general net increased their onshore equity and bond holdings in Q2; supply and demand in the FX market is "basically stable"; Yuan has been basically stable at reasonable and balanced levels this year.
- PBoC Shanghai Head Office says foreign holdings of yuan-denominated bonds traded on China's interbank market totalled CNY 4.23tln at the end of June.
European bourses (STOXX 600 -0.4%) opened mostly lower and sentiment continued to deteriorate as the session progressed. Downside, which followed a mixed APAC session, where indices failed to sustain early upward momentum. European sectors hold a slight negative bias, with only a handful of industries managing to stay afloat. Utilities takes the top spot, joined closely by Basic Resources and then Travel & Leisure to complete the top three. Chemicals sits at the foot of the pile, with two of the top 10 industry constituents reporting today; Givaudan reported weak sales and Akzo Nobel missed across its headline figures, alongside a cut to its FY Adj. EBITDA view.
Top European News
- BoE Governor Bailey says they have seen steeper yield curves and it's a global phenomenon; UK experience is not out of line with other markets. The cause of the steeper yield curve reflects greater uncertainty on trade policy. The steeper yield curve also reflects global uncertainty on fiscal policy.
- UK Deputy PM Rayner is pushing for councils to be given new powers to tax tourists, despite opposition from Chancellor Reeves, according to The Telegraph.
- ECB July Bank Lending Survey: Corporate credit demand is weak but rose in Q2 and expected to rise further in Q3 Credit standards for firm loans remained broadly unchanged. Credit standards tightened slightly for housing loans and more markedly for consumer credit. Housing loan demand continued to increase strongly, while demand for firm loans remained weak. Trade war was a drag on demand but did not lead to a tightening in credit standards.
- UK FCA says "borrowers will find it easier to remortgage, saving time and money, under changes confirmed by the FCA". Under these changes, buyers will: Find it easier to reduce their mortgage term, helping to lower the total cost of borrowing and reduce the risk of repayment extending into retirement. More easily remortgage with a new lender, helping them access cheaper products. Be able to discuss options with their mortgage provider and get advice when they need it.
FX
- DXY is flat after declining around 0.6% on Monday. There was no obvious fundamental catalyst for the pullback in the USD on Monday with some pinning the move on the flattening of the US curve and price action being exaggerated by summer trading conditions. The macro narrative since the start of the week is relatively unchanged, with trade deals between the US and global trading partners remaining elusive and the Fed in its blackout period. On the latter, both Powell and Bowman are due on the speaker slate today but are not expected to comment on monetary policy. DXY has failed to make its way back onto a 98 handle with a current session peak at 97.99.
- EUR is flat. Focus at the start of the week has been on the trade agenda with the EU reportedly looking at a wider set of potential countermeasures against the US in the event that a deal is not reached by August 1st. Note, if a deal is not reached by the deadline, the EU will be subject to a 30% tariff rate by the US. As August 1st draws closer and a deal is lacking, the EUR will likely embed a greater risk premium. EUR/USD currently trading around the 1.17 mark, session high at 1.1703.
- JPY is softer vs. the USD as Japanese participants return to market and digest the upper house election results, which saw the ruling majority lose its coalition. Today's losses appear to be more of a scaling back of Monday's upside vs. the USD rather than a reassessment of the outcome of the election.
- GBP is flat vs the Dollar. Today's main macro highlight from the UK has come via a worse-than-expected outturn for UK borrowing figures with Borrowing in June coming in at GBP 20.7bln vs. Exp. GBP 16.75bln; the second-highest June borrowing since monthly records began in 1993, after that of June 2020. BoE Governor Bailey is currently speaking with the Treasury Select Committee; nothing too pertinent thus far. Cable is back on a 1.34 handle and trades in a 1.3462-91 range.
- Antipodeans are both at the bottom of the G10 leaderboard alongside the current flimsy risk tone. Little follow-through was seen into AUD following the RBA minutes, which provided very little incrementally. The account noted that the majority agreed it was prudent to await confirmation on inflation slowdown before easing, although the Board agreed further rate cuts are warranted over time with focus on the timing and extent of easing.
Fixed Income
- JGBs climbed higher overnight in reaction to Sunday’s Japanese Upper House election. At best, posted gains of 40 ticks to a 138.71 peak but ended the Japanese day off highs, though still markedly clear of the 138.31 open.
- USTs are in the red, but only marginally. In a thin 111-01+ to 111-06+ band as fresh catalysts are light and the US docket, ex-earnings, is limited on account of the Fed blackout. Note, a handful of Fed speakers due today incl. Chair Powell; however, remarks are not expected to be pertinent to monetary policy. Elsewhere, Richmond Fed Index is also due. If the current marginal pressure extends, Friday’s low resides at 110-21+, that week’s low at 110-10+, and the current WTD base at 110-08.
- Bunds are in-fitting with USTs. Softer in a 130.24 to 130.49 band. Specifics this morning have been light with no pertinent EU trade updates, data or speakers thus far; as is the case for the Fed, the ECB is currently in its quiet period, so while President Lagarde is scheduled today, she is not expected to provide any pertinent commentary. No reaction to this morning’s ECB Bank Lending Survey, where credit standards were broadly unchanged for firm loans in Q2, tightened slightly for households but more markedly for consumer credit. If the morning’s bearish bias extends, then the July 7th low stands at 130.02 before the figure and then numerous levels from the last two weeks between 129.73 and 129.02.
- Gilts are underperforming a touch, began the morning lower by 12 ticks in-fitting with the above modest bearish bias before slipping another 20 to a 91.46 base. While in the red by just over 30 ticks at worst, the benchmark remains clear of Monday’s 91.29 low and last week’s 91.08 trough. This morning’s underperformance is seemingly a function of the latest PSNB data. A series that showed borrowing in June was above market consensus and the second-highest June figure since records began; highest was in 2020, during COVID. A series that provides no relief for the Chancellor’s fiscal position and keeps the narrative for the Autumn Budget firmly towards tax increases. Elsewhere, BoE Governor Bailey is currently speaking with the Treasury Select Committee; nothing too pertinent thus far.
- UK sells GBP 1.7bln 1.125% 2035 I/L: b/c 3.35x (prev. 3.02x) & real yield 1.588% (prev. 1.386%).
- Germany sells EUR 0.422bln vs exp. EUR 0.5bln 2.30% 2033 Green and EUR 0.931bln vs exp EUR 1bln 2.50% 2035 Green Bund.
Commodities
- Subdued trade across the crude complex as prices move in tandem with broader sentiment, with just over a week left until US President Trump's August 1st tariff deadline, with little in the way of deals announced in recent days. WTI trades towards the bottom of a USD 65.07-65.86/bbl range while Brent resides in a USD 68.36-69.12/bbl parameter.
- Precious metals are taking a breather following Monday's rise and with macro newsflow rather light ahead of the August 1st tariff deadline, which also coincides with the US jobs report and the ISM Manufacturing PMI. Spot gold trades in a USD 3,344.90-3401.65/oz range after failing to sustain above USD 3,400/oz in APAC hours.
- Mostly but modestly subdued trade across base metals, although losses seem somewhat cushioned by the recent Chinese dam project, with iron ore prices overnight closing higher for a fifth consecutive session. 3M LME copper meanwhile trades flat in a notably narrow USD 9,827.70-9,883.00/t range at the time of writing.
- Coking coal prices overnight surged by 8%, hitting the daily limit. Some cited unverified market chatter that the Chinese National Energy Administration has reportedly issued a verification notice requiring all mines that have exceeded production capacity to suspend operations for rectification.
Geopolitics
- Iran's Foreign Minister said Iran is open to talks with the US but not directly for now, while it was separately reported that Iran's Foreign Minister told Fox News they cannot give up Iranian enrichment.
- Iranian Foreign Minister reiterates that Iran will not give up uranium enrichment program, via IRNA.
- World Health Organisation's Tedros said WHO staff residence in Deir al Balah, Gaza, was attacked three times on Monday as well as its main warehouse, while he demanded the immediate release of the detained staff and protection of all its staff. Tedros said two WHO staff and two family members were detained although three were later released and one staff member remained in detention.
US Event Calendar
- 8:30 am: Fed’s Powell Gives Welcome Remarks at Regulatory Conference
- 8:30 am: Powell Gives Opening Remarks
- 1:00 pm: Fed’s Bowman in Fireside Chat with Sam Altman
- Fed’s External Communications Blackout (July 19 - July 31)
DB's Jim Reid concludes the overnight wrap
If you see any evidence of me working harder this week it's because I was told last night how much it would cost to redecorate the house.There are people in the house who think that after 6 plus years post a complete renovation and having lived in it with three grubby kids, it is in desperate need of some fresh licks of paint. There are others (ok me) who disagree. I think we all know which argument will come out on top.
60/40 portfolios have generally come out on top over the last 24 hours with both equities and bonds continuing to rally even if the high-water mark for equities seemed to be the European close last night. The S&P 500 (+0.14%) crept up to a fresh record helped by the slew of good earnings reports but drifted around half a percent off its highs around the time Europe closed. The bigger move has been in sovereign bonds, with a large global rally that saw 10yr BTPs (-10.1bps) and OATs (-10.4bps) lead the way. 10yr bund yields (-8.3bps) posted their biggest daily decline since January (same for BTPs), and 10yr USTs (-3.9bps) also rallied. So this all helped to ease some fears about fiscal policy, as well as concerns about tighter financial conditions that had accompanied the recent rise in long-end bond yields. Overnight Japanese yields have re-opened after the election and holiday with 10yr yields -4bps lower but 30yr yields a couple of basis points higher. The ultra long end has marched to its own beat in recent weeks.
That small US equity rally was powered by the ongoing strength in big tech stocks, with the Magnificent 7 (+0.70%) posting a 9th consecutive advance for the first time since 2023. That left the index just half a percent beneath its all-time high from December, whilst the NASDAQ (+0.38%) hit an all-time of its own. We see Tesla and Alphabet report after the close tomorrow. As mentioned at the top, the equity rally did lose some steam later in the session, with almost two thirds of the S&P 500 constituents lower on the day, while the small cap Russell 2000 fell by -0.40%.
Another factor supporting bonds and equities in recent days has been a growing confidence that Fed Chair Powell was unlikely to be fired after the peak fears last week. However there were comments from Treasury Secretary Bessent yesterday that “we need to examine the entire Federal Reserve institution and whether they have been successful.” But they weren’t seen as particularly aggressive, and the 30yr Treasury yield came down -4.3bps to 4.94%, some way beneath the 5.07% intraday peak it reached last week. That was echoed across the yield curve, with 2yr yields down -0.9bps to 3.86%, and the 10yr yield as discussed at the top down -3.9bps to 4.38%. The flattening in the yield curve was the mirror image of the large steepening as Powell’s position came into focus last week. However, that decline in long-end yields also took out some support for the dollar, with the dollar index (-0.64%) seeing its biggest daily decline since mid-June after having rallied the previous two weeks.
Over in Europe, the picture was initially very different, as worries over the fate of the EU-US trade deal weighed on investors’ minds ahead of the August 1 deadline. Officials are expected to continue negotiating this week, and Bessent said on CNBC yesterday that things “don’t have to get ugly with the Europeans.” But the lack of concrete progress has continued to give investors pause. That meant the major indices were down for most of the session, although several managed to pare back their losses as the positive mood from US earnings spread more widely. So the STOXX 600, which had been down -0.41% intraday, recovered to close only -0.08% lower, and there were gains for the FTSE 100 (+0.23%) and the DAX (+0.08%) as well.
Japanese stocks opened significantly higher this morning (up around a percent) but have subsequently slipped with the Nikkei now -0.38% lower as focus shifts to the August 1st trade deadline and how the ruling coalition will deal with being three seats short of a majority.
Elsewhere in Asia the Hang Seng and Shanghai Composite are both up around a quarter of a percent but with the KOSPI (-1.58%) sliding after a strong start. It seems that August 1st is starting to focus investor minds in Korea as well. The S&P/ASX 200 (-0.17%) is slightly lower alongside S&P 500 (-0.05%) and NASDAQ 100 (-0.14%) futures.
Finally on geopolitics, Iran’s Tasnim news agency reported that Iran had agreed to hold talks with the UK, France and Germany over its nuclear program, expected to take place this Friday and separate to ongoing discussions on indirect talks with the US. And separately on Ukraine, Bloomberg reported that the US and Germany had agreed to send two Patriot systems to Kyiv. This follows last Friday’s announcement that the EU had approved “one of its strongest sanction packages” against Russia, including a lower oil price cap from $60 to $47.6/bbl. Brent crude fell as much as -1.23% intra-day on Monday but was a mere -0.10% lower at $69.21/bbl by the close. Those oil moves helped support the bond rally during European hours before its partial reversal later in the US session.
Now for the day ahead, we’ll get the US July Philadelphia Fed non-manufacturing activity, Richmond Fed manufacturing index, UK June public finances and France’s retail sales. We’ll also get the ECB’s bank lending survey and RBA minutes of the July meeting. Central Bank speakers include Fed Chair Powell and BoE Governor Bailey. Finally, today’s earnings reports include SAP and Coca-Cola.
Tyler Durden
Tue, 07/22/2025 - 08:29
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Trump at the White House, accompanied from left by technology executives Larry Ellison, Masayoshi Son and Sam Altman in January.
SoftBank CEO Masayoshi Son with OpenAI CEO Sam Altman in Tokyo in February. The companies each pledged $18 billion to Stargate
A Stargate AI-infrastructure site under construction in Abilene, Texas
Son and Altman participated in a Tokyo-based tech event last week. They have been at odds over Stargate partnership terms
The 2nd round of talks, Anadolu/Getty Images
This scanning electron microscope image shows the novel coronavirus (orange), which causes COVID-19 disease, isolated from a patient in the U.S., emerging from the surface of cells (green) cultured in the lab. Photo published on Feb. 13, 2020. NIAID-RML
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