PETER’S BUSINESS & FINANCE BRIEFING – Monday 21 July 2025, 06:00 Hong Kong
● Japan's ruling LDP set to lose majority, exit polls suggest ● Trump pushes for 15%-20% minimum tariff on all EU goods ● Global crypto assets hit $4tn as industry wins backing of US lawmakers
Monday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 24,657 -169 points -0.7%
Nikkei 225 (Japan) Market closed for public holiday
Quick Summary - 4 Things To Know Before Asian Markets Open
Donald Trump has escalated his demands in trade negotiations with the EU, pushing for a minimum tariff of 15% to 20% in any deal with the bloc, according to a Financial Times report Friday. The US president’s hardened stance aims to test the EU’s pain threshold after weeks of talks on a framework agreement that would have maintained a baseline tariff of 10% on most goods. If Trump insists on permanent reciprocal duties of 15% to 20%, they would be as high as they were when trade talks began in April, and could push Brussels towards retaliation, said a senior EU diplomat.
Exit polls from a key election in Japan project the ruling coalition is set to lose its majority. The coalition needs 50 seats to retain control of the 248-seat upper chamber. By the early hours of Monday in Tokyo, with around 16 seats left to call, it looked as though the ruling bloc would fall short. Prime Minister Shigeru Ishiba said he intends to stay on.
Japan’s core inflation cooled to 3.3% in June, down from a 29-month high of 3.7% as rice inflation showed signs of easing. The figure, which strips out costs for fresh food, was in line with the 3.3% expected by economists polled by Reuters. The headline inflation rate in the country dropped to 3.3%, cooling from 3.5% in May, but marking the 39th straight month that inflation has run above the Bank of Japan’s 2% target. The so-called “core-core” inflation rate, which strips out prices of both fresh food and energy and is closely monitored by the BOJ, climbed to 3.4% from 3.3% in the month before.
The total market value of all cryptoassets soared past US$4 trillion for the first time Friday, according to digital assets data provider CoinGecko. It comes after lawmakers in the US passed the country's first major national cryptocurrency legislation. The US House of Representatives passed a bill, known as the Genius Act, to create a regulatory framework for stablecoins, which are cryptocurrencies pegged to traditional assets like the US dollar. Trump is also preparing to sign an executive order that would open up the US$9tn US retirement market to crypto and other alternative investments. Bitcoin prices rose over 1% to $120,692 on Friday, taking its gains for the year to almost 27%.
Japan's Ruling LDP Set To Lose Majority
Exit polls from a key election in Japan project the ruling coalition is set to lose its majority. Voters headed to the polls earlier on Sunday for the tightly-contested election, being held amid public frustration over rising prices and the threat of US tariffs. Polls indicated that Ishiba's Liberal Democratic Party (LDP) and its junior partner Komeito were at risk of losing their majority, having already lost their majority in Japan's more powerful lower house. The coalition needs 50 seats to retain control of the 248-seat upper chamber - with an exit poll from public broadcaster NHK projecting them to win between 32 and 51. NHK projected it "may be difficult for the ruling coalition to maintain their majority". The Asahi newspaper estimated that Ishiba’s Liberal Democratic Party would win about 34 seats and its junior coalition partner Komeito would take about seven, giving them some 41 seats combined. By the early hours of Monday in Tokyo, with around 16 seats left to call, it looked as though the ruling bloc would fall short of the 50 it needed to remain in outright control.
The same polls showed that the small populist Democratic Party for the People is likely to win 14-21 seats, up from four now, as it appeals to younger voters seeking more take-home pay. Right-wing party Sanseito, which has tapped into anti-foreigner sentiment, could win 10-22 seats, a huge leap from the single seat it held before. Half of the seats in the upper chamber were being voted on in Sunday's election, with members elected for six-year terms. If the coalition takes home less than 46 seats, it would mark its worst performance since it was formed in 1999.
Japanese Prime Minister Shigeru Ishiba said he intends to stay on. It marks the first time since 1955 that a leader from the Liberal Democratic Party will govern the country without a majority in at least one of the legislative bodies. The less powerful upper house can’t appoint a prime minister, hold a no-confidence vote or stop the passage of a budget. But it can delay or block other legislation, potentially leading to gridlock in the policymaking process.
Trump Pushes For 15%-20% Minimum Tariff On All EU Goods
Donald Trump has escalated his demands in trade negotiations with the EU, pushing for a minimum tariff of 15% to 20% in any deal with the bloc, according to a Financial Times report Friday. The US president’s hardened stance aims to test the EU’s pain threshold after weeks of talks on a framework agreement that would have maintained a baseline tariff of 10% on most goods. Trump has also been unmoved by the latest EU offer to reduce car tariffs and would be happy to keep duties on the sector at 25% as planned, the FT reported, citing people familiar with the negotiations.
Maroš Šefčovič, EU trade commissioner, gave a downbeat assessment of his recent talks in Washington to the bloc’s ambassadors on Friday, said two people briefed on the meeting. One US official told the Financial Times the administration is now looking at a reciprocal tariff rate that exceeds 10%, even if a deal is reached. The position puts the EU in a bind as it approaches an August 1 deadline, when Trump said he will impose a 30% tariff on all its imports. The bloc has indicated it would retaliate over such a move but is divided over taking countermeasures and may be forced to accept a baseline of more than 10% in any deal.
If Trump insists on permanent reciprocal duties of 15% to 20%, they would be as high as they were when trade talks began in April and could push Brussels towards retaliation, said the senior EU diplomat. The US has also imposed sectoral tariffs of 50% on EU steel and aluminium. “We don’t want a trade war, but we don’t know if the US will leave us a choice,” they said. A second EU diplomat added “the mood has clearly changed” in favour of retaliation. “We are not going to settle at 15%,” they said.
Asian Economies Seek Trade Agreements With US
Indonesia is seeking tariff exemptions on commodities exports to the US, and the Philippines is hoping to secure a trade agreement when President Ferdinand Marcos Jr. meets Trump in Washington during his July 20-22 visit. Thailand expects the US to reduce a threatened tariff on its exports from 36% to a level in line with regional neighbours after presenting a “very substantial improvement” in a fresh round of talks, Finance Minister Pichai Chunhavajira said.
India’s Modi Likely To Visit UK This Week To Sign Trade Deal
Indian Prime Minister Narendra Modi is likely to visit the UK this week to sign a landmark trade deal between the countries. The agreement would slash tariffs on cosmetics, cars, and alcohol, amongst other goods, helping India and the UK to reduce disruption in the wake of protectionism from the US. The trading relationship is currently worth around £42.6 billion (US$57.1bn), and the deal, the UK’s biggest new agreement since Brexit, was finalised in May and is likely to take around a year to become effective.
China Spy Agency Accuses Foreign Agents Of Stealing Rare Earths
China’s spy agency has accused overseas intelligence agencies of stealing controlled rare earth materials, even as Beijing agrees to review applications to export the vital industrial resource after trade talks with the US. Without naming any country, the Chinese Ministry of State Security accused foreign entities of orchestrating the trafficking of these items, which Beijing sees as a strategic asset and has used as a bargaining chip in tariff negotiations with Washington. “In recent years, foreign espionage and intelligence agencies and their agents have attempted to collude with and incite unlawful people in the country to steal our rare earth-related items by means of mail delivery, posing a serious danger to our national security,” the ministry said in a WeChat post Friday.
The ministry claimed to have foiled an attempt by an unnamed country to illicitly acquire rare earths for stockpiling. The ministry urged citizens to report suspicious activities related to rare earth resources, citing tactics such as hiding rare earth powders in ceramic tile ingredients or disguising them in water bottles.
China and the US last month ratified a deal to suspend tariffs of as much as 145% after Beijing vowed to process export licenses on rare earths and the US agreed to lift its own controls on technology including some advanced AI chips. Exports of rare earths jumped 80% in June, but that’s still well below the levels that preceded the huge shock to global magnet supplies, prompting governments to urge China to boost flows.
Xi Jinping Warns Chinese Officials Against Over Investment
President Xi Jinping has issued an unusually blunt warning to local governments against over-investment in artificial intelligence and electric vehicles, as vicious price wars fuel deflation in the world’s second-largest economy. The comments, in which Xi attacked what he called “three pats officials” who evade responsibility for reckless investment plans, will strengthen market expectations that Beijing will intervene in the AI, EV and other industries it believes are suffering from over-investment. “When it comes to projects, there are a few things — artificial intelligence, computing power and new energy vehicles. Do all provinces in the country have to develop industries in these directions?” Xi told the Central Urban Work Conference, a rarely held high-level Communist party meeting on urban development.
Xi’s remarks were carried on the front page of the Communist party mouthpiece, the People’s Daily, underlining their importance. They follow a series of official statements attacking what Beijing calls “neijuan”, or “involution”, price wars in industries suffering from overcapacity. Xi referenced popular idioms to criticise so-called three pats officials — those who pat their own heads and chests while making reckless decisions and assuring others everything is fine, then “pat the dust off their buttocks” and slip away.
Wells Fargo Halts Travel To China After Banker Hit With Exit Ban
Wells Fargo has stopped work travel to China after authorities there prevented a senior trade finance banker from leaving, amid strained relations between Beijing and Washington. Chenyue Mao, an Atlanta-based managing director at Wells Fargo and a US citizen, was barred from departing China after she recently travelled there for work, according to the Financial Times. Mao’s exit ban led Wells to halt all work travel to China. A Wells Fargo spokesperson said the bank was “closely tracking this situation and working through the appropriate channels so our employee can return to the United States as soon as possible”. The reasons for the exit ban are unclear.
Japan Tells Cos. In Taiwan ‘You’re On Your Own’ If China Invades
Japanese government officials are telling companies they would be “on their own” if they needed to evacuate staff from Taiwan in case of a Chinese attack, according to a Financial Times report Friday citing people familiar with the matter. The message has hit one of Taiwan’s largest sources of foreign direct investment.
The FT reported last week that the Pentagon had pressed Japan and Australia to clarify what role they would play in a US-China war over Taiwan, frustrating Tokyo and Canberra. Two Japanese officials told the FT that, under the country’s pacifist constitution, its military could only be deployed abroad with approval from a host government. Given that Japan does not recognise Taiwan diplomatically, as with all but 12 countries in the world, there “is no government in Taiwan from our viewpoint”, one of the officials said. They added that China was unlikely to grant the Japanese military approval to conduct evacuations.
Although the Japanese government has never confirmed this line as its official position, companies have been receiving the warnings for about three years, diplomats and corporate executives said. Japanese diplomats told company risk officers that “you are on your own if you put significant assets in Taiwan”, said one person present at one of the conversations. The warnings have had a chilling effect on Japanese business in the country. “It has discouraged investment. There is lots of new US investment in Taiwan, but barely any Japanese,” said a US official familiar with the issue.
Foreign direct investment by Japanese companies, traditionally Taiwan’s third-largest source of FDI, after the EU and US, slumped 27% last year to US$452mn, and is down from a peak of US$1.7bn in 2022. Almost 3,000 Japanese companies have operations in Taiwan, according to Teikoku Databank, a research group, of which one-third is involved in manufacturing, especially semiconductor materials and equipment. Retailers, wholesalers and restaurant groups are also big investors.
Japan’s Core Inflation Eases From 29-Month High
Japan’s core inflation cooled to 3.3% in June, down from a 29-month high of 3.7% as rice inflation showed signs of easing. The figure, which strips out costs for fresh food, was in line with the 3.3% expected by economists polled by Reuters. The headline inflation rate in the country dropped to 3.3%, cooling from 3.5% in May, but marking the 39th straight month that inflation has run above the Bank of Japan’s 2% target. The so-called “core-core” inflation rate, which strips out prices of both fresh food and energy and is closely monitored by the BOJ, climbed to 3.4% from 3.3% in the month before.
Rice prices, which have seen their fastest rate of increase in over half a century in May, saw a slight easing to a 100.2% increase year-over-year, compared to the 101.7% jump in May. Rice prices have begun to decline after the government released its stockpiles earlier this year, although prices remain elevated.
Harumi Taguchi, Principal Economist at S&P Global Market Intelligence, said that while the June results were in line with expectations, inflationary pressures persist, particularly for items not subsidized by the government. “However, if yen depreciation persists, the rise in import prices could lead to higher prices. Continued vigilance in consumer spending is expected as real wages decline and uncertainties loom over the economic landscape.” Krishna Bhimavarapu, APAC Economist at State Street Investment Management pointed out that higher tariffs further complicate the outlook for Japan. Bhimavarapu forecast GDP growth to average 0.4% year-over-year in 2025. Japan faces a 25% tariff that will come into effect on August 1, and currently faces a 25% levy on automobiles, which are its largest export to the U.S.
The rising cost of living was a dominant theme in Sunday’s Upper House election as inflation-strained households vented their anger on the ruling Liberal Democratic Party. After years of deflation, prices are rising and real incomes declining, boosting the appeal of right-wing parties that have made populist appeals to voters. Prime Minister “Ishiba’s hesitant, half-measure approach does little to address voter frustration with a major cost of living crisis,” said Moody’s Analytics economist Stefan Angrick.
Hong Kong Business Morale Improves Slightly In Q3
Business confidence in Hong Kong improved slightly to -8 in the third quarter of 2025 from -9 in the previous quarter. The share of respondents expecting business conditions to improve edged up to 10% (vs 9% in Q2), while those anticipating worse conditions remained unchanged at 18%. Confidence strengthened for financing and insurance (11 vs 8 in Q2) and turned positive for real estate (3 vs -11). Sentiment also improved, though remained negative, for manufacturing (-2 vs -20), import/export trade and wholesale (-18 vs -19), accommodation and food services (-16 vs -37), and information and communications (-9 vs -17). In contrast, sentiment deteriorated further for construction (-22 vs -16), transportation, storage and courier services (-31 vs -25), and professional and business services (-14 vs -6). Meanwhile, confidence in retail slipped into negative territory at -14, down from 4 in the previous quarter.
Malaysia's Economy Expands 4.5% In Q2
Malaysia’s economy expanded by 4.5% year-on-year in the second quarter of 2025, slightly up from 4.4% growth in the previous period, preliminary estimates showed. The uptick was driven by a faster rise in agricultural activity, which grew by 2% compared to a 0.6% rise in Q1. Growth in services accelerated to 5.3% from 5%. Growth moderated in manufacturing (3.8% vs 4.1%) and construction (11% vs 14.2%). On a quarterly basis, the economy contracted by 1%, following a 3.5% decline in the prior period.
Malaysia Exports Unexpectedly Fall
Exports from Malaysia unexpectedly shrank by 3.5% y/y to a four-month low in June, missing forecasts of a 5.6% increase and following an upwardly revised 1.2% drop in May. This marked the second straight month of decline and the steepest fall in exports since December 2023, driven largely by a 9.3% drop in shipments to China, Malaysia’s top trading partner. By destination, exports also declined to Singapore (-16.9%) and Japan (-1.6%), while exports to the US grew 4.7% as factories rushed to ship goods ahead of the August deadline, following tariff warnings. For H1 of 2025, total exports rose 3.8% y/y.
Malaysia’s trade surplus narrowed sharply to MYR 8.6 billion in June, down from MYR 14.3 billion in the same month last year and well below market expectations of MYR 10.4 billion. For the first half of 2025, the country recorded a surplus of MYR 55.5 billion, with exports and imports advancing by 3.8% and 5.9%, respectively.
US Consumer Sentiment At 5-Month High
US consumer sentiment rose to a five-month high in early July as expectations about the economy and inflation improved. The University of Michigan Consumer Sentiment Index for the US increased to 61.8 in July, the highest reading in five months. That compared to 60.7 in June and was above forecasts of 61.5, preliminary estimates showed. The current conditions index improved to 66.8 from 64.8 and the expectations gauge rose to 58.6 from 58.1.
Meanwhile, year-ahead inflation expectations fell for a second consecutive month to 4.4% from 5% in June. Long-run inflation expectations receded for the third consecutive month, falling back to 3.6% from 4%. Both inflation gauges are the lowest since February but remain above December 2024, indicating that consumers still perceive substantial risk that inflation will increase in the future. “Consumers’ expectations over business conditions, labour markets and even their own incomes continue to be weaker than a year ago,” Joanne Hsu, director of the survey, said in a statement.
US Housing Starts & Building Permits Close To Estimates In June
The latest numbers on US housing starts and building permits showed some improvement and were close to expectations. Starts in June totalled a seasonally adjusted annual rate of 1.32 million, up 4.6% from May and a bit better than the 1.3 million estimate from Dow Jones, according to Commerce Department figures released Friday. On the permits side, authorizations totalled just shy of 1.4 million, up 0.2% monthly and ahead of the 1.39 million estimate. However, housing completions slumped, totalling 1.31 million, which was off 14.7% monthly and 21.4% from a year ago.
Week Ahead - July 21st to 27th
This week, market attention will remain focused on trade developments and any potential agreements between the US and its key trading partners. Results from the Magnificent Seven tech giants will kick off this week with Alphabet and Tesla reporting. Together, the seven megacap tech companies are projected to post earnings growth of over 14% in the second quarter, while the other 493 S&P 500 companies are set to grow just 3.4%, according to FactSet. Other major companies including Verizon, Coca-Cola, T-Mobile, and IBM are set to report their quarterly results. On the economic front, key US data releases include flash S&P Global PMIs, durable goods orders, existing and new home sales. Federal Reserve Chairman Jerome Powell is slated to speak on bank regulation, his last scheduled remarks before the central bank weighs its next move on interest rates on July 29-30.
Meanwhile, investors are looking ahead to the August 1 tariff-pause expiration and related drama. Donald Trump backed away from threats to fire Federal Reserve Chair Jerome Powell last week but continues to say rates should be lower. On Friday, Fed governor Christopher Waller said he would accept the top job at the central bank, if offered. Powell's term as chair ends next year. Waller has pushed for an interest-rate cut this month, a move that aligns with Trump's demands for looser policy. Investors see only a marginal chance of an imminent cut, however.
In Asia, investors will closely monitor the results of Japan’s upper house election and the Tokyo CPI report. There will be flash PMI figures for Japan and India.
Globally, monetary policy decisions from the ECB, the Russian Central Bank, and the Central Bank of Turkey will be in focus. Consumer and business sentiment surveys will be released including GfK consumer confidence readings for Germany and the UK, and the Ifo business climate index in Germany. There will also be UK retail sales to digest.
Australian Stocks At Record High
Asia-Pacific stock markets were mixed Friday after the S&P 500 and Nasdaq hit record highs Thursday following a slew of better-than-expected second quarter earnings reports. Investors in the region were also reacting to a cooling inflation print out of Japan. Stocks in Australia closed at record highs after rising unemployment figures fuelled bets of a rate cut from the country’s central bank. The S&P/ASX 200 jumped 1.4% to close at 8,757.2, an all-time high. For the week it was up 2.1%. Japan’s Nikkei 225 slipped 0.2% to 39,819 as investors remained cautious ahead of the weekend’s Upper House election. The Nikkei rose 0.6% last week. South Korea’s Kospi lost 0.1% but was up 0.4% over the five days.
Stocks in Indonesia increased 0.3%, extending gains for the ninth straight session. The Jakarta Stock Exchange Composite Index hit its highest level since mid-December 2024 and surpassed the 7,300 mark for the first time.
In Singapore, the Straits Times Index hit a fresh peak, closing 0.7% higher. It was the tenth straight session of gains.
In India, the BSE Sensex closed 0.6% lower at 81,758, hitting its lowest level in nearly four weeks. For the week, the Sensex declined 0.9%, marking its third straight weekly drop amid ongoing uncertainty surrounding US–India trade negotiations.
Shares of Taiwan Semiconductor Manufacturing Company (TSMC) rose 2.2% Friday in Taipei following its better-than-expected second-quarter earnings posted Thursday after Taiwan’s trading hours. The company reported a near 61% year-on-year rise in second-quarter profit which hit a record high, as demand for artificial intelligence chips stayed strong. TSMC also forecast a 38% year-over-year increase in third quarter revenue.
Global battery material stocks jumped after the US moved to impose hefty duties on graphite imported from China. Shares of non-Chinese graphite producers surged on Friday after the US announced anti-dumping duties of 93.5% on imports from China of a mineral vital to batteries in electric vehicles. Australia-listed Syrah Resources, the largest non-Chinese graphite miner, rose almost 26% as investors bet the duties could help them compete against dominant Chinese rivals. Novonix, a dual-listed Australian-US producer, gained 16% Friday, and South Korea’s Posco Future M was up 19.6%.
Hong Kong Stocks Close At 3-Year High
Hong Kong stocks rose to a three-year high on Friday, following a rally on Wall Street the previous day that took the S&P 500 and Nasdaq Composite Index to record highs. The Hang Seng Index closed up 327 points, or 1.3%, to 24,826, the highest level since February 2022, pushing the index’s gains for the week to 2.8%, the most in three weeks. The Hang Seng Tech Index added 1.7%. On the mainland, the CSI 300 Index rose 0.6% to 4.059. For 2025 so far, the Hang Seng Index is up 23.8% and the CSI 300 has gained 3.1%.
Sentiment was boosted after Beijing last week pledged to curb massive price-cutting by Chinese firms. Logistics firm ZTO Express jumped 6.5%. E-commerce leader Alibaba rose 2.9% and peer JD.com gained 3.0%. Online game operator NetEase added 2.5%, while food delivery platform Meituan increased 1.4%.
European Stocks Mixed Despite Earnings Beats
European stocks closed mixed Friday with earnings once again in the spotlight. Investors are still monitoring trade tensions between the European Union and the United States. The pan-European Stoxx 600 gave up earlier gains to close unchanged. Healthcare and technology stocks dragged on Friday, both down around 0.6%, while oil and gas gained 0.7%. London’s FTSE 100 ended the day 0.3% lower. For the week, the Stoxx was down 0.1% while the FTSE gained 0.6% over the five days.
Shares of Saab led gains in the Stoxx, closing 16.4% higher, after the company reported stronger-than-expected profit and sales growth for the second quarter. The Swedish defence giant reported operating income of 1.98 billion Swedish krona (US$200mn). It marks a 49% jump from the same period a year ago and beat the 1.71 billion krona expected by analysts polled by LSEG. Quarterly sales rose by a better-than-expected 30% year-on-year.
Vestas Wind was up 15.0% after it announced a new US contract and analysts at JPMorgan upgraded the stock to “overweight” from “neutral.”
Shares of Burberry were up 5.6% after reporting sales in the Americas rose 4% year-on-year in the fiscal first quarter, indicating the green shoots of a turnaround at the luxury brand. Burberry’s overall group revenues declined 1% year-on-year on a comparable basis. Analysts had been expecting a year-on-year decline of 3%. Sales declined 5% in the Greater China region and by 4% in Asia Pacific, which the company said was “driven by Japan following a slowdown in tourism.”
European Union states have approved a fresh sanctions package on Russia over its war against Ukraine including a revised oil price cap, new banking restrictions and curbs on fuels made from Russian petroleum. The package will see about 20 more Russian banks cut off from the international payments system SWIFT and face a full transaction ban, as well as restrictions imposed on Russian petroleum refined in third countries. EU High Representative for Foreign Affairs and Security Policy, Kaja Kallas, said the EU is "cutting the Kremlin's war budget further, going after 105 more shadow fleet ships, their enablers, and limiting Russian banks' access to funding" with the new sanctions package.
US Stocks Retreat As Trump Pushes For Higher EU Tariffs
US stocks came off their highs Friday following a Financial Times report that Donald Trump was pushing for greater tariffs on the European Union. Trump is demanding a minimum tariff of between 15% and 20% in any deal with the EU, the FT reported. But a solid start to earnings season helped offset investors' worries over tariffs and also threats to the Federal Reserve’s independence. Updates from banks and consumer-focused companies last week have pointed to a resilient economy.
Stocks were mixed Friday after the S&P 500 and Nasdaq Composite both notched record highs Thursday. The Dow fell 142 points, or 0.3%, settling at 44,342. A 2.4% post-earnings slide in American Express dragged the Dow lower along with 3M which fell 3.7% after reporting premarket. The S&P 500 was unchanged at 6,297, after hitting a record high earlier in the day. The Nasdaq Composite added less than 0.1%, ending at a record high of 20,896. It was the 11th record high of the year for the tech heavy index.
Both the S&P 500 and Nasdaq posted weekly gains, rising 0.6% and 1.5%, respectively. The Dow was 0.1% lower on the week. With 12% of S&P 500 companies reporting results so far, 83% have beaten estimates.
Netflix shares slipped 5.1%. The streaming-TV provider’s results beat expectations in every major metric, and it raised its forecasts, but that wasn’t enough given that the stock has soared almost 50% from an April low.
Meanwhile, Wall Street awaits any trade announcements from President Trump ahead of the August 1 tariff-pause expiration, plus any moves regarding Federal Reserve Chair Jerome Powell. Trump backed away from threats to fire Powell last week, but his advisers have seized on a building-renovation project plagued by cost overruns as a new way to undermine the Fed chair.
US Treasury Yields Edge Down
The yield on the US 10-year Treasury note edged down 3 bps to 4.42% on Friday, and the 2-year yield dropped 4 bps to 3.87%, as investors digested the latest University of Michigan Consumer Sentiment data and comments from Federal Reserve officials. Consumer sentiment improved in July, and inflation expectations declined for both the short and long term. Meanwhile, Fed Governor Christopher Waller reiterated his support for a rate cut in July and suggested he may dissent if the Federal Open Market Committee opts to hold rates steady. Fed President Mary Daly maintained her outlook for two rate cuts this year. Despite the remarks, markets continue to price in no change to the federal funds rate this month, but they still anticipate two quarter-point cuts, likely in September and December. Earlier in the week, data showed resilient consumer spending through strong retail sales figures, while both core CPI and PPI came in softer than expected.
Dollar Notches Second Weekly Gain
The US Dollar Index trimmed some losses to end 0.2% lower at 98.46 on Friday after the University of Michigan’s consumer sentiment index rose to 61.8 in July, marking a five-month high and beating expectations. The data added to signs of economic resilience, reinforcing the view that the Federal Reserve can afford to delay interest rate cuts. Earlier this week, stronger-than-expected retail sales and a drop in jobless claims to a three-month low also supported the dollar. Fed Governor Adriana Kugler backed holding rates steady for “some time,” while others, like Governor Waller and San Francisco Fed’s Daly, still anticipate cuts later this year. Meanwhile, Donald Trump reassured markets that he won’t fire Fed Chair Jerome Powell, though he continues to criticize the pace of rate cuts. The dollar gained 0.6% last week, marking its second consecutive weekly advance and the first such streak since May.
The Japanese yen fell 0.1% to ¥148.81 per dollar on Friday, following a 0.5% drop in the previous session, as investors digested the latest inflation data. Headline inflation ticked down to 3.3% in June from 3.5% in May, yet it marked the 39th consecutive month that inflation remained above the Bank of Japan's 2% target. This bolstered expectations that the BoJ may consider tightening monetary policy. The offshore Chinese yuan was unchanged around Rmb 7.1775 per dollar.
Gold Notches Weekly Decline
Gold traded 0.3% higher at $3,350 per ounce on Friday, but notched its first weekly loss in three, as strong US economic data reduced the urgency for the Fed to cut interest rates. Last week, the precious metal was down 0.2%. Nevertheless, safe-haven demand for gold remained supported by ongoing trade uncertainties and geopolitical tensions, including the escalating Russia-Ukraine conflict and unrest in the Middle East, which further enhanced gold’s appeal as a safety asset.
Oil Falls After EU Imposes Fresh Sanctions On Russia
Global oil prices fell as mixed US economic data offset concerns about new EU sanctions on Russian energy exports. The EU approved its 18th sanctions package targeting Russia’s oil industry, including a new floating price cap and a ban on petroleum products made from Russian crude. Separately, Chevron finalized its US$55 billion acquisition of Hess, securing a stake in a major oil discovery off the coast of Guyana. Brent crude futures traded 0.4% lower at $69.28 a barrel. For the week, oil was down 1.5%.
Global Crypto Assets Hit $4tn
Lawmakers in the US have passed the country's first major national cryptocurrency legislation. The US House of Representatives passed a bill, known as the Genius Act, to create a regulatory framework for stablecoins, which are cryptocurrencies pegged to traditional assets like the US dollar. Trump is also preparing to sign an executive order that would open up the US$9tn US retirement market to crypto and other alternative investments. Bitcoin prices rose over 1% to $120,692 on Friday, taking its gains for the year to almost 27%. The industry’s benchmark asset, hit a record $123,205 earlier last week. Ether prices jumped over 5% Friday to $3,634. Ether has surged 22% over the past week. The total market value of all cryptoassets soared past US$4 trillion for the first time Friday, according to digital assets data provider CoinGecko.
Mark Palmer, an analyst at investment bank The Benchmark Company, said the flurry of US legislation constituted “one of the most significant moves” towards mainstream adoption of crypto. “Institutional funds which have been on the sidelines waiting for exactly this type of clarity will flow into the space,” he said.
However, critics have warned that tying crypto closer to traditional finance poses grave risks in the event of another market crash. Democrat senator Elizabeth Warren said that the Genius Act “lacks the basic safeguards necessary to ensure that stablecoins don’t blow up our entire financial system”. She also argued that the issuance of stablecoins by private companies risked “concentrating too much economic power in the hands of a few”. Donald Trump received hundreds of millions of dollars in campaign funding from crypto executives and has vowed to make the US the “crypto capital of the world”.
Peter Lewis’ Money Talk Podcast
On Monday’s “Peter Lewis’ Money Talk” podcast, I’ll be joined by Alex Wong, director at Alex KY Wong Asset Management, and William Ma, Chief Investment Officer at GROW Investment Group. Providing a view from Mainland China will be Hao Hong, Managing Partner and CIO at Lotus Asset Management.
The podcast is also available on Apple Podcasts, YouTube Studio and Spotify.
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https://www.youtube.com/playlist?list=PLnwqOJD9ie5gHH29bNfuG1Nscy8rdJo6O
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This podcast is sponsored by Surfin Group, which is headquartered in Singapore and offers online financial services to 60 million customers across 10 countries. You can find out more about them by going to their website www.surfin.sg
