PETER’S BUSINESS & FINANCE BRIEFING – Thursday 17 July 2025, 06:00 Hong Kong
● Trump reportedly asks lawmakers whether he should fire Fed’s Powell ● Trump says pharmaceuticals tariffs probable by August 1 ● Bank Indonesia cuts its benchmark interest rate by 25 bps to 5.25%
Thursday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 24,563 +46 points +0.2%
Nikkei 225 (Japan) Projected Open: 39,570 -93 points -0.2%
Quick Summary - 4 Things To Know Before Asian Markets Open
A US-China deal is making headway, according to Scott Bessent who said talks between the world’s largest economies are in a “very good place” ahead of an expected meeting in the coming weeks. “I tell market participants not to worry about August 12,” the Treasury secretary told Bloomberg, referring to the end of a 90-day reprieve announced in May.
Donald Trump said he was likely to impose tariffs on pharmaceuticals as soon as the end of the month and that levies on semiconductors could come soon as well, suggesting that those import taxes could hit alongside broad “reciprocal” rates set for implementation on Aug. 1. At a Cabinet meeting earlier this month, Trump said he expected pharmaceutical tariffs to grow as high as 200% after giving companies a year to bring manufacturing back to the US.
Bank Indonesia (BI) cut its benchmark interest rate, the BI-Rate, by 25 bps to 5.25% and said it’s ready to ease further if needed. It was the fourth cut of an easing cycle that began last September. The decision accords with lower inflation projections for 2025 and 2026, the currency’s stability, and the need to bolster the economy, Bank Indonesia Governor Perry Warjiyo said in a briefing. The move comes after Donald Trump said he reached a deal with Indonesia that will tariff its goods at 19%, adding that the Southeast Asian nation agreed to erase all duties on US imports.
Donald Trump reportedly asked lawmakers whether he should fire Federal Reserve chairman Jerome Powell in a move that sparked renewed concerns over the central bank’s independence and sent the US dollar lower. A White House official on Wednesday said Trump asked Republican members of Congress during an Oval Office meeting late the previous day whether he should remove Powell. Lawmakers supported the idea, the official said. The President “indicated he likely will soon,” said the official. However, Trump later denied he had plans to remove Powell. “We’re not planning on doing it,” he said Wednesday at the White House. “I don’t rule out anything,” he added, “but I think it’s highly unlikely, unless he has to leave for fraud, and it’s possible there’s fraud.”
Bessent Tells Markets Not To Worry About China Tariff Deadline
A US-China deal is making headway, according to Scott Bessent who said talks between the world’s largest economies are in a “very good place” ahead of an expected meeting in the coming weeks. “I tell market participants not to worry about August 12,” the Treasury secretary told Bloomberg, referring to the end of a 90-day reprieve announced in May. Bessent said he hopes to meet with his counterpart Vice Premier He Lifeng soon, possibly in a third country, either before or after the Chinese leadership hold a meeting early next month. “We’re still working on it,” he said. “The Chinese leadership has a big conclave at the beginning of August. We’re trying to work out whether that could be in a third country either before or after that conclave.”
Bessent and his fellow US trade negotiators previously met with Chinese officials in Geneva in May, where they agreed to reduce their overall tariffs rates on each other. They held more talks in June in London, where they reached an understanding on easing export controls on semiconductors and rare earths.
The US government has recently assured chip maker Nvidia Corp. that licenses for sales of its advanced H20 GPU to Chinese firms would be granted, the company said in a blog post. In the Bloomberg TV interview, Bessent confirmed that development and said the granting of such licenses was among the offerings from the Trump administration in its talks with China. “You might say that that was a negotiating chip that we used in Geneva and in London,” he said. “It was all part of a mosaic. They had things we wanted. We had things they wanted, and we’re in a very good place.”
President Donald Trump has softened his tone with China in an effort to secure a summit with Xi Jinping and a trade deal, according to people familiar with internal deliberations, Bloomberg News reported Wednesday. Trump is focused on cutting purchase deals with Beijing and celebrating quick wins, rather than addressing root causes of trade imbalances, people said. Trump's gentler handling of China is causing a rift among his advisers, with some wanting to hold a tough line against Beijing and others supporting a more conciliatory approach, people familiar with the matter said.
Trump Says Pharmaceuticals Tariffs Probable By August 1
Donald Trump said he was likely to impose tariffs on pharmaceuticals as soon as the end of the month and that levies on semiconductors could come soon as well, suggesting that those import taxes could hit alongside broad “reciprocal” rates set for implementation on August 1. “Probably at the end of the month, we're going to start off with a low tariff and give the pharmaceutical companies a year or so to build, and then we’re going to make it a very high tariff,” Trump told reporters Wednesday. At a Cabinet meeting earlier this month, Trump said he expected pharmaceutical tariffs to grow as high as 200% after giving companies a year to bring manufacturing back to the US. Drugmakers like Eli Lilly, Merck and Pfizer could be impacted immediately, risking higher costs for US consumers.
The inflationary threat is compounded by the semiconductor tariffs, which are expected to affect not only the chips themselves but popular products like Apple and Samsung laptops and smartphones. Trump said his timeline for implementing tariffs on semiconductors was “similar” and that it was “less complicated” to impose levies on chips, without providing additional detail.
Trump also predicted that he could strike “two or three” trade deals with countries before his so-called reciprocal tariffs are implemented on August 1, saying that an agreement with India was among the most likely. Trump told reporters the US was engaged in substantive discussions with between five and six countries, but that he wasn’t necessarily inclined to finalize agreements over simply dictating a tariff rate. “I would say India, and we have a couple of others, but I have to tell you, for the most part, I’m very happy with the letters,” Trump said. The US president also said that he was likely to impose a standard tariff of “probably a little over 10%” on smaller countries that did not receive tailored rates.
Trump Says Indonesia To Face 19% Tariff
Donald Trump says he has reached a deal with Indonesia that will tariff its goods at 19%, adding that the Southeast Asian nation agreed to erase all duties on US imports and buy more than US$19 billion of American products including 50 Boeing jets. “We are going to have full access to Indonesia,” Trump told reporters Wednesday at the White House. “They are paying 19% and we are not paying anything.” He also threatened higher tariffs on goods transshipped through the country, a similar demand he’s made on regional neighbours aimed at stopping Chinese goods from dodging US barriers.
Trump said later on social media that Indonesia agreed to purchase US$15 billion in US energy and US$4.5 billion worth of agricultural products, adding that “many” of the Boeing planes would be 777s. No timing or details of the purchases were disclosed, and Jakarta hasn’t confirmed the tariff rate. It’s unclear if some of the big-ticket deals he’s touted are realistic. For instance, Indonesia’s state-owned airline Garuda is short on cash and hasn’t taken delivery of dozens of Boeing planes it already ordered.
Indonesia President Prabowo Subianto said he had a “very good call” with Donald Trump following the latter’s announcement of a trade deal. However, Prabowo did not confirm the details of the trade deal or the tariff rate. “Together, we agreed and concluded to take trade relations between Indonesia and the United States into a new era of mutual benefit between our two great nations,” Prabowo wrote in an Instagram post on Wednesday.
Last week, Trump sent a letter to Indonesia threatening to tariff it at a 32% rate unless it negotiated a trade deal by August 1. Still, the 19% tariff is a sharp increase from the 5% average US tariff on Indonesian goods in 2024. The pact with Indonesia is the first struck with a country targeted by Trump’s tariff letters sent over the last week. . He also said while some countries had indicated a willingness to “open” trade after his threats, others had not.
The US is Indonesia’s second-largest export market for goods ranging from apparel to palm oil, two sectors that are also responsible for millions of jobs in the country. The government had cut its growth forecast this year to 5% from 5.2% to account for the trade war fallout. The slew of tariff threats from Trump have prompted economies, including Indonesia, to broaden trade ties beyond the US. Indonesia reached a tentative economic agreement with the EU over the weekend after 10 years of trade negotiations.
Bank Indonesia Cuts Interest Rates & Signals More To Come
Bank Indonesia (BI) cut its benchmark interest rate, the BI-Rate, by 25 bps to 5.25% and said it’s ready to ease further if needed. It was the fourth cut of an easing cycle that began last September.
The decision accords with lower inflation projections for 2025 and 2026, the currency’s stability, and the need to bolster the economy, Bank Indonesia Governor Perry Warjiyo said in a briefing. He said lower borrowing costs should help boost credit growth, while the tariff deal with the US should help businesses as they plan ahead. “We are grateful that the uncertainty has gradually subsided from month to month,” Warjiyo said. “We have just received the results of tariff negotiations with the US, which we welcome positively.”
The rupiah’s recent stability has given the central bank room to support the economy after the government cut its growth outlook to 5% this year, down from a 5.2% target. BI maintained its 2025 growth forecast at 4.6%-5.4%. Core inflation will be lower than expected this year and come in below the midpoint of BI’s target range of 1.5%-3.5%, Warjiyo said.
Mohit Mirpuri, senior partner at SGMC Capital, said, "today’s cut sends a strong pro-growth signal." Pantheon Macroeconomics’ Miguel Chanco said, "the central bank still rightly believes that the economy needs more support".
Singapore Warns Of Slower Growth Amid Tariff Uncertainty
Singapore's economic growth is expected to slow in the second half of 2025 despite a stronger-than-expected 4.3% expansion in Q2 due to front-loaded exports ahead of new US tariffs. Monetary Authority of Singapore chief Chia Der Jiun said that the outlook aligns with expectations of weaker global activity and external demand. “There is a range of possibilities around the extent and scope of tariffs, whether trade agreements are concluded and prove to be durable, and whether escalating trade conflicts recur,” Chia noted. The city-state had already lowered its full-year GDP forecast to 0–2%, down from an earlier 1–3%. Although Donald Trump recently announced sweeping new tariffs of 20–50% on over 20 countries starting August 1, Singapore has not yet been notified and remains subject to a 10% baseline tariff announced in April.
Japan Manufacturers’ Sentiment Strengthens In July
The Reuters Tankan index for Japanese manufacturers rose to +7 in July from +6 in June, marking the first improvement in three months. The uptick was driven largely by a rebound in the semiconductor sector, despite lingering concerns over US trade tariffs. Looking ahead, manufacturers anticipate further improvement, projecting sentiment to reach +8 by October. While overall sentiment remains positive, manufacturers continue to closely watch evolving US trade policy as a potential risk factor.
South Korea Export Prices Fall 4.5% Amid Trade Headwinds
South Korea’s export prices fell 4.5% year-on-year in June, deepening from a revised 2.6% drop in May. The decline was largely driven by a sharp 4.5% fall in manufactured goods prices, which had previously risen 2.6% the month before. On a monthly basis, export prices declined 1.1% after a 3.5% drop in May, with the Korean won’s appreciation playing a key role. The continued weakness in export prices reflects growing external challenges, including newly imposed US tariffs of up to 25% announced by Donald Trump, set to take effect on August 1. These factors are adding pressure to South Korea’s trade environment in the months ahead.
US Wholesale Inflation Unchanged In June
A measure of wholesale prices showed no change in June. The producer price index (PPI) was flat, according to seasonally adjusted numbers from the Bureau of Labor Statistics reported Wednesday, largely driven by a drop in services costs. Economists surveyed by Dow Jones had been looking for an increase of 0.2%. In the previous month the PPI was 0.3%. Core PPI, which also was expected to show a 0.2% increase, also came in unchanged following an upwardly revised increase of 0.4% in the previous month.
Data released Tuesday showed US consumer prices rose in June as Donald Trump’s tariffs began to slowly work their way through the US economy. Americans as of Sunday faced a 20.6% average effective tariff rate, according to the Yale Budget Lab, the highest since 1910. The consumer price index increased 0.3% m/m, putting the 12-month inflation rate at 2.7%, the Bureau of Labor Statistics reported Tuesday. The numbers were in line with the Dow Jones consensus, though the annual rate is the highest since February and still above the Federal Reserve’s 2% target. Excluding volatile food and energy prices, core inflation picked up 0.2% m/m, slightly below the outlook for a 0.3% gain. The annual rate moved up to 2.9%, in line with estimates. Both the main and underlying inflation measures are now printing at their highest levels in four months.
There were notable increases on what Americans pay for key imports such as furniture and clothing, a potential sign of tariff-linked price increases that many economists think will continue in the months ahead. Appliances jumped the most in nearly five years, toys increased at the fastest pace since early 2021 while household furnishings and sports equipment climbed by the most since 2022. Inflation Insights President Omair Sharif pointed out that excluding cars, core goods prices climbed 0.55% in June, the biggest monthly advance since November 2021. “Today’s report showed that tariffs are beginning to bite,” he said in a note.
Trump Asks Lawmakers Whether He Should Fire Fed’s Powell
Donald Trump reportedly asked lawmakers whether he should fire Federal Reserve chairman Jerome Powell in a move that sparked renewed concerns over the central bank’s independence and sent the US dollar lower. A White House official on Wednesday said Trump asked Republican members of Congress during an Oval Office meeting late the previous day whether he should remove Powell. Lawmakers supported the idea, the official said. The President “indicated he likely will soon,” said the official. However, Trump later denied he had plans to remove Powell. “We’re not planning on doing it,” he said Wednesday at the White House. “I don’t rule out anything,” he added, “but I think it’s highly unlikely, unless he has to leave for fraud, and it’s possible there’s fraud.”
Separately, The New York Times reported that Trump has gone so far as to draft a letter for firing Powell, and that he showed it to lawmakers during the meeting. A Fed official declined to comment on what happened during the Oval Office meeting. But Powell has said repeatedly that his firing is “not permitted under the law.” No president ever has attempted to fire the country’s top central banker, though others have criticized prior Fed chairs.
Kevin Hassett, one of Donald Trump’s longest-serving economic aides, is the early frontrunner to replace Jerome Powell as Federal Reserve chief next year, according to Bloomberg News citing people familiar with the process. Hassett, director of the National Economic Council, and Kevin Warsh are the top two contenders in a contest run by Trump out of the White House. Treasury Secretary Scott Bessent is advising on selection, but he could get the job himself if others fail to impress. Fed governor Christopher Waller remains the dark horse, people familiar with the deliberations told Bloomberg News.
Trump has said he will pick a Fed chair who wants to cut interest rates, which has left investors worried about the central bank's autonomy from political pressure. Hassett has echoed President Donald Trump's criticism of the Fed. He said that by cutting rates before last year’s presidential election and then keeping them on hold more recently, citing inflation risk from tariffs – it deserved the president’s barbs. “I think that that raises the spectre that they’re not being non-partisan, they’re not being independent,” Hassett said.
The process of choosing Powell is officially under way, Bessent said on Tuesday. He also suggested that when current Chair Jerome Powell is replaced, he should also step down from the board. "There’s a formal process that’s already starting," Bessent said in a Bloomberg television interview Tuesday. "It’s President Trump’s decision and it’ll move at his speed," he said, saying there were good candidates both inside and outside the central bank. "Traditionally the Fed chair also steps down as a governor. There’s been a lot of talk of a shadow Fed chair causing confusion in advance of his or her nomination, and I can tell you, I think it would be very confusing for the market for a former Fed chair to stay on also," the Treasury secretary said. Asked if Trump would seek to remove Powell before his term ends next year, Bessent said, "as President Trump said, he’s not looking to fire Chair Powell."
Nvidia Chief Vows To ‘Accelerate Recovery’ Of China Sales
Nvidia boss Jensen Huang anticipates getting the first batch of US licenses to export H20 AI chips soon after he won a sudden reprieve to do business in China. That would formally allow the company to resume sales of a much sought-after component in the world’s top semiconductor arena. The Nvidia boss, who is visiting Beijing, said the company had plenty of orders to fill and it would “accelerate the recovery” of its China sales. Nvidia had reported a US$4.5bn write down in its April quarter, as the Trump administration tightened export restrictions on advanced chips and it was left with a huge H20 inventory it could no longer ship. “Some of what we wrote off is hard to recover, but what we put on reserve will not be scrapped permanently,” he said on Wednesday.
US Commerce secretary Howard Lutnick said the US’s reversal of restrictions on sales of chips to China followed recent trade negotiations with Beijing over rare earths. Donald Trump curbed exports of Nvidia’s H2O artificial intelligence chips to China in April as part of an escalation of his trade war with Beijing. The commerce department is expected to start approving export licences for these chips, after Nvidia on Monday said it expected to restart sales to Chinese companies. Lutnick said on Tuesday the loosening of export controls had been part of recent trade talks between American and Chinese officials in London and Geneva as the two sides met in a bid to de-escalate trade tensions. Lutnick added that the chip being sold to China, which was tailored to comply with 2022 Biden-era controls aimed at preventing the sale of the most powerful chips to Chinese companies, was the company’s “fourth best” chip. “We don’t sell them our best stuff, not our second-best stuff, not even our third best,” Lutnick said.
Lutnick explained the Trump administration's turnabout in assuring Nvidia that it can sell its H20 artificial-intelligence chip in China, saying the US wants them dependent on American technology. Lutnick said on CNBC Tuesday that the US wants to stay one step ahead of what China can build so they will keep buying US semiconductors. "We want to keep having the Chinese using the American technology stack, because they still rely upon it," he said, adding that Nvidia is selling China an older AI chip. “You want to sell the Chinese enough that their developers get addicted to the American technology stack. That’s the thinking.”
The move could add billions to Nvidia’s revenue this year, restoring its ability to fulfil orders it had written off as lost due to government restrictions. Jensen Huang has previously branded US chip curbs a “failure” and warned that Nvidia’s loss of market share in China, from 95% to 50%, directly benefits competitors such as Huawei. The reversal could help recover a substantial portion of the US$15 billion in fiscal 2026 data centre revenue previously at risk, including US$4-5 billion originally expected in 2H, and part of the US$8 billion in unshipped 2Q orders.
Huawei Tops China Smartphone Market
Huawei took the top spot in China’s smartphone market for the first time in more than four years, a comeback fuelled by new designs and software that appealed to users in a slowing market. The hardware giant held on to a roughly 18% share of the market in the June quarter, while other leading competitors like Vivo and Oppo slumped. The Shenzhen device maker showed greater resilience than rivals as overall shipments in China fell 4% to 69 million units, according to International Data Corporation (IDC) figures. That was the first decline in China shipments after six consecutive quarters of growth, which IDC attributed to diminishing help from government subsidies.
In 2024, Huawei launched several smartphones powered by domestically designed and manufactured semiconductors, including the world’s first commercially available device with two folds. It’s also added smartphones with its own operating system, transitioning away from Google’s Android.
Asia-Pacific Markets Mainly Fall Following US-Indonesia Trade Deal
Asia-Pacific markets mostly declined Wednesday after Donald Trump announced he had reached a preliminary trade agreement with Indonesia, which provides for a 19% tariff on the country’s exports to the US and tariff free access to the Southeast Asian economy for US goods. Indonesia’s benchmark Jakarta Stock Exchange Composite Index ended the day 0.7% higher, helped by a 25 bps rate cut from Bank Indonesia.
Elsewhere in the region, Japan’s Nikkei 225 closed flat at 39,663. South Korea’s Kospi lost 0.9%. Australia’s S&P/ASX 200 declined 0.8%. Taiwan’s Taiex bucked the downward trend to end the day 0.9% higher. In India, the BSE Sensex added 0.1% to close at 82,635.
Chip stocks in Asia rose after Nvidia said it would resume sales of its H20 AI general processing units to China “soon” following a US reversal of export controls. TSMC, which manufactures Nvidia’s high-performance graphics processing units that help power large language models, rose 1.8%. Taiwan’s Hon Hai Precision Industry, also known as Foxconn, rose as much as 0.6% before closing 0.3% lower. It has a strategic partnership with Nvidia to build “AI factories,” that incorporate Nvidia’s chips in a whole range of applications, including electric vehicles and LLMs. Several Japanese chip stocks also rose. Semiconductor testing equipment supplier Advantest gained 0.6%.
Japan’s super-long bonds rose on Wednesday, reversing course after a rout earlier in the week over concern that the Upper House election on Sunday will result in higher government spending. The gains saw the nation’s 30-year government bond yield drop 10 bps to 3.06%, after climbing on Tuesday to its highest level since 1999. The 40-year yield also fell 10 bps, to 3.38%. Japan’s 10-year yield touched the highest since 2008 on Tuesday as investors reacted to election campaigning that has featured promises of cash handouts and tax cuts.
Michael Brown, senior research strategist at Pepperstone, said "it feels like the market has probably taken the selling as far as it wants to for now" and the market will likely "await the result of those elections before taking things further." Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management, said that although traders are cautious ahead of the election, the sharp rise in yields has likely paused until the results are known.
Chinese Stocks Give Up Gains To Close Lower
Chinese shares gave up gains from earlier in the session to close lower. The CSI 300 ended the day down 0.3% at 4,007. In Hong Kong, the Hang Seng Index closed 72 points lower, or 0.3%, at 24,518, having been up as much as 1.1% during the morning session, hitting a four-month high intraday. The Hang Seng Tech Index ended with losses of 0.2% after rising as much as 1.8%.
Shares in Pop Mart International closed 4.0% lower on Wednesday after the toymaker issued a bullish first-half earnings forecast. The Beijing headquartered company is behind the global craze around Labubu, a toothy, pointy-eared monster-like character. The toymaker sells its dolls in a blind box to buyers who don’t know what character is inside until they open it, with prices ranging from about 59 yuan (US$8.22) to 5,999 yuan (US$836). In a filing to the Hong Kong stock exchange on Tuesday, Pop Mart said it expects at least a 350% increase in profit and at least a 200% increase in revenue for the first six months of 2025 from the same period last year. The negative stock reaction may be a reflection of investors’ conservative outlook on Pop Mart’s sales growth, Jeff Zhang, an equity analyst at Morningstar, told CNBC on Wednesday.
European Stocks Lower
European stocks closed lower on Wednesday, reversing gains from earlier on in the session as Trump-Powell tensions, higher US and UK inflation prints, concern about the regional semiconductor sector and a profit warning from Renault all weighed on sentiment. The pan-European Stoxx 600 was 0.6% lower. Technology stocks led the losses, slumping 2.2%, while the insurance sector was a standout gainer climbing 0.5%. Among major bourses, France’s CAC index led losses with a 0.6% loss. London’s FTSE 100 fell 0.1%.
ASML shares tumbled 11.4% after the chip giant said it can’t confirm that it will grow in 2026, even as it beat top and bottom-line expectations for the second quarter. Like many companies in the semiconductor industry, ASML has been grappling with uncertainty created by US tariff policy. The company forecast third-quarter revenue of between €7.4 billion (US$8.6bn) and €7.9 billion, which was shy of market expectations of €8.3 billion. ASML said it expects full-year 2025 net sales to grow 15%. ASML is one of the most important semiconductor supply chain companies in the world. It makes extreme ultraviolet lithography (EUV) machines, which are required to manufacture the most advanced chips in the world, such as those designed by Apple and Nvidia.
Other European chip names also fell. ASM International was down 5.2%, while BE Semiconductor was 5.0% lower. STMicro (-2.1%) and Infineon (-0.7%) were also down.
Renault dropped 18.5% in Paris after the French automaker slashed its profitability outlook and named company veteran Duncan Minto as CEO. Stellantis was down 6.2% and Volkswagen fell 3.7%.
UK inflation unexpectedly rose to its highest level since January 2024 on climbing food bills. Consumer price inflation picked up to 3.6% in June from 3.4% previously, the Office for National Statistics said on Wednesday. Food prices rose 4.4%, the highest since February 2024, with retailers blaming recent increases in payroll taxes and the minimum wage. Bond prices dipped, pushing the 10-year gilt yield up 3 bps to 4.66%. Traders pared bets on Bank of England interest rate cuts, and now see 49 bps of easing by year-end, compared with 53 bps ahead of the data.
The Eurozone’s trade surplus widened to €16.2 billion in May from €12.7 billion a year earlier, as exports rose 0.9% while imports declined 0.6%. In the broader EU, the trade surplus also grew to €13.1 billion from €8.9 billion. Exports to key partners rose, including the US (+4.4%), Switzerland (+6.8%), and the UK (+2.5%). On the import side, the EU purchased €203.8 billion in goods, down 2% from last year. This drop was mainly driven by weaker demand for energy (-18.7%) and raw materials (-1.7%). Imports increased from China (+3.4%) but fell significantly from the US (-7.4%) and the UK (-7.1%).
US Stocks Higher In Volatile Trading After Powell Sacking Reports
US stocks saw volatile trading after Donald Trump reportedly asked a group of lawmakers whether he should fire Jerome Powell as Federal Reserve chairman, initially sending stocks into negative territory. The New York Times reported that Trump has gone so far to draft a letter for firing Powell and showed it to lawmakers during that meeting. The benchmark indices rebounded as Trump later denied the report. But traders remain concerned that the US President may try to become the first in history to fire a Fed chairman, ending the Fed’s decades-long independence in setting monetary policy, and in the process, risk stoking a surge in inflation.
The S&P 500 added 0.3% and ended at 6,264. The Nasdaq Composite gained 0.3%, settling at 20,730 and posting its ninth record close of the year. The Dow added 231 points, or 0.5%, ending at 44,255. At its low of the session, the 30-stock index had fallen 264 points, or 0.6%.
Big bank earnings releases continued for a second day. Bank of America reported better-than-expected earnings for the second quarter, sending shares up 1.0%. Goldman Sachs shares rose 0.9% after topping second-quarter expectations on the back of better-than-expected equities trading. Shares of Morgan Stanley, which also beat expectations, dipped 1.3%. These results come a day after JPMorgan Chase, Wells Fargo and Citigroup each posted quarterly figures that topped analysts’ expectations for earnings and revenue.
US Treasury Yields Lower
Bond markets were also impacted by the “credible threats” that Trump may try to fire Jerome Powell. Short-term Treasuries rallied on speculation that Trump's replacement for Powell would cut interest rates. The yield on the 2-year note fell 6 bps to 3.90%. The 10-year yield was down 3 bps at 4.46% after rising earlier in the session.
The yield on the 30-year bond ended the session above 5% for the first time in more than a month. Bets were placed in the options market that target a jump to around 5.3% within roughly five weeks. The rate on the long bond hasn’t been that high since 2007.
Bond traders remained concerned about the latest US consumer price inflation data released Tuesday. The data showed a smaller-than-estimated increase in prices excluding food and energy. But it contained elements suggesting that the inflation gauge targeted by the Fed, to be released at the end of the month, may increase more than economists previously expected. While a separate Wednesday report on wholesale prices showed no change month-over-month, the data “is not as promising when you look under the surface,” said Marc Balcer, director of investment strategy at Girard. The probability of a rate cut in September is now seen as only slightly higher than 50%.
US Dollar Swings Wildly On Powell Firing Threats
The dollar swung in volatile trading following reports that Donald Trump would attempt to fire Fed Chair Jerome Powell. The US Dollar Index, tracking the currency against its peers, erased a gain of 0.2% and slid as much as 0.9%, before trimming its losses to 0.3%. The odds on prediction market Polymarket that Trump would fire Powell in 2025 shot up to as high as 40%, before receding to 20% before the president appeared to backtrack.
In Asia, the Japanese yen rose 0.6% to ¥147.89 per US dollar. The offshore yuan remained steady around Rmb 7.18 per dollar on Wednesday, as investors digested a batch of mixed Chinese economic data. While GDP grew 5.2% in the second quarter, slightly above expectations, it marked a slowdown from 5.4% in the previous quarter. Stronger-than-expected industrial output offered some support, but softer retail sales and disappointing investment figures highlighted uneven domestic demand.
Hong Kong authorities intervened for the fifth time in three weeks to prevent the city's currency from weakening beyond its official trading band. The Hong Kong Monetary Authority (HKMA) purchased HK$14.8 billion (US$1.9bn) of the local currency. Its four previous rounds of purchases cost it about HK$72 billion. The HKMA is seeking to dampen trades by withdrawing liquidity from the financial system and guiding borrowing costs higher.
Gold Rebounds After Reports About Powell’s Future
Gold prices rose 0.6% to $3,348 per ounce on Wednesday, following a two-day decline, as investors assessed a pick-up in US inflation and ongoing trade developments as well as the threats to fire Jerome Powell. Gold prices have been on a tear, scaling fresh highs amid geopolitical uncertainties and waning confidence in other traditional safe havens. Spot gold prices are up almost 28% year to date.
Oil Falls For Third Day
Brent crude oil futures fell 0.2% to $68.67 per barrel on Wednesday, extending losses into a third day as concerns remain that President Trump’s trade tariffs could slow global growth and hurt fuel demand. In addition, OPEC+ plans to continue increasing output, raising fears of oversupply later this year.
Bitcoin Gains As Crypto Regulation Bill Moves Forward
Cryptocurrencies rose Wednesday on optimism that Trump-supported pieces of crypto legislation will now advance, just one day after failing to receive approval from the House of Representatives. Bitcoin rose 2.8% to $119,760, close to its record high of over $120,000 hit earlier in the week. Ether rose more than 5.5% to $3,226.
Peter Lewis’ Money Talk Podcast
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