Housekeeping: Good Morning.
Gold Revaluation is happening (quite literally) before our eyes
Today:
Commentary: Market Recap
Premium: Trump Tariff Redux
Equity Recap:
US equities sold off sharply on Thursday after weak employment, manufacturing and construction data
Premium Markets:
Asia and the Trump redux Presidential candidate, Donald Trump, is going into the US November elections promising far more prohibitive trade policies than those implemented during his presidency in 2017–21. Taking these proposals at face value, we examine the implications for Asia.
A 60% tariff or more on all US imports from mainland China is likely to truncate aggregate demand in both economies and put global supply chains in disarray.
• Any potential gains to the rest of Asia from trade being diverted and production relocated away from mainland China will be limited by the growing risk that a second Trump administration would likely make it more challenging for products with significant Chinese content to enter the US.
• We also anticipate greater export competition among Asian economies in non-US markets as well as greater penetration of Chinese exports in Asia’s domestic markets. Sustained weakness in mainland China’s economy will likely exacerbate this competition.
A universal baseline import tariff of 10% on all US imports could raise the risk of a global trade war. And the resulting disruptions would be greatest for export-oriented and manufacturing-heavy economies. Taiwan, Vietnam, Thailand, South Korea and Malaysia stand out as the most vulnerable in the region.
Full analysis and industries most effected at bottom
FULL RECAP
JAPAN and ASIA
Big equity sell-offs happened yesterday. Japan took another hit with the Nikkei dropping 5.8%. Former BOJ executive director indicated a high chance of an October rate hike. Japan’s rate-sensitive banks fell nearly 10%, semiconductors dropped 9%, and automation was down 7%. It looks like a serious risk-off episode. Onshore China held up better, with the Shanghai Composite only down 0.9% compared to the Hang Seng's 2%, Taiwan’s 4.4%, and South Korea’s 3.5%.
METALS LEAD LOWER, NEXT HIGHER
Metals outperformed slightly, with copper and iron ore posting small gains, possibly due to lingering hopes for onshore stimulus. Metals have already priced in a slowdown; equities haven’t caught up yet.
Continues at bottom
Market News:
"Apple’s iPhone revenue fell for a second consecutive quarter, a soft demand signal investors hope will turn around once the company releases new AI features in the fall... Source: WSJ Shares -0.3% in the pre-market.
"Intel on Thursday revealed drastic plans to slash its employee headcount and capital spending in an attempt to put its business back on a stable financial footing, as it suffered the latest setback in its slow-moving turnaround plans." Source: FT -21% in the pre-market.
"Amazon reported weaker-than-expected revenue for the second quarter and issued a disappointing forecast for the current period. Amazon’s cloud business exceeded analyst estimates, but it’s advertising unit came up short." Source: CNBC Shares -8.3% in the pre-market.
Politics/Geopolitics:
"Russia freed wrongly convicted Wall Street Journal reporter Evan Gershkovich as part of the largest and most complex East-West prisoner swap since the Cold War, in which he and more than a dozen others jailed by the Kremlin were exchanged for Russians held in the U.S. and Europe, including a convicted murderer."
US President Biden and Israeli PM Netanyahu discussed new defensive military deployments, according to the White House.
"American officials estimate that a significant Iranian attack will be carried out against Israel within a few days.", via IsraelHayom.
"Israeli media: Letter from Knesset members to Netanyahu supporting the incursion into Lebanon", according to Al Arabiya.
Syrian Observatory says Iranian militias in Deir Ezzor (city in Syria) raise alert; Iranian militias evacuate their headquarters in Albu Kamal in Deir Ezzor, via Al Arabiya.
Some headlines via NewSquawk or DataTrek
Data on Deck:
MONDAY, JULY 29 None scheduledTUESDAY, JULY 30 10:00 am Consumer confidence JulyWEDNESDAY, JULY 31 2:00 pm FOMC interest-rate decisionTHURSDAY, AUG 1 PMI July ISM manufacturing July 48.8% 48.5%FRIDAY, AUG. 2 8:30 am U.S. employment report July 190,000 206,000 8:30 am U.S. unemployment rate July 4.1% 4.1% 1
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FULL RECAP
JAPAN and ASIA
Big equity sell-offs happened yesterday. Japan took another hit with the Nikkei dropping 5.8%. Former BOJ executive director indicated a high chance of an October rate hike. Japan’s rate-sensitive banks fell nearly 10%, semiconductors dropped 9%, and automation was down 7%. It looks like a serious risk-off episode. Onshore China held up better, with the Shanghai Composite only down 0.9% compared to the Hang Seng's 2%, Taiwan’s 4.4%, and South Korea’s 3.5%.
METALS LEAD LOWER, NEXT HIGHER
Metals outperformed slightly, with copper and iron ore posting small gains, possibly due to lingering hopes for onshore stimulus. Metals have already priced in a slowdown; equities haven’t caught up yet.
