Highlights
Tariffs remained the dominant theme moving markets in the week, but the reaction in the equities market was relatively muted when compared with previous tariff announcements. U.S. President Donald Trump announced 25% trade levies on major trading partners South Korea and Japan while also saying that he would significantly increase Brazil’s tariff to 50% in a move linked to the country’s legal proceedings against former right-wing President Jair Bolsonaro. In addition to the country-specific tariffs, President Trump also announced an upcoming 50% tariff on copper causing a surge in U.S. copper futures contract prices while benchmark copper futures traded outside the U.S. were little changed to lower. Silver prices also rallied just under 4% in the week hitting levels last seen almost 14 years ago as soured risk sentiment buoyed the rush to safe haven assets. Increasing concerns about the ever-rising U.S. trade deficit and interest payments crowding out essential services have also helped boost the metal’s allure. In a slow week for economic data releases, investors digested Wednesday’s release of the minutes from the Federal Reserve’s mid-June policy meeting. The report showed some disagreement among the committee members with a few being open to rate reductions as soon as the next meeting scheduled late July, while other members opined that they did not anticipate cutting rates at all in 2025. Meanwhile in Europe, Eurozone retail sales volumes fell 0.7% sequentially in May—slightly more than expected and a sign that consumers remained subdued. UK gross domestic product (GDP) shrank unexpectedly by 0.1% in May, after contracting 0.3% in April. Declining production and construction output drove this weakness. In Asia, Japanese stocks traded lower over the week as increased tensions in trade relations with the U.S. and mixed domestic economic data releases weighed on investor risk appetite. The U.S. announced that it would implement a slightly higher tariff of 25% on Japanese imports, up from the 24% rate the administration set in early April. However, many investors viewed positively the indication that the higher tariff will only come into force on August 1, 2025, leaving more time for negotiations. In Mainland China, the producer price index fell 3.6% from June last year. The year-on-year inflation unexpectedly rose 0.1%, raising the possibility that China’s leaders may roll out more stimulus to lift the economy out of a persistent cycle of falling prices, corporate profits, and wages.
Data highlights:
Canada’s unemployment rate fell to 6.9%. This came in lower than market expectation of 7.1% unemployment rate. The Eurozone retail sales grew by 1.8% YoY in May, higher than market estimate of a 1.2% growth. Reserve Bank of Australia decided to keep interest rates unchanged at 3.85%, a surprise to the market as the expectation was a 25 basis points cut.
Week ahead:
Canada Inflation Rate YoY, U.S Consumer Price Index – Tuesday | U.K Inflation Rate YoY – Wednesday |Australia Unemployment Rate, Eurozone Consumer Price Index, U.S Retail Sales – Thursday| Japan Inflation Rate YoY– Friday
