Stocks sold off as EU weighs 30% tariff threat by Trump

EU mid-market update: Stocks sold off as EU weighs 30% tariff threat by Trump; US CPI and bank earnings on Tues to guide market sentiment; Trump's announcement on Russia may include offensive weapons for Ukraine.

Notes/observations

- Trump’s threat on weekend of 30% tariff on EU has hit European indices, particularly German DAX and automobile sector, both extra sensitive to trade. Tech also seeing weakness. Trump added this tariff would be separate from sectoral tariffs. Tariff to be effective from Aug 1st. US futures opened sharply lower on the escalation.

- Euro currency holding up better, trading around ~1.168, but still in downtrend which started from 1.18 on July 1st. Analysts note the lack of downside movement could be due to TACO (Trump Always Chickens Out) trade theme, that the tariff will be ‘negotiated’ away or reduced.

- WSJ's Timiraos said that White House advisers are ramping up a pressure campaign against Fed Chair Powell by alleging he either lied to Congress about the Fed’s headquarters renovation or grossly mismanaged it, potentially creating a new legal avenue to oust him.

- On Monday, Pres Trump said to potentially unveil a new “aggressive” plan to arm Ukraine—potentially including offensive weapons such as long-range missiles and Patriot air-defense batteries funded by European allies.

- Boeing shares slightly higher premarket after India’s preliminary report on the Air India 787 Dreamliner crash found that both engines’ fuel cutoff switches were toggled off then back on seconds before impact—allowing one engine to recover but leaving the other in repeated deceleration despite relight—with no immediate recommendations for Boeing or GE as the investigation continues.

- Bitcoin hit another all-time high on weekend, passing $120K. Crypto week begins, during which the U.S. House of Representatives focuses on debating and voting on key cryptocurrency-related legislation.

- In focus ahead, US CPI on Tues and commencement of Q2 earnings season with several major bank names on Tues as well.

- Asia closed mixed with KOSPI outperforming +0.8%. EU indices -0.6% to +0.4%. US futures -0.3%. Gold +0.3%, DXY +0.1%; Commodity: Brent +0.8%, WTI +0.8%; Crypto: BTC +4.0%, ETH +3.1%.

Asia

- China Jun Trade Balance: $114.8B v $112.1Be; Exports Y/Y: 5.8% v 5.0%e; Imports Y/Y:+1.1% v -0.5%e.

- Japan May Core Machine Orders M/M:-0.6% v -1.5%e; Y/Y: 4.4% v 5.2%e.

- Singapore Q2 Advance GDP Q/Q: 1.4% v 0.8%e; Y/Y: 4.3% v 3.5%e.

- BOJ said to be likely to 'consider' raising inflation forecast for fiscal 2025 at July policy meeting.

- Japan ruling LDP coalition may lose majority at July 20th Upper House elections.

Global conflict/tensions

- President Trump stated that would send Patriot air defense missiles to Ukraine.

Europe

- France Pres Macron announced extra military spending of €6.5B over next 2 years. Govt working on a fiscal package of as much as €40B in spending cuts and tax hikes.

Trade

- President Trump announced a 30% tariff on the EU and Mexico, effective Aug. 1st (**Note: replace previous threats of 20% reciprocal tariffs on the EU and 25% tariffs on Mexico).

- EU Commission Pres Von der Leyen: Application of tariffs to €21B of annual US exports due to come into effect on July 15 would be suspended until “early August”.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.36% at 545.36, FTSE +0.37% at 8,974.24, DAX -0.63% at 24,087.16, CAC-40 -0.52% at 7,788.21, IBEX-35 -0.31% at 13,953.50, FTSE MIB -0.32% at 39,950.00, SMI -0.29% at 11,891.86, S&P 500 Futures -0.32%].

Market Focal Points/Key Themes: European indices open mostly lower and remained under pressure through the early part of the session; threat of new tariffs over the weekend seen weighing on risk appetite; among sectors managing to stay in the green are health care and materials; sectors leading to the downside include industrials and technology; reportedly Orange, Bouygues looking to acquire SFR from Patrick Drahi; Partners to sell Techem to its infrastructure unit; DCC to sell UK & Ireland info tech unit to Aurelius; earnings expected in the upcoming US session include Fastenal.

Equities

- Consumer discretionary: Hermes [RMS.FR] -2.5% (analyst downgrade), DCC [DCC.UK] -1.0% (divests Info Tech unit in UK and Ireland for £100M).

- Financials: Banco BPM [BAMI.IT] +3.5% (Italy court rules that some govt conditions on Banco BPM deal with Unicredit are excessive and not proportionate), Ashmore Group [ASHM.UK] +3.5% (trading update).

- Healthcare: Eco Animal Health Group [EAH.UK] +9.5% (FY results).

- Industrials: Rheinmetall [RHM.DE] +1.0% (Pres Trump expected to announce 'aggressive' US weapons plan to Ukraine, May include offensive weapons - Axios), BASF [BAS.DE] -1.0% (outlook cut on Friday).

- Technology: Seco Spa [IOT.IT] +2.0% (prelim Q2 results).

Speakers

- EU Trade Commissioner Sefcovic noted that: US tariff plan was prohibitive for mutual trade; 30% tariffs practically eliminated trade. Noted that was approaching a good outcome for both sides with U.S but must prepare well balanced countermeasures against US.

- China PBOC Dep Gov Zou Lan H1 financial data press conference reiterated stance to continue to implement a moderately loose monetary policy. Monetary policy support for economy was obvious in H1. To set pace of policy based upon domestic and overseas situation and work on expanding domestic demand.

- PBoC Stats chief Yan Xiandong noted that H1 data showing financial support for real economy was strong.

Currencies/fixed income

- Continued trade uncertainties providing headwinds on risk appetite and aiding the USD sentiment.

- EUR/USD staying below the 1.17 level. More analysts push back calls for the next potential ECB rate cut until September.

- USD/JPY was at 147.30 as yen weakness persisted. More speculation circulated that upcoming Japan Upper House election could see the LDP lose its majority grip on power. The political uncertainty prompting some fiscal concerns for the govt. Japanese bond yields continued their upward movements. Yen weakness also magnified by speculation political uncertainty could further hamper BOJ's drive to raise rates.

- Bitcoin continued to hit fresh all-time highs above $121K.

- 10-year German Bund yield at 2.72% and 10-year Gilt yield at 4.60%. 10-year Treasury yield: 4.42%.

Economic data

- (FI) Finland Jun CPI M/M: -0.2% v -0.1% prior; Y/Y: 0.2% v 0.5% prior.

- (SE) Sweden Jun Final CPI M/M: 0.5% v 0.5% prelim; Y/Y: 0.7% v 0.8% prelim.

- (SE) Sweden Jun Final CPIF M/M: 0.5% v 0.5% prelim; Y/Y: 2.9%e v 2.9% prelim.

- (SE) Sweden Jun Final CPIF (ex-energy) M/M: 0.7% v 0.7% prelim; Y/Y: 3.3% v 3.3% prelim; CPI Level: 418.94 v 416.95 prior.

- (IN) India Jun Wholesale Prices Y/Y: -0.1% v +0.5%e.

- (CH) Swiss Jun Producer & Import Prices M/M: -0.1% v -0.5% prior; Y/Y: -0.7% v -0.7% prior.

- (CN) China Jun YTD New Yuan Loans (CNY): 12.92T v 12.70Te.

- (CN) China Jun YTD Aggregate Financing (CNY) 22.83T v 22.41Te.

- (CN) China Jun M2 Money Supply Y/Y: 8.3%e v 8.2%e.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 464.1B v 459.8B prior; Domestic Sight Deposits: 434.9B v 424.4B prior.

- (CZ) Czech May Current Account (CZK): -5.8B v -6.0Be.

Fixed income issuance

- None seen.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell €3.0B in 12-month BuBills; Avg Yield: % v 1.849% prior; Bid-to-cover: x v 2.64x prior (July 7th 2025).

- 05:30 (EU) European Union to sell combined €5.0B in 2028, 2034 and 2054 NGEU bonds.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (IL) Israel to sell combined ILS2.7B in 2027, 2029, 2031, 2033, 2034, 2035 and 2052 bonds.

- 06:00 (RO) Romania to sell combined RON800M in 2028 and 2033 bonds.

- Sells RONM vs. RON400M indicated in 8.75% Oct 2028 bonds; Avg Yield: % v 7.46% prior; bid-to-cover: x v 1.30x prior (Jun 12th 2025).

- Sells RON vs. RON400M indicated in 7.5% 2033 Bonds; Avg Yield: % v 7.55% prior, bid-to-cover: x v 1.39x prior (Jun 16th 2025).

- 06:00 (TR) Turkey to sell bonds (2 tranches).

- 06:30 (IN) India Jun CPI Y/Y: 2.3%e v 2.8% prior.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (BR) Brazil May Economic Activity Index (Monthly GDP) M/M: 0.0%e v 0.2% prior; Y/Y: 4.1%e v 2.5% prior.

- 08:00 (PL) Poland May Current Account Balance (PLN): -€0.8Be v -0.4B prior; Trade Balance: -€1.3Be v -0.9B prior; Exports: €27.7Be v 28.1B prior; Imports: €29.0Be v 29.0B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 08:30 (CA) Canada May Wholesale Sales (ex-petroleum) M/M: -0.4%e v -2.3% prior- 11:00 (IT) ECB’s Cipollone (Italy).

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 15:00 (AR) Argentina Jun National CPI M/M: 1.9%e v 1.5% prior; Y/Y: 39.7%e v 43.5% prior.

- 16:00 (US) Weekly Crop Progress Report.

- 19:01 (UK) Jun BRC LFL Sales Y/Y: 1.0%e v 0.6% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 88.6 prior.

- 20:30 (AU) Australia July Westpac Consumer Confidence: No est v 92.6 prior.

- 21:30 (CN) China Jun New Home Prices M/M: No est v -0.2% prior; Used Home Prices M/M: No est v -0.5% prior.

- 22:00 (CN) China Q2 GDP Q/Q: 0.9%e v 1.2% prior; Y/Y: 5.1%e v 5.4% prior; GDP YTD Y/Y: 5.3%e v 5.4% prior.

- 22:00 (CN) China Jun Retail Sales Y/Y: 5.2%e v 6.4% prior; Retail Sales YTD Y/Y: 5.0%e v 5.0% prior.

- 22:00 (CN) China Jun Industrial Production Y/Y: 5.6%e v 5.8% prior; Industrial Production YTD Y/Y: 6.2%e v 6.3% prior.

- 22:00 (CN) China Jun YTD Fixed Urban Assets Y/Y: 3.6%e v 3.7% prior.

- 22:00 (CN) China Jun Surveyed Jobless Rate: 5.0%e v 5.0% prior.

- 22:00 (CN) China Jun YTD Property Investment Y/Y: -10.9%e v -10.7% prior; Residential Property Sales Y/Y: No est v -2.8% prior.

- 22:30 (HK) Hong Kong to sell 3-month and 6-month Bills.

- 23:00 (KR) South Korea May M2 Money Supply M/M: No est v 0.2% prior; ‘L’ Money Supply L M/M: No est v 0.5% prior.

- 23:00 (TH) Thailand Central Bank to s THB60B in 3-month bills.

- 23:35 (JP) Japan to sell 5-year Climate Transition Bonds.