Hot UK CPI but economists see it overshadowed by competing macro factors

EU mid-market update: Hot UK CPI but economists see it overshadowed by competing macro factors; Renault crashes auto sector and ASML outlook disappointed.

Notes/observations

- On the surface, Europe looks flat to mixed, but sector breakdown underneath is seeing volatility. Autos are the biggest underperformer after Renault cut FY guidance due to poor Jun performance, while technology lags from ASML narrowing FY guidance and making cautious comments about FY26 citing uncertainty in geopolitical developments.

- UK CPI was a shock to the upside, coming in at highest annual pace since Jan 2024 for headline YoY. Core no better, at 3.7% against 3.5% estimate. The initial move higher in Cable (GBP/USD) was reversed given the larger macro trend of weak UK growth, fiscal concerns, and an uncertain trade environment despite US deal. BOE rate cut bets were trimmed slightly.

- Pres Trump announced that low initial tariffs on pharmaceuticals will likely begin at the end of the month—rising to much higher levels after a year—and that semiconductor duties will follow on a similar but less complex timeline.

- J.B.Hunt during earnings call framed its Q2 performance against a backdrop of trade-policy uncertainty and regulatory headwinds—rolling out early peak-season surcharges, navigating a tighter-than-usual truckload market during Roadcheck, and leaning on premium service scores and pre-funded capacity to absorb broad demand and pricing volatility.

- Asia closed mixed with KOSPI underperforming -0.9%. EU indices -0.2% to +0.5%. US futures -0.2% to +0.0%. Gold +0.5%, DXY -0.1%; Commodity: Brent -0.5%, WTI -0.4%; Crypto: BTC +1.8%, ETH +6.6%.

Asia

- South Korea Jun Export Price Index M/M: -1.1% v -3.5% prior; Y/Y: -4.5% v -2.6% prior.

- South Korea Jun Import Price Index M/M: -0.6% v -3.7% prior; Y/Y: -6.2% v -5.1% prior.

- South Korea Jun Unemployment Rate: 2.6% v 2.7%e.

- China Vice Premier He Lifeng stated that the country was accelerating the construction of a modern industrial system.

Global conflict/tensions

- US Sec State Rubio in a call with UK, French and German foreign ministers said to all agreed that Iran would face stiff sanctions if there was no nuclear deal by the end of Aug.

Europe

- BOE Gov Bailey warned against “dangerous” US tariffs and urged governments around the world to address global trade imbalances without hammering growth.

Americas

- Fed's Logan (non-voter) noted that the base case called for continued restrictive policy; To hold tight for a while longer to bring inflation down.

- Pres Trump noted that Fed Chair Powell's HQ renovations 'sort of was' a fireable offense; Bessent was an option for Fed Chair, but liked the job he's currently doing as Treasury Sec.

Trade

- Pres Trump: noted that tariff timeline on chips would be similar to pharmaceuticals, but less complex.

- US began section 301 tariff investigation into Brazil trade practices.

- Pres Trump to hit at least 100 smaller nations with tariffs >10%.

Energy

- Weekly API Crude Oil Inventories: +19.1M v +7.1M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.12% at 544.28, FTSE +0.19% at 8,955.19, DAX +0.06% at 24,098.86, CAC-40 -0.01% at 7,765.10, IBEX-35 +0.69% at 13,975.25, FTSE MIB +0.39% at 40,077.00, SMI +0.09% at 11,890.91, S&P 500 Futures -0.08%].

Market Focal Points/Key Themes: European indices opened mixed but took on a positive bias as the session progressed; potential for progress in trade negotiations seen supporting risk appetite; among sectors leading the way higher are communication services and health care; sectors stuck in the red include technology and industrials; tech sector dragged by ASML following disappointing earnings; automotive subsector under pressure after Renault cut guidance; pharmaceuticals subsector under pressure after Trump said tariffs on medications were coming; reportedly EU regulators to open investigation int Universal Music unit Virgin Music’s acquisition of Downtown Music; focus on US PPI figures later in the day; earnings expected in the upcoming Americas session include Morgan Stanley, Johnson & Johnson, Alcoa and Goldman Sachs.

Equities

- Consumer discretionary: Ceconomy [CEC.DE] +0.5% (preannouncement), Richemont [CFR.CH] -1.0% (earnings).

- Financials: Partners Group [PGHN.CH] +5.0% (affirmed outlook), SEB [SEBA.SE] +1.5% (earnings; buyback) - Healthcare: Novartis [NOVN.CH] -1.0% (Pres Trump: Pharma tariffs will begin probably at the end of July; Initial tariffs on pharmaceuticals will be low) - Industrials: Renault [RNO.FR] -15.0%, Volkswagen [VOW3.DE] -1.5% (Renault outlook cut) - Technology: ASML [ASML.NL] -7.5% (earnings; cautions Q3 and FY26 guidance) - Materials: Rio Tinto [RIO.UK] +1.5% (production outlook; iron ore prices rise).

Speakers

- France Fin Min Lombard stated that govt was addressing debt very seriously; would improve fiscal plan with opposition parties. Monitoring execution of 2025 budget very closely and was confident that 2026 budget would be approved. Not far from a US-EU trade agreement before the Aug 1st deadline and stressed that retaliatory trade measures would hurt both US and EU.

- German Chancellor Merz reportedly planned to attract more foreign investors to Germany.

- EU Law Min McGrath shated that believed EU-US trade deal can be done before Aug 1st.

- Indonesia Central Bank Policy Statement noted that the decision to cut was in-line with lower inflation expectations and IDR currency (Rupiah) stability. Decision also in-line to support economic growth.

- China and Australia sign MoU to implement and review Free Trade Agreement (FTA).

Currencies/fixed income

- GBP/USD initially edged back above the 1.34 level as UK CPI data came in a bit hotter than expected. Upside facing headwinds as BOE was expected to deliver rate cut du to weakening growth outlook.

- EUR/USD consolidating recent losses as held above the 1.16 level In quiet trade.

- USD/JPY approached the 149 level as yen weakness persisted. Continued concerns over the Japanese political landscape as ruling LDP party coalition remained at risk of losing its majority in Upper House elections

- 10-year German Bund yield at 2.72% and 10-year Gilt yield at 4.67%. 10-year Treasury yield: 4.48%

Economic data

- (SE) Sweden Jun PES Unemployment Rate: 3.8% v 3.6% prior.

- (UK) Jun CPI M/M: 0.3% v 0.1%; Y/Y: 3.6% v 3.4%e; CPI Core Y/Y: 3.7% v 3.5%e; CPI Services Y/Y: 4.7% v 4.5%e; CPIH Y/Y: 4.1% v 4.0%e.

- (UK) Jun RPI M/M: 0.4% v 0.2%e; Y/Y: 4.4% v 4.2%e; RPI-X (ex-mortgage payments) Y/Y4,.3% v 4.1% prior; Retail Price Index: 404.5 v 404.0e.

- (HU) Hungary May Average Gross Wages Y/Y: 7.7% v 8.6%e.

- (CZ) Czech Jun PPI Industrial M/M: -0.2% v 0.0%e; Y/Y: -0.7% v -0.5%e.

- (ID) Indonesia Central Bank (BI) cut Bi-Rate by 25bps to 5.25% (not expected).

- (IT) Italy Jun Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 1.8% v 1.7% prelim.

- (IT) Italy Jun Final CPI EU Harmonized M/M: 0.2% v 0.2% prelim; Y/Y: 1.7% v 1.7% prelim; CPI Index (ex-tobacco): 121.3 v 121.2 prior.

- (TR) Turkey Jun Central Gov't Budget Balance (TRY): -330.2B v +235.2B prior.

- (IT) Italy May Trade Balance: €6.2B v €2.5B prior; EU Trade Balance: €0.8B v €0.1B prior.

- (EU) Euro Zone May Trade Balance (seasonally adj): €16.2B v €14.0Be; Trade Balance NSA (unadj):€16.2B v €9.9B prior.

Fixed income issuance

- (IN) India sold total INR200B vs. INR200B indicated in 3-month, 6-month and 12-month bills.

- (UK) DMO sold £1.5B in 4.5% Sept 2034 Gilts via tender; Avg Yield: %; bid-to-cover: x; Tail: bps.

Looking ahead

- (AR) Argentina Jun Budget Balance (ARS): No est v 1.690T prior.

- (CO) Colombia Jun Consumer Confidence: No est v -3.8 prior.

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

- 05:30 (DE) Germany to sell combined €2.5B in 2048 and 2056 Bunds.

- 05:30 (PL) Poland to sell Bonds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (IE) Ireland May Property Prices M/M: No est v 0.3% prior; Y/Y: No est v 7.5% prior.

- 06:00 (IL) Israel Q1 Final GDP Annualized: No est v 3.7% prelim.

- 06:00 (CZ) Czech Republic to sell 2028 and 2033 bonds.

- 06:30 (EU) European Union to sell combined €3.0B in 3-month, 6-month and 12-month bills.

- 07:00 (US) MBA Mortgage Applications w/e July 11th: No est v 9.4% prior.

- 07:00 (ZA) South Africa May Retail Sales M/M: No est v 0.9% prior; Y/Y: 4.5%e v 5.1% prior.

- 07:00 (UK) Weekly PM Question time in House.

- 08:00 (PL) Poland Jun CPI Core M/M: +0.3%e v -0.1% prior; Y/Y: 3.4%e v 3.3% prior.

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

- 08:15 (CA) Canada Jun Annualized Housing Starts: 262.5Ke v 279.5K prior.

- 08:30 (US) Jun PPI Final Demand M/M: 0.2%e v 0.1% prior; Y/Y: 2.5%e v 2.6% prior.

- 08:30 (US) Jun PPI (ex-food/energy) M/M: 0.2%e v 0.1% prior; Y/Y: 2.7%e v 3.0% prior.

- 08:30 (US) Jun PPI (ex-food/energy/Trade) M/M: 0.2%e v 0.1% prior; Y/Y: No est v 2.7% prior.

- 08:30 (US) July New York Fed Services Business Activity: No est v -13.2 prior.

- 09:15 (US) Jun Industrial Production M/M: 0.1%e v -0.2% prior; Manufacturing Production: 0.0%e v 0.1% prior; Capacity Utilization: 77.4%e v 77.4% prior.

- 09:15 (US) Fed's Hammack.

- 10:00 (US) Fed’s Barr.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (CA) Canada to sell 30 Year Bonds.

- 12:00 (RU) Russia Jun PPI M/M: No est v -1.3% prior; Y/Y: No est v 0.3% prior.

- 14:00 (US) Fed Releases Beige Book.

- 17:30 (US) Fed's Williams on Economic Outlook, Policy.

- 18:45 (NZ) New Zealand Jun Food Prices M/M: No est v 0.5% prior.

- 19:50 (JP) Japan Jun Trade Balance: +¥353.9Be v -¥638.6B prior (revised from -¥637.6B); Adjusted Trade Balance: -¥274.7Be v -¥305.5B prior; Exports Y/Y: +0.5%e v -1.7% prior; Imports Y/Y: -1.1%e v -7.7% prior.

- 20:30 (SG) Singapore Jun Non-Oil Domestic Exports Y/Y: +4.9%e v -3.5% prior; Electronic Exports Y/Y: No est v 1.7% prior.

- 21:00 (AU) Australia July Consumer Inflation Expectation: No est v 5.0% prior.

- 21:30 (AU) Australia Jun Employment Change: +20.0Ke v -2.5K prior; Unemployment Rate: 4.1%e v 4.1% prior; Full Time Employment Change: No est v 38.7K prior; Part Time Employment Change: No est v -41.1K prior; Participation Rate: 67.0%e v 67.0% prior.

- 23:00 (TH) Thailand Central bank to sell THB20B in 2027 Bonds.

- 23:30 (JP) Japan to sell 12-Month Bills.