The new Cold War is gaining momentum, nervousness in Japan, corporate news from the USA
Fundamental Analysis
• Traders will see jitters in the foreign exchange market on Friday, no doubt driven by the yen, as the Japanese currency's erratic moves across the board have puzzled investors. The yen swung between gains and losses early in the Asian session, sometimes for minutes at a time, although it is difficult to say whether Tokyo was involved in the process. The Nikkei newspaper reported that the Bank of Japan (BOJ) carried out reviews of bank rates on the euro against the yen on Friday, with traders still reeling from the fallout from an alleged yen buying intervention on Thursday. Authorities, as usual, were coy to comment, but Tokyo has made clear to the market that it knows when the best time is to intervene. Thursday's jump in the yen came just after data showed U.S. consumer inflation slowed more than expected in June, initially leading currency analysts and traders to think the jump was likely driven by options-related activity. However, after Thursday's events, traders were once again on edge.
• Fed Chairman Jerome Powell, in two days of testimony before Congress this week, appeared to open the door to an easing cycle starting in September, saying the US economy is "no longer overheated."
• Customs data on Friday showed China's exports rose more than expected in June, although imports fell 2.3% as the world's second-largest economy continues to struggle with an uneven recovery.
• Democrats are increasing pressure on Biden to drop out of the presidential race. Biden accidentally called Zelensky "President Putin" yesterday. It fixes itself after a few seconds. "He's going to beat President Putin... I'm so focused on beating Putin that we have to worry about that." And later, at another press conference, he called Kamala Harris “Vice President Trump.” It doesn't even look funny anymore.
• NATO called China a “decisive supporter” of the Russian war against Ukraine. China, for its part, accused NATO of seeking security at the expense of others and warned the Western military alliance not to bring that same “chaos” to Asia.
• Alternative for Germany has formed a new group of right-wing populists in the European Parliament. As one of the members of the new faction told Reuters, it will include 28 deputies from far-right parties in Bulgaria, France, Lithuania, Poland, Slovakia, Spain, the Czech Republic and Hungary. The new group will be called “Europe of Sovereign Nations”.
• What will the French government be like? Macron rejected a request for the resignation of French Prime Minister Gabriel Attal. It is expected that the country's new government will be formed after the Olympic Games, which will be held in Paris from July 26 to August 11. And doing this with
a parliament where none of the major political forces received a majority will be
difficult, experts say.
• Ariane 6 first flight: Europe regains access to space. For a whole year, the European Space Agency (ESA), for political and technical reasons, was unable to independently launch scientific, commercial or military satellites into orbit and was forced to purchase this service from the United States. The demand for such launches is enormous, and of the 30 orders received for the new launch vehicle, 18 came from the owner of the Amazon online store, Jeff Bezos. Until 2028, all starts are already booked.
• Trump will meet with Orban at his Mar-a-Lago estate in Florida after the NATO summit in Washington - BBG. Previously, Orban had already visited Kyiv, Moscow and Beijing, where he held meetings with the heads of these countries.
• Greece, Bulgaria and Romania have decided to create a military corridor that will pass through the eastern wing of NATO.
A trilateral meeting is planned in Greece in the fall to discuss the implementation of this project.
• The US and Mexico are restricting imports of Chinese steel. Together with Mexico, Washington said that metal products that enter the
United States through the southern border and do not originate in North America will be subject to additional tariffs.
Mexico and Canada are exempt from the 25% tariffs on steel and 10% on aluminum that the U.S. imposes under Section 232 of the Trade Expansion Act, allowing imports to be limited on national security grounds.
Washington said those tariffs will now apply to steel from Mexico unless importers can prove it was smelted and cast in North America. Aluminum products from China, Russia, Iran and Belarus will also be subject to tariffs.
• The US is resuming the transfer of aerial bombs to Israel, the supply of which was previously suspended - Reuters
We are talking about 500-pound aerial bombs. But the United States will continue to refrain from supplying 2,000-pound aerial bombs due to fears of their use in densely populated Gaza.
• The USA, Canada and Finland plan to build more icebreakers to counter the Russian Federation in the Arctic - AP. They are seeking to strengthen their defense in the Arctic, where the Russian Federation is increasingly active.
• Iranian missile linked to Houthi attack on ship, US analysis of wreckage suggests. In December, Yemen's Houthi rebels likely fired an Iranian-made anti-ship cruise missile at a Norwegian-flagged tanker in the Red Sea, U.S. military officials said. The attack is now a public, evidence-based link between the rebels' ongoing anti-shipping campaign and Tehran.
- Inflation in Germany fell as expected from 2.4% y/y to 2.2%
- UK GDP (May) unexpectedly accelerated from 0.6% y/y to 1.4% y/y. 1.2% was expected.
- Inflation in the US unexpectedly fell from 3.3% y/y to 3.0% y/y (3.1% y/y was expected)
- Core CPI fell from 3.4% to 3.3% (stability was expected). Lower gasoline prices helped slow inflation in June.
• The Fed may soon cut interest rates.
• The US labor market is stable. The Labor Department reported Thursday that jobless claims for the week ended July 6 fell by 17,000 to 222,000 from 239,000 the previous week.
Corporate analysis
• Yesterday, the US stock market experienced a large rotation from Growth to Value. Inflation came out better than expected and, it seems, was simply an occasion for a long-overdue rotation.
• Falls in shares of Tesla, Nvidia and other big tech companies wiped out $598 billion in market capitalization from the Magnificent Seven, the second-largest one-day decline in history.
• The real estate and small-cap stocks, which are dependent on the Fed rate, rose in price the most. The dollar fell a little. Especially against the yen. But this didn’t help Bitcoin at all.
• The Japanese stock market falls 2% as the yen strengthens.
• Elon Musk said that Grok 2 will likely be ready for release next month, and xAI will also begin training on the 100k H100 system. He also confirmed that xAI has completed negotiations with Oracle on a potential $10 billion artificial intelligence server deal.
• Airbnb (ABNB) risks getting caught in a scandal: leaked photos and videos of tenants having sex are to blame. Airbnb themselves are not making a proper attempt to solve the problem. They apologize to the client, give a promotional code and block the owner of the property. The latter easily creates a new account.
• The EU and Apple have settled an antitrust investigation into contactless payments. The company will avoid a fine, writes the Financial Times. Apple will allow developers to use tap-and-go or short-range wireless technology to use Apple Pay and Apple Wallet to resolve EU regulations.
• India does not intend to abandon Russian oil - Reuters. State-owned oil refining companies in India are holding joint negotiations with the Russian Federation regarding a long-term agreement on oil imports.
• The Olympics in Paris will be commentated by a neuron. The Olympic Games will be commentated by an AI clone of 79-year-old sports announcer and TV host Al Michaels.
The neural network will learn about 7 million phrases that it will use during the performance.
• Spending by foreign tourists in Europe in 2024 will increase by 37% compared to pre-Covid 2019 and amount to a record $800 billion – Bloomberg
The bulk of the money will be spent by American tourists. Spending by Chinese tourists will decline. The majority of tourists' money - 72% - will be spent in Western European countries.
• As a separate trend, the authors of the report note the growing popularity of Northern European destinations, where in the summer it is not as hot as in the south of Europe.
Shell, BP and TotalEnergies invest in major LNG project in Abu Dhabi - WSJ. European energy giants Shell, BP and TotalEnergies have signed agreements to invest in Abu Dhabi's Ruwais liquefied natural gas project, set to significantly boost the Gulf country's export capacity as it seeks to tap into global LNG markets.
• Abnormal heat threatens the work of refineries in Europe and the USA, writes Bloomberg. Temperatures in Warsaw could exceed 35°C in the coming days, according to the European Center for Medium-Range Weather Forecasts. This mark will become the threshold for the regular operation of the country's main fuel supplier, Orlen SA. At higher temperatures, seven refineries in Poland, the Czech Republic and Lithuania will not be able to operate.
In the US, the East Coast and Midwest could be hit the hardest. Production there is designed for winter cold, not summer heat.
• The IEA lowered its oil demand forecast for 2025, but increased its estimate of oil demand - WSJ. Which is likely to push the market into surplus, fueling expectations of significant oversupply this decade.
• US Republican lawmakers are concerned about Microsoft's G42 deal - Reuters. Republican lawmakers are seeking a briefing from the Biden administration on Microsoft's G42 deal for Microsoft's $1.5 billion investment in UAE-based artificial intelligence firm G42, citing concerns about the transfer of sensitive technology and the company's connections.
• The yen jumped 2% after US inflation sparked talk of intervention - Bloomberg. The yen soared more than 2% against the dollar after reports of softer-than-expected inflation in the United States. This prompted speculation that Japan had entered the market to support its currency.
Japanese Finance Minister Shunichi Suzuki on Friday expressed concern about the yen's weakness but declined to comment on whether the government intervened on Thursday to support the yen.
• Pfizer (PFE) wants to be in the lucrative market for weight-loss drugs - Bloomberg. Pfizer Inc. is promoting its diet pills as it seeks to emerge from its post-pandemic slump.
• Wall Street Banks Set to Start Selling Bonds After Earnings - Bloomberg Wall Street's biggest banks are set to borrow far more than they typically do after reporting their second-quarter earnings. Financial giants are looking to capitalize on attractive borrowing costs ahead of potential volatility later this year MicroStrategy (MSTR) to conduct a 10-for-1 stock split MSTR, the largest publicly traded corporate holder of Bitcoin, said it will conduct a 10-for-1 stock split to make shares more accessible to investors and employees.
• Wall Street Bet Against Airlines Even as Summer Travel Boom - Bloomberg. Americans are flying in record numbers as the summer travel season begins, but traders are betting that airlines won't be able to make
money from it.
• Jack Dorsey's Block (SQ) investors need more to value cryptocurrency's earning potential, analysts say - Reuters
Jack Dorsey-led payments technology company Block could become a formidable player in the cryptocurrency industry. But Wall Street will need detailed information on profit margins to assess the earnings tailwind from the business.
• Tesla (TSLA) plans to delay the robotaxi launch from August to October - Bloomberg. TSLA shares fell 8% yesterday and are down another 2% in premarket trading, testing $236.
• PepsiCo (PEP) sales are disappointing. American consumers are reducing their snack consumption.
PepsiCo reported weaker-than-expected revenue growth as its snacks business was hit by increasingly budget-conscious shoppers and recent price cuts from Quaker Foods.
PEP stock had a wild day but ended the day in the red thanks to demand for defensive stocks.
• Delta Airlines (DAL) fell 4% after the report. Shares of US development companies yesterday rose by an average of 7%. After the weakening of inflation, which raised hopes for an imminent Fed rate cut.
• Jeff Bezos sold another 2.26 million AMZN shares. For approximately $400 million.
• Intuit (INTU) will cut 1,800 employees, or 10% of its workforce.
• China has taken some of its most dramatic steps to curb short selling. So he seeks to support the country's stock market, which is falling - BBG.
Key events that could impact markets on Friday:
- German Wholesale Price Index (June)
- Consumer Price Index (EU) for France, final (June)
- June US Producer Price Index report.
- The US Department of Agriculture will publish its report on global supply and demand for agricultural products.
- Reports JPM, WFC, C, BK, ERIC