Daily Market Reports | 8:46 AM
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Entering second quarter earnings season in earnest this week for the US will shine a light on just how robust the economy is alongside the outlook from corporate USA, just as Trump enters Ground Hog Day momentum on trade tariffs.
A weak lead from overseas markets to end last week and more tariff threats over the weekend has the ASX200 futures pointing to a slightly lower start for the week.
| World Overnight | |||
| SPI Overnight | 8548.00 | – 13.00 | – 0.15% |
| S&P ASX 200 | 8580.10 | – 9.10 | – 0.11% |
| S&P500 | 6259.75 | – 20.71 | – 0.33% |
| Nasdaq Comp | 20585.53 | – 45.14 | – 0.22% |
| DJIA | 44371.51 | – 279.13 | – 0.63% |
| S&P500 VIX | 16.40 | + 0.62 | 3.93% |
| US 10-year yield | 4.42 | + 0.08 | 1.77% |
| USD Index | 97.53 | + 0.24 | 0.25% |
| FTSE100 | 8941.12 | – 34.54 | – 0.38% |
| DAX30 | 24255.31 | – 201.50 | – 0.82% |
Good Morning,
Extract Tony Sycamore, IG
To recap, the week began with “tariffs in letters” sent to mostly minor trading partners (apart from Japan and South Korea), before the tension escalated with a sharp increase in Brazil’s tariff rate, threats of baseline tariffs of 15-20%, and the announcement of a 35% tariff on Canada.
After markets closed on Friday, President Trump announced a 30% tariff on imports from Mexico and the EU, effective August 1.
It is worth highlighting that together Canada, Mexico and the EU account for roughly 45% of all imports into the US.
If in the unlikely event there is no reduction in the tariff rates announced last week, the average tariff rate is expected to rise to nearly 25% from the current rate of around 14%. This will have severe implications for growth, inflation and consumer and business confidence. However, this won’t be evident in the data until the September and October data which won’t be released until October and November.
Looking ahead and aside from tariff headlines, attention this week will focus on earnings reports from banking behemoths including JP Morgan, Goldman Sachs, Bank of America, as well as Netflix and 3M. Tuesday’s US CPI report for June is expected to show core inflation rose to 3.0% YoY from 2.8%, reflecting the impact for the Liberation Day tariff increases.
The US rates market is pricing in -18bps of Fed rate cuts for the September FOMC meeting and a cumulative -52bps of cuts priced between now and the end of the year.
This week the key event on the domestic economic calendar is Thursday’s Labour Force Report for June. Last month (May), employment in Australia fell by -2.5k jobs, well below the 22.5k gain the market had expected. The fall in employment in May followed a robust rise of 87.6k in April, which suggests some payback took place in May. With the participation rate easing marginally, it allowed the unemployment rate to remain unchanged at 4.1% for a fifth straight month.
While there has been some mild cooling in the labour market this year, conditions remain tight as highlighted in the RBA’s statement last week.
A tight labour market along with the easing in downside risks to the global economy and the need for more confirmation that inflation has been tamed were the key drivers of the RBA’s “on hold” rates decision last week.
The preliminary expectation for June is the Australian economy will add 2,000 jobs and the unemployment rate will remain at 4.1%. Assuming the actual numbers are inline or softer than expected, we expect the RBA to cut interest rates by -25 basis points to 3.60% at its next meeting on August the 12th.
The Australian interest rate market starts the week pricing in -21bp of rate cuts for August with a cumulative -60bp of RBA rate cuts priced between now and year end
Now, What If TACO trade turns out to be the whole Tariff Enchilada? Stephen Innes, SPI Asset Management
Wall Street may be floating at record altitude, but there’s a smell of kerosene in the cabin, and some of the most seasoned pilots in global finance are beginning to reach for the parachutes. The S&P500’s 30% moonshot from April lows masks a growing disquiet beneath the surface: that President Trump’s tariff sabre-rattling may no longer be just theatre, and that investors are dangerously under-pricing the possibility of a genuine policy rupture.
The street’s working assumption, the so-called Taco Trade, rests on the belief that Trump always blinks. That when the heat rises, he pulls back from the edge. But what if this time the edge is the point? With reciprocal tariffs scheduled to detonate on August 1, and only a few trade partners exempted so far, the market may be walking into a minefield wearing blinders.
Senior bankers from JPMorgan to Amundi are sounding the alarm that too much faith is being placed in the idea that cooler heads will prevail. Complacency, they argue, is not just dangerous, it’s pervasive. Volatility gauges remain sedated, credit spreads tight, and bond yields compressed, all reinforcing the illusion that risks are under control. But if Trump sticks the landing on full-scale tariffs, those metrics won’t just reprice, they’ll whipsaw.
The real concern isn’t just tariffs; it’s the broader unraveling of American financial orthodoxy. Trump’s repeated attacks on Fed independence, the eye-watering fiscal deficits from his latest budget bill, and a flurry of institutional challenges to the rule of law are shaking the pillars of what once made U.S. markets the global safe haven. A dollar once considered a vault of value is now showing stress fractures, suffering its worst first half since Nixon closed the gold window in 1973.
That’s not just noise. That’s repricing risk premia. As one U.S. bank executive put it, the “risk-free premium” of American assets is eroding. And that decay isn’t confined to the dollar, it bleeds into how global allocators view the entire U.S. investment proposition. What used to be the rock is starting to look like sand.
Even Wall Street’s alpha dogs, typically calibrated to tune out political theatre, are now whispering what was once unthinkable: the U.S. may be behaving more like an emerging market than the world’s anchor economy. When major institutions start talking about the rule of law, media freedom, and budget credibility in the same breath as FX risk, it’s clear the perception window has cracked.
So, what then?
If Trump does deliver on his August 1 tariff barrage, the street will be forced to reckon with a scenario that’s been largely waved off, a true exogenous policy shock in the heart of a late-cycle rally. The correction wouldn’t be technical; it would be philosophical. The market’s confidence in the U.S. as a stable steward of capital would take a visible dent, and with it, the cost of equity, the price of debt, and the value of the dollar could all adjust sharply, perhaps violently.
This is no longer about whether markets are too hot. It’s about whether the foundation they’re built on is shifting. And if Trump lights the fuse, we may find out just how much of this rally was built on trust, and how fast trust can burn.
Trump & Bessent versus Powell & the bond vigilantes: Extract Ed Yardeni
President Donald Trump wants lower interest rates. He blames Fed Chair Jerome Powell for keeping them too high. He has been saying so since his first term in office as President. He said so again on June 27: “I think we should be paying 1% right now, and we’re paying more because we have a guy who suffers from, I think, Trump Derangement Syndrome.” That’s after he reiterated that “I’d love him to resign if he wanted to; he’s done a lousy job”.
Trump has also been frustrated by the Bond Vigilantes. On April 9, he was forced to postpone imposing his April 2 “Liberation Day” reciprocal tariffs on America’s trading partners for 90 days after bond yields spiked on the resulting turmoil in the capital markets. He acknowledged as much that same day (April 9) when he said, “I was watching the bond market. The bond market is very tricky; I was watching it. But if you look at it now, it’s beautiful. The bond market right now is beautiful. … I saw last night where people were getting a little queasy”.
If the Fed were to lower interest rates, Trump’s expectation is the entire yield curve would decline, saving the US federal government “hundreds of billions of dollars.” Last week, on his Truth Social site, Trump shared a handwritten note he wrote to Powell. “You are, as usual, Too Late,” he wrote. “You have cost the USA a fortune and continue to do so. You should lower the interest rate by a lot! Hundreds of billions of dollars being lost! No inflation.”
However, Trump also realizes that bond yields wouldn’t necessarily follow short-term interest rates downward: After what happened in early April, he knows that the Bond Vigilantes could spoil his victory by pushing bond yields higher.
That’s what happened last year from September through December when the Fed cut the federal funds rate four times by -100bps in total. The 10-year bond yield (and mortgage rates) rose by 100bps. The Bond Vigilantes recognized that the economy wasn’t as weak as Fed officials thought at the time. We did too, and we predicted that the bond yield would rise in response to the Fed’s unwarranted easing.
Trump has a plan for dealing with Powell and the Bond Vigilantes. Last week on Sunday, June 29, in a pre-taped interview with Maria Bartiromo on her Fox News show Sunday Morning Futures, he said, “I don’t want to have to pay for 10-year debt at a higher rate,” when talking about financing the US government debt.
When Maria asked the President how he was going to deal with the US$9 trillion in debt that is due this year, Trump said he was going to refinance it as short-term debt because “we have a stupid person” at the Federal Reserve. He added, “Then we’re gonna get somebody into the Fed who’s going to be able to lower [the rates].” He noted the rates should be at 1% or 2%: “You know, if you look at Switzerland, they’re the lowest right now. They’re at much less than one point, and frankly we should be there, too. ”
So according to this plan, the Treasury will issue more Treasury bills and fewer notes and bonds over the rest of the year through next year until Trump appoints the next Fed chair, who then will lower interest rates so that the maturing Treasury bills can be refinanced with longer-maturity debt at the then-lower interest rates. Brilliant!
Not so fast: It would be brilliant except for a couple of loose ends:
(1) Fed Chair Jerome Powell’s term as Fed chair expires on May 15, 2026. However, he could stay on as a Fed governor until his term in that position expires on January 31, 2028. Fed Governor Adriana D. Kugler’s term expires on January 31, 2026. Trump could fill her open position with someone outside the current Fed roster, such as Treasury Secretary Scott Bessent or another Trump loyalist, including current Fed Governor Christopher Waller.
But Trump loyalist or not, the next Fed chair will still need to work with the other 11 voting members of the Federal Open Market Committee to make monetary policy decisions. In the past, Fed chairs have succeeded in persuading the majority of their voting colleagues on the Federal Open Market Committee to vote for their policy stances. There rarely have been any dissenters, and when there were dissenters, they were few in number (one or two).
A Trump loyalist as Fed chair might have more dissenters or even more than enough of them to vote for a policy stance contrary to the one supported by Trump’s Fed chair. That would seriously weaken the power of the Fed chair and raise concerns about the internal conflict with the Fed.
(2) In addition, if Trump’s loyal Fed chair replacement manages to deliver rate cuts when they are not justified by the incoming data, the Bond Vigilantes might do what they did in late 2023, i.e., push bond yields higher. The Treasury might be forced to continue issuing more Treasury bills in the hopes that a reduced supply of Treasury bonds would bring their yields down. But the Bond Vigilantes might push back, recognizing that lower bond yields would cause the Treasury to rapidly increase the supply of bonds.
Corporate news in Australia
-National Storage REIT ((NSR)) looks to be styming the Kirsch bid for Abacus Storage King ((ASK)) with a blocking stake.
-Morgan Stanley is set to run the sale of Dental Boutique.
-RACQ has employed Macquarie Group ((MQG)) is sell its bank with Bendigo and Adelaide Bank ((BEN)) touted as the likely buyer.
-Pacific Equity Partners’ bid for Johns Lyng Group ((JLG)) has received support and could trigger more transactions in the sector.
-nib Holdings’ ((NHF)) sale of its travel insurance business for estimated $200m has received interest from numerous bidders such as Zurich, Allianz and Hollard.
-Glencore continues to consider the divestment of its coal assets despite weak coal prices.
-Imugene ((IMU)) is expected to announce an equity raise for $35m.
-Betashares’ ($3bn in FUM) managed account product is merging with InvestSense ($5bn in FUM) to form a new subsidiary in managed accounts, called Trellia Wealth Partners.
On the calendar today:
-JP May core machine orders
-CH June Trade Bal
FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 3364.00 | + 30.78 | 0.92% |
| Silver (oz) | 38.96 | + 1.33 | 3.53% |
| Copper (lb) | 5.60 | – 0.02 | – 0.33% |
| Aluminium (lb) | 1.18 | – 0.00 | – 0.21% |
| Nickel (lb) | 6.79 | – 0.07 | – 0.96% |
| Zinc (lb) | 1.24 | – 0.02 | – 1.59% |
| West Texas Crude | 68.45 | + 1.57 | 2.35% |
| Brent Crude | 70.36 | + 1.51 | 2.19% |
| Iron Ore (t) | 96.71 | – 0.05 | – 0.05% |
The Australian share market over the past thirty days
| Index | 11 Jul 2025 | Week To Date | Month To Date (Jul) | Quarter To Date (Jul-Sep) | Year To Date (2025) |
|---|---|---|---|---|---|
| S&P ASX 200 (ex-div) | 8580.10 | -0.27% | 0.44% | 0.44% | 5.16% |
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| A2M | a2 Milk Co | Downgrade to Neutral from Buy | Citi |
| BOE | Boss Energy | Downgrade to Hold from Buy | Ord Minnett |
| CIP | Centuria Industrial REIT | Upgrade to Hold from Trim | Morgans |
| COF | Centuria Office REIT | Upgrade to Hold from Trim | Morgans |
| DXC | Dexus Convenience Retail REIT | Downgrade to Hold from Accumulate | Morgans |
| DXI | Dexus Industria REIT | Upgrade to Accumulate from Trim | Morgans |
| EVN | Evolution Mining | Upgrade to Hold from Trim | Morgans |
| GMG | Goodman Group | Downgrade to Hold from Accumulate | Morgans |
| JIN | Jumbo Interactive | Downgrade to Neutral from Buy | Citi |
| LIC | Lifestyle Communities | Downgrade to Neutral from Buy | Citi |
| Downgrade to Hold from Accumulate | Ord Minnett | ||
| NEM | Newmont Corp | Downgrade to Accumulate from Buy | Morgans |
| PTM | Platinum Asset Management | Upgrade to Buy from Hold | Bell Potter |
| QAL | Qualitas | Downgrade to Accumulate from Buy | Morgans |
| RRL | Regis Resources | Upgrade to Accumulate from Hold | Morgans |
For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.
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CHARTS
For more info SHARE ANALYSIS: ASK - ABACUS STORAGE KING
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For more info SHARE ANALYSIS: NSR - NATIONAL STORAGE REIT