Thoughts for the day NEWS

16 July 25 NOT Recommendations

In June, the core CPI inflation increased from a very soft level to a soft level.
US core CPI rose 0.3% in June, and 2.7%YoY. CPI supports the notion that imported goods are subtly beginning to experience a slight increase in prices, yet disinflation in the services and housing sectors continues to overshadow the broader landscape. For five consecutive months, the inflation estimate has remained below the consensus.

The gains were counterbalanced by a decrease in inflation for vehicles and hotels, as consumers reduce their spending on non-essential items.

CPI services prices reflect a persistent decline in the cost of discretionary services. Airline fares decreased by 0.1%, effectively maintaining the 14% reduction noted over the last four months, while accommodation costs dropped by 2.9%, bringing the total decline since February to 6.5%. These reductions in prices are likely influenced in part by a decrease in international tourist arrivals, but it also seems that US households have reduced their discretionary spending recently, in light of expectations that price increases driven by tariffs will impact their real wages.

Reflation seems to be developing beneath the surface due to tariffs, but it is insufficient to trigger a hawkish shift.

Economists have consistently cautioned about the potential collateral damage stemming from Donald Trump’s trade war. However, after four months of numbers that were cooler than anticipated, the US Bureau of Labor Statistics reported on Tuesday that US inflation increased less than expected.

Donald Trump repeated his call for the Fed to slash rates given “Very Low Inflation.”

Treasuries initially rallied on the CPI data but later slumped, with the 30-year yield touching 5% for the first time since June. Oil dropped and the dollar rebounded. BofA’s monthly survey showed fund managers are piling into risk assets at a record pace. Risk appetite is at the highest level since tracking - BofA fund managers survey.


SCOTUS greenlights Education Department cuts: The Supreme Court has cleared the Trump administration to continue dismantling the Education Department, which is expected to shortly lay off over 1,000 staff.

Donald Trump intends to implement tariffs on pharmaceuticals by the end of the month and indicated that levies on semiconductors could follow shortly thereafter.

Scott Bessent proposed that Jerome Powell ought to resign from the central bank’s board when his chairmanship concludes in May 2026. He additionally mentioned that a "formal process" is currently underway to find a possible successor.

Kevin Hassett is currently the leading candidate to succeed Jerome Powell as the chair of the Federal Reserve next year, according to sources. Other potential candidates include Kevin Warsh and Christopher Waller. Trump mentioned that Scott Bessent is not among the top contenders, although he is considered "very good."

Hassett has reiterated President Donald Trump's critique of the Federal Reserve, asserting that it warranted the president's criticisms regarding its management of interest rates.

Trump has indicated that he will select a Fed chair who is inclined to lower interest rates, raising concerns among investors about the central bank's independence from political influence.


Fed Hawks:
Tom Barkin mentioned that he anticipates additional price pressures resulting from US tariffs.

Lorie Logan indicated that interest rates might need to remain stable for a while longer as companies start to transfer tariff expenses.
Logan also mentioned that policymakers might have to shift towards reducing interest rates if inflation and the labour markets weaken.

Logan cautioned against relying too heavily on brief periods of positive inflation news, stating that she would prefer to see sustained low inflation over a longer duration to be truly convinced.


US Visa’s decline.
Recent data indicates a significant decrease in visas for both students and skilled workers in the first half of 2025 compared to the previous year, alongside notable declines from several major sources of tourism to the United States. This situation jeopardizes billions of dollars in tourism revenue and student tuition, the influx of foreign students and skilled professionals, and ultimately, America's long-term global academic leadership, supremacy in advanced scientific research, and soft power.

Treasury Secretary Scott Bessent indicated that the deadline for a US-China tariff truce, which is set to conclude next month, is adaptable. He mentioned that discussions between the two largest economies in the world are currently in a "very good place" in anticipation of a forthcoming meeting in the next few weeks.
“I tell market participants not to worry about Aug. 12,” Bessent said Tuesday on “Bloomberg Surveillance,” referring to the end of a 90-day reprieve that was announced May 12.
Bessent's perceived assurance in stable relations with Beijing also strengthens his position as a counterbalance to the China hawks advising Trump.


US-Indonesia Trade Agreement.

President Trump has revealed a new trade agreement with Indonesia, a significant economy in Southeast Asia. While specific details are limited and Jakarta has not yet verified the information, it seems that the deal reduces Indonesia's "reciprocal" tariff rate to 19%, down from the 32% mentioned in Trump's letter from July.



The European Union has completed its plans for counteractions against €72 billion worth of US products, which encompass Boeing airplanes, automobiles, and bourbon, should it choose to respond to Trump's 30% tariffs.

Donald Trump has not succeeded in applying sufficient pressure on Russia to engage in authentic peace negotiations regarding Ukraine. However, recent reports indicate that he inquired of President Volodymyr Zelenskiy whether he could propose the one action that no rational person would advocate: bombing Moscow,
Trump inquired of Volodymyr Zelenskiy whether Ukraine could target Moscow and St. Petersburg if he supplied long-range missiles, according to the FT. White House spokesperson Karoline Leavitt stated that the report had misinterpreted the president's remarks.



Foreign investors continue to show a strong interest in Treasuries, despite previous concerns that President Donald Trump’s trade war would deter them. Their ongoing support is likely to limit yield increases for the time being.

The successful 10- and 30-year Treasury auctions held last week, occurring more than three months after the announcement of reciprocal tariffs, indicate that foreign buyers are committed to the market. The prominent 10-year note achieved its fifth consecutive award below the auction deadline, marking its longest streak since 2021. Indirect bidders, who primarily represent foreign accounts, accounted for over 65% of the sale. This occurred just two days after Trump threatened to raise tariffs on key trading partners, including Japan, which holds the largest amount of US debt.

Market participants consider monthly Treasury auctions to be a real-time indicator of foreign purchasing activity amid Trump’s trade policies.

Concerns about a weakening dollar, a selloff in US assets, rising costs for FX hedging, and growing fiscal worries have raised doubts about the attractiveness of US bonds to foreign investors. However, the demand data from the Treasury’s debt sales suggest that these concerns were misplaced.

Additionally, reports from Treasury International Capital indicate that major foreign holdings of Treasuries reached the second highest level on record in April, the latest month for which data is available.

Treasury Secretary Scott Bessent commented in late May that he had not observed any decline in foreign demand for Treasuries.


Bank of England Governor Andrew Bailey stated that US President Donald Trump's trade war with other nations is an ineffective method for tackling imbalances in the global economy and will negatively impact households.

Bailey emphasized the need for enhanced collaboration among countries to address "unsustainable" trade and financial disparities, proposing the use of multilateral organizations such as the International Monetary Fund and the World Trade Organization to restore balance in trading and financial systems.

Bailey cautioned that raising tariffs poses a risk of fragmenting the global economy and diminishing economic activity, asserting that the primary challenge is to boost growth in the world economy to improve living standards.


The EU seems to be in a state of stagnation, taking no action.
Just days after a collective sigh of acceptance in Brussels regarding the inevitability of US blanket tariffs of approximately 10%, trade officials are now hastily responding to President Donald Trump’s recent threat of a 30% tariff, which could likely lead to a recession in the euro area. While it may be perceived as a bullying tactic — one that would provoke counter-tariffs on €72 billion ($84 billion) worth of goods, including Boeing Co. aircraft — it highlights the extent to which the mood has soured, especially as Germany approaches a year of zero growth and France grapples with its deficit.

The EU is being attack from a second front.
Additionally, there is the influence of China. The European Union’s other major trading partner is ramping up its export activities, supported by a weaker yuan, and shifting goods to markets outside the US. This situation mirrors the initial China “shock” from two decades ago, which could lead to further destabilization as China increasingly outperforms the Old Continent in sectors such as electric vehicles and battery technology, thereby accelerating deindustrialization and fuelling populist sentiments. The EU's tariffs on Chinese electric vehicles and state support for gigafactories have not alleviated this looming threat.


UK CPI rose more than expectations. CPI MoM cam in at 0.3% estimate was 0.1% and YoY came in at 3.6%, above the 3.4% estimate.

Catherine Mann, a rate-setter at the Bank of England, cautioned that concerns over unemployment and increasing expenses are driving UK households to establish a "rainy day fund" as the economy is constrained by savings rates that are still considerably higher than they were prior to Covid.

Mann stated on Tuesday that this "cautious consumer behaviour" has resulted in "significantly lower growth" in specific sectors, including hospitality and retail.


French Prime Minister Francois Bayrou has suggested eliminating two national holidays as a measure to mend the nation's finances.

France is teetering on the brink as its debt keeps increasing, Prime Minister Francois Bayrou stated on Tuesday while presenting plans to significantly reduce the budget deficit in the coming year.

"We must take responsibility; we are at the final stop before the edge," the Prime Minister remarked during a press conference in Paris to detail his financial strategy.

The government's objective is to reduce the budget deficit to 4.6% of economic output by 2026 and to meet the European Union's threshold of 3% by 2029.

Bayrou remarked that the nation is "addicted to public spending" and is in "mortal danger" as debt rises by €5,000 every second.

Nvidia Corp. CEO Jensen Huang expects to receive the initial set of US licenses for exporting H20 AI chips to China shortly, as per officials who have assured Nvidia of a swift process.

Huang mentioned that the company has a substantial number of orders to fulfill and is eager to dispatch the H20 as soon as possible, although it remains uncertain how many licenses the US is likely to authorize.

Huang commended China's advancements in artificial intelligence, stating, "China's open source AI is a catalyst for global progress, giving every country and industry a chance to join the AI revolution."

SoftBank Group Corp. founder Masayoshi Son and OpenAI chief Sam Altman see an unquenchable demand for AI, making it essential to continuously expand computing capacity.

Altman mentioned that as AI costs decrease, an increasing number of individuals are eager to utilize it, indicating a significant global demand for intelligence.

Son aims to launch a billion AI agents within the SoftBank group this year and create an operating system for them, while SoftBank intends to invest up to $30 billion in OpenAI.

President Donald Trump praised over $92 billion in investments directed towards artificial intelligence and energy infrastructure during his visit to Pennsylvania.

The investments, coming from various companies, encompass new data centres, enhancements to power generation and grid infrastructure, as well as AI training and apprenticeship programs.

Trump emphasized that these investments are securing a future that will be designed, constructed, and manufactured in the United States, underscoring his commitment to enhancing US competitiveness in the AI sector.


Americans Are Worrying About Jobs and Ai Regulation?
The swift integration of AI has raised concerns - or at least unease - among numerous employees.

According to a survey conducted from August to October 2024, U.S. adults tend to underestimate the effects of AI on employment for lawyers and truck drivers. In contrast, the general public in the U.S. was more inclined than experts to believe that medical doctors, teachers, and musicians face the threat of job reductions due to AI in the next two decades - although half of both U.S. adults and experts agree that job losses will occur in each of these professions. A significant majority in both demographics believed that AI will result in fewer positions for cashiers and journalists.

The survey also revealed that while AI specialists generally hold a more optimistic view of AI's potential compared to the public, a majority from both groups expressed concern that government oversight of AI may not be sufficient.


Google, xAI, OpenAI, and Anthropic have each secured U.S. defence contracts worth up to $200M to develop advanced AI systems for national security.

Second-quarter earnings kick off this week, starting with Banks.

JPMorgan’s stock traders notched their best second quarter.
JPMorgan Chase topped Q2 estimates with $45.68B in revenue, driven by strong trading and investment banking, though earnings fell 17% due to a gain on Visa shares from last year.

BlackRock reported record Q2 assets under management of $12.53T, driven by $68B in net inflows and rising equity markets. Adjusted EPS of $12.05 beat estimates, while revenue rose 13% to $5.42B.

Citi traders also rode the tariff-induced volatility wave with beats.
Citigroup reported Q2 earnings of $1.96 per share on $21.67B in revenue, topping estimates on strong markets and banking performance, as CEO Jane Fraser’s turnaround gains traction.

BNY’s profit also surpassed expectations.

Wells Fargo lowered its full-year guidance for net interest income.
Wells Fargo posted better-than-expected Q2 profit of $1.60 per share, but shares as the company cut its 2025 net interest income guidance, citing weakness in its markets unit.


Apple has signed a $500M supply agreement with MP Materials to secure U.S.-produced rare earths and jointly develop recycling and magnet tech.

Google is investing $25B in AI and data centre infrastructure over 2 years and will modernize 2 hydropower plants in Pennsylvania under a deal with Brookfield Asset Management

Renault has revised its profitability forecast for the year and appointed Duncan Minto as the interim CEO.

ASML's quarterly orders exceeded expectations.
In the second quarter, ASML Holding NV's orders exceeded expectations, achieving order bookings of €5.5 billion, surpassing the average estimate of €4.8 billion.

According to the company's statement, ASML anticipates third-quarter net sales to range from €7.4 billion to €7.9 billion, along with a projected 15% increase in net sales for the year.

GM and LG Energy are upgrading a Tennessee factory to produce lower-cost EV batteries without cobalt or nickel, aiming for commercial output by late 2027.

Meta Platforms plans to spend hundreds of billions on massive AI data centres as part of its new Superintelligence Labs initiative, with CEO Mark Zuckerberg citing strong ad revenue as justification.

Meta Platforms Inc. is on the verge of yet another confrontation with the European Union, as a €200 million ($232 million) penalty did not ensure that Facebook and Instagram adhered to a stringent new digital regulation.

The European Commission reached out to the social media behemoth last week, warning that Meta's pay or consent service — which offers ad-free experiences for a fee — requires additional modifications.

Oracle will invest $3B over 5 years in AI and cloud infrastructure across Germany and the Netherlands, expanding capacity to meet rising demand.

SpaceX is reportedly preparing for an insider share sale that could value the company at approximately $400 billion. The firm aims to start deploying its third-generation satellites in the first half of 2026.

Uber and Baidu are launching a multi-year deal to deploy Baidu’s autonomous vehicles on Uber’s platform in Asia and the Middle East starting later this year, with thousands of robotaxis planned.

According to Morgan Stanley, global oil inventories have increased significantly; however, prices have remained stable because the majority of the increases are occurring in Asia. Only 10% of the growth in stockpiles has taken place in the OECD, which is essential for price determination.

According to reports from the API, US crude oil inventories saw an increase of 800,000 barrels last week. Additionally, supplies of gasoline and distillate also experienced a rise.

Fiat-backed stablecoins are now a USD 226B market.
Stablecoins have emerged as one of the defining features of the crypto market over the past year, but especially since Donald Trump’s election. Blockchain-based dollars once drew the ire of global regulators; Meta (NASDAQ: META) abandoned its stablecoin project in 2022 due to global regulatory pushback. In 2025, however, the US government sees these tokens as aligned with its core national interests. This has contributed to the Trump Administration’s relatively broad support for the digital asset space, including networks and assets beyond BTC. Proponents of particular blockchains are optimistic that their networks will be able to attract a portion of the USD 3.7T in stablecoins that US Treasury Secretary Scott Bessent thinks will exist by the end of the decade.

Assessing stablecoins' role in payments and settlements is a priority for the Financial Stability Board (FSB), according to its chair Andrew Bailey. He stated the FSB should keep implementing its stablecoin recommendations and monitoring global developments, especially after the US Senate passed the GENIUS bill and amid increased stablecoin adoption.


CBDC concerns stall legislation

House Majority Leader Steve Scalise joined 12 other Republican lawmakers in voting no on considering the bills on Tuesday. The other dissenters were Andrew Clyde, Tim Burchett, Andy Biggs, Eli Crane, Michael Cloud, Marjorie Taylor Greene, Andy Harris, Anna Paulina Luna, Scott Perry, Victoria Spartz, Chip Roy and Keith Self.

House Republican leaders' strategy to advance crypto regulatory measures seems to be back on track after President Donald Trump stated he had persuaded reluctant conservatives to proceed with the legislation.

A group of Republican hardliners had insisted on modifications to a Senate-approved stablecoin regulation bill and collaborated with Democrats to block a procedural step required to initiate the consideration of the crypto bills.

President Trump declared that the 11 essential Congress members had consented to support the Rule, as noted in his Truth Social post, and House Speaker Mike Johnson expressed gratitude for Trump's engagement in securing the passage of the GENIUS Act.


Crypto Hedge Funds Achieved a 6.3% Return in May
According to the most recent data from the CFR Crypto Fund Index, crypto hedge funds posted a robust return of 6.3% in May. However, these funds lagged behind Bitcoin, which saw an 11% increase during the same timeframe.

Even with the encouraging performance in May, the year-to-date returns for crypto funds as of May 2025 are still in the negative at -4.8% – highlighting the volatility and intricacies of this market. Early data for June suggests that returns for crypto funds were largely unchanged.


US federal agencies issued guidance outlining risks for banks considering crypto custody services, without creating new supervisory expectations. The agencies emphasized banks must understand complexities, potential liabilities, and compliance obligations surrounding crypto assets, including oversight of third-party custodians. The document stressed the need for robust audit programs or external expertise.