Macro

• The further acceleration by ‘Opec+ eight’ in unwinding the second package of voluntary output cuts was a surprise, albeit one that left markets unmoved.
• The cartel now appears to be firmly on track to complete its unwinding in September, even though its stated justifications for increasing output remain highly questionable.
• Despite downside global growth risks, the Saudis in particular may press to start unwinding the first package, a move which may be announced as early as next week.

• The copper trade still gets lots of attention. Reason for us to dig a little deeper and evaluate emerging opportunities.

• Let’s also evaluate the “fundamental” reason market participants have why COMEX Copper is so much pricier than LME copper…

• The announcement of a 50% tariff on imported refined copper into the US has triggered a widening of the COMEX-LME-Spread from 11% to 27%.

• US economic growth expectations for Q2 are in positive territory. The tone of US banks’ financial results for Q2 suggests the economy is in decent shape, particularly the household sector.
• US banks have become large holders of Treasuries since the end of the COVID-19-induced recession and could become even larger holders if changes to the supplementary leverage ratio are instituted.
• Labour market data indicates higher frictional unemployment and tougher entry conditions for new graduates, potentially indicating the growing influence of artificial intelligence (AI) in hiring decisions.

• Trump’s 50-day ultimatum to Russia expires on September 2nd, potentially leading to sanctions and increased weapons supplies to Ukraine
• EU’s new price cap on Russian crude takes effect on September 3rd, aiming to curtail Russia’s energy revenues and strengthen anti-circumvention measures
• Snapback provisions on Iran could be triggered in September, adding to global oil price volatility and uncertainty

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• In 2025, Greece continued to see an increase in its GDP, with a slight decrease in its growth rate from last year, at 2.11%, above the EU’s growth rate of approximately 1%.
• Projections from the IMF, OECD, and EU Commission suggest that this trend will continue in 2026.
• Inflation appears to be easing and progressively aligning with ECB’s 2% target, as May’s price data indicated a 2.48% increase.

• Brad Setzer is an expert in global trade, capital flows, and sovereign debt restructuring
• He has been involved in various government positions related to international economic analysis
• Setzer discusses the rapid rollout of tariffs under the Trump administration and their potential impact on the economy

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• Asia’s base oils demand could get support as buyers focus on locking in supply to cover requirements during final weeks of Q3 2025.
• Dynamic would highlight disconnect between typical seasonal slowdown in lube demand in month of August and need to secure base oils supplies to meet pick-up in demand at end of third quarter.
• Expectations of sufficient supply could prompt buyers to maintain balanced inventories rather than to seek larger stocks.

• The immediate post-Civil War period exemplifies a crucial pivot in U.S. trade policy. Trade policy that began as wartime fiscal expedients became permanent structural features. The Morrill tariff, enacted in 1861 primarily to finance the Union’s war effort, had notably raised average duties on dutiable imports to about 47 percent.
• By 1865, this elevated tariff regime was entrenched, sustained by several intertwined forces. First, the federal government emerged from the war burdened with a staggering debt of approximately $2.7 billion, some 30 percent of GDP at the time.
• This fiscal strain made cutting tariffs risky, as customs duties were vital for government revenue. Bondholders thus benefited from a generation of fiscal conservatism, while equity investors in protected domestic industries enjoyed durable shelter from foreign competition.

• EM sovereign credit markets are a key focus
• Overall risk environment for EM is being closely monitored, with a more neutral stance on EMFX rates and corporates
• Tariffs and ongoing tariff uncertainty are major drivers in the coming weeks, with markets having ground better despite potential downside risks in growth

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• Context: Central Bank rate decisions, index changes and political events can move markets and affect volatility. Exchange holidays and option expiration schedules might influence liquidity on these days.
• Highlights: Earnings season keeps several regional markets busy through early to mid-August. Meanwhile, three central banks in the region are scheduled to hold monetary policy meetings spaced across the month.
• Why Read: Plan ahead and take into account known market events when making investment and trading decision.

• The U.S. market is exhibiting a strong broad-based recovery that’s appears to be global in scope.
• A leadership rotation appears to be underway from growth to value and cyclical stocks, which would be a welcome sign of broader participation in the rally.
• The main risk to our bullish scenario is a failure in factor and sector rotation. This is consistent with our scenario of a market stall during the August–September time frame.

• Q2 earnings season was supposed to be a key test of how the Trump tariffs would affect corporate earnings and margins. So far, the preliminary verdict has been relatively benign.
• We believe the consensus expectation of stagflation, below-average growth and higher-than-expected inflation is the correct scenario.
• The full effects of tariffs on inflation and growth will start to be seen in Q3 2025 and continue into 2026.

• Market narratives were driven by US trade pacts, critically with Japan, the ECB watching data from a good place, and further evidence of UK fiscal problems.
• Tariff uncertainty eased slightly, but it is still fierce ahead of the 1 August deadline. PMIs remained resilient, and UK retail sales rebounded into growth again for Q2.
• Next week brings Fed, BoC and BoJ meetings (broadly on hold), US and euro-area GDP growth for Q2, US payrolls, euro-area unemployment and slower flash HICP data.

• Competition / In Depth: China intensifies war on toxic competition as economy suffers
• IPOs /In Depth: China reopens the door for loss-making tech startups to go public
• Energy /: Massive new hydropower dam in Xizang won’t harm downstream nations, China says

• WTI crude prices are pressured by oversupply and weak sentiment, but received support late-week by a strong inventory draw and improved outlook for U.S.-EU trade talks. 
• U.S. natural gas prices dipped early due to high output and mild weather but recovered slightly on heat-driven demand, with ample storage limiting further upside.
• Oil and gas corporate updates showed mixed earnings and strategy shifts, with Halliburton guiding lower, BP appointing a new chairman, and SLB falling despite beating expectations.

• Iron ore futures surged on China’s massive hydropower push, but gains faded as property sector stress lingered.
• Investors are watching the upcoming Politburo meeting for potential action on curbing excess capacity in EV, solar, and lithium battery sectors to support struggling prices.
• Prices are holding firm above key moving averages, pointing to continued upward momentum, while the RSI hints at a potential price correction. 

• The ECB kept its description of the policy setting as in a good place, and wants to watch the news in the next few months. Lagarde refused to emphasise September’s meeting.
• Euro strength is depressing inflation below target in the near-term forecasts, but the ECB remains relaxed about this. It sees the outlook as broadly unchanged since June.
• We still see rolling resilience in the economy and doubt US trade policy will break it. More rate cuts are inappropriate without demand destruction, so we don’t expect any.

• China’s economic malaise will not end until its housing market clears and households have sufficiently rebuilt their savings. These adjustments are far from complete. 
• Continued declines in housing prices across major and smaller urban areas suggest that prices have further to fall, while housing demand and supply are still sluggish. 
• Households also remain defensive, with deposit growth outstripping income growth by a large margin. The economic headwinds will entrench precautionary savings behaviour.

• Sinovac / In Depth: Sinovac’s Covid fortune fuels bitter boardroom battle
• Wahaha /Chinese beverage heir was an American citizen, U.S. tax records reveal
• Visa /U.S. visa scrutiny pushes Chinese students to scrub their social media

• Podcast has been running for almost seven months with recent guest episodes
• Discussion on recent global asset trends and market news, including inflation, Fed rate cuts, and Trump’s tariff threats
• Mention of interns from CUNY City Tech helping with macro database analysis and highlighting Ethereum’s strong performance in the market.

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• Higher employment taxes can entirely explain the fall in payrolls as the tax wedge hits its highest since 1987, raising our structural unemployment rate estimate by 0.48pp.
• That could understate the structural shift amid a substantial drop in the threshold, rise in the minimum wage (jobs ban) and benefit rates. Some will go ‘inactive’ on disability.
• The unemployment rate must rise more than its natural rate to deliver disinflationary pressure sustainably. Our structural estimates suggest it won’t break excess inflation.

• HSI poised to break 25k for first time since 2022.  Next resistance 27100.  Hong Kong market outperforming global markets by wide margin since our BUY was initiated in March 2024.
• Financial, materials and healthcare sectors leading the market higher as tech sector consolidates.  China shares still offer the best valuation metrics in Asia.
• Alibaba Pictures (1060 HK) , renamed Damai Entertainment has seen increased analyst attention as the company becomes the Live Nation Entertainment, Inc (LYV US) of China.

• Our commentary this week is more limited and slightly disjointed, as we are not seeing any clear narratives or themes to focus on.
• Here are a few charts that caught our attention in flipping this week’s chartbook.
• Our tactical breadth charts, specifically for metals and mining stocks, suggest that a reversal of the recent rise may be in the cards.

• U.S. “Crypto Week”—GENIUS Act signed, CLARITY + anti-CBDC bills advanced—promises fresh stable-coin liquidity, yet practical impacts will lag the market’s rapid pricing.
• Bitcoin touched a $123k ATH on $19 bn YTD ETF inflows, while ETH and SOL still sit 20–30 % below prior highs despite Q2 gains of +35% and +24%.
• Altcoins caught up fast—XRP led the charge, ETH also outpaced BTC, while SOL trailed peers—showing a brisk, uneven rotation away from Bitcoin dominance.

• AI / In Depth: AI foray is teaching China’s edtech firms a valuable lesson
• Wells Fargo /: Wells Fargo executive barred from leaving China amid criminal probe
• Tax /: Chinese investors face 20% tax bill on offshore trading profits

• The UK’s de facto fiscal rule is slippage, with a £50bn to £100bn increase in borrowing between initial official forecasts and outcomes. 2025-26 made another slippery start.
• Politicians spend any space in the OBR forecasts, skewing surprises to higher spending. Yet tax hikes keep failing to raise the hoped revenue, motivating further increases.
• Investors should not be fooled by forecasts for consolidation when the failed strategy driving the fiscal slippage rule survives. Issuance may stay near £300bn in 2029-30.

• Silver (SILVER COMDTY) going parabolic. Why? Three reasons. Stratospheric Gold prices. Robust industrial demand amid supply constraints. Weaking dollar.
• Silver IV is spiking up. Especially, Up Var jumped 10.7% to 35.64 signalling rising bullish sentiments among options market makers.
• Silver is forecasted to have supply deficit seventh year in succession.

• China’s mega hydropower project signals stronger infrastructure-led steel demand, offering a lifeline to mills and boosting near-term iron ore demand and prices amid weak property activity.
• Rio Tinto’s strong Q2 output boosts near-term iron ore momentum, but muted shipments, cyclone impact, and gradual Simandou ramp-up may limit upside in prices.
• Portside iron ore inventory data showed mixed signals last week, with SMM reporting a sharp drop while CISA data reflected a slight increase.

• WTI futures dropped by 3.5% for the week ending 18/Jul, marking its first fall in three weeks. The downtrend was driven by fears over oversupply and weak demand.
• The U.S. rig count rose by seven to 544, led by a rise in gas rigs. Oil rigs dropped for the twelfth straight week, down by two to 422.
• WTI OI PCR rose to 0.96 on 18/Jul compared to 0.91 on 11/Jul. Call OI fell by 22.8% WoW, while put OI dropped by 18.4%.

• The Abrdn Commodity Index is putting in a textbook head and shoulders consolidation pattern.
• These chart patterns with a large base have the tendency to build the fundament for big breakouts. Something is brewing from a technical perspective here…
• The ETF is tracking the Bloomberg Commodity Index Total Return (BCOM).

• For the week ending 18/Jul, Henry Hub rebounded by 7.6% on the back of warm weather forecasts and rising gas flows to LNG export terminals.
• For the week ending 11/Jul, the EIA reported that U.S. natural gas inventories rose by 46 Bcf, higher than analyst expectations of a 44 Bcf build.
• Henry Hub OI PCR remained unchanged at 0.87 on 18/Jul compared to 11/Jul. Call OI grew by 3.1% WoW, while put OI increased by 3.3%.

• Overweight US equities.  Government debt issuance is rising, investors switching from bonds to equities and foreign US bond investor appetite waning.
• Trump’s One Big Beautiful Bill is classic demand side fiscal stimulus, benefiting consumers.
• The 12–18-month outlook for domestic demand and corporate earnings growth has improved – reinforcing what business cycle indicators were already signalling.

• US Group II base oils price-premium to feedstock/competing fuel prices stays in narrow range, increasingly lags year-earlier levels.
• Base oils margins hold at levels that sustain incentive to maintain steady output.
• Base oils prices hold at levels that facilitate removal of surplus supplies in overseas markets.

• Global base oils prices face more pressure versus feedstock/competing fuel prices, especially for light grades, and especially in Asia.
• Heavy-grade price-premium to feedstock/competing fuel prices also faces more pressure in Asia than in other markets.
• Dynamic increases prospect of any adjustments in output taking place in Asia ahead of other markets.

• US base oils demand likely to wane amid seasonal slowdown in consumption during summer holidays.
• Steady outright prices and expectations of healthy availability of supply add to attraction of holding back.
• Build-up of additional stocks to cover against weather-related supply disruptions likely to have mostly been completed.

• The Epstein files row has intensified deep splits in the MAGA movement and triggered persistent demands for accountability.
• Trump’s recent pivot towards supporting Ukraine and critical foreign policy shifts have fuelled further rifts among his traditional base.
• Despite controversies, the key midterm factor remains Trump’s economic agenda, as tariffs and fiscal changes may hit his core supporters hardest.

• The capital gains tax on stock sale gains and securities transaction taxes could be raised in 2H 2025, which could negatively impact the Korean stock market, especially small caps.
• Combination of higher securities transaction tax and capital gains on stock sales could result in local retail investors selling their shares in 4Q 2025, before these changes come into effect. 
• Although many small caps in Korea have performed well this year, the potential changes on these two important taxes could put some damper on the recent excellent share price performances.

• Default markets are taking a breather and cleansing weak hands, with global fiscal concerns affecting G10 markets.
• Japan’s upcoming upper house elections could impact fiscal situation and yen value.
• Dollar strength has been driven by mixed US data and policy news, with potential for dollar Bears to get a reprieve.

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• Uncertainty surrounds the implementation of reciprocal tariffs and fentanyl-based tariffs under the IPA Act, with a federal court hearing scheduled for July 31st.
• The average tariff rate for ASEAN economies is currently around 9%, but could increase significantly if threatened tariffs are implemented, possibly exceeding 20%.
• The impact of these tariffs on EM economies and inflation remains uncertain, leading to a less stable macroeconomic landscape in the second half of the year.

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• Concerns for sugar cane yields and sugar content in major sugar market exporter
• China’s soybean import demand reached record seasonal high, following Brazilian crop
• Short covering seen in grain complex, USDA trimmed US corn availability expectations, driving force behind corn price recovery; tariff impacts on Brazilian products into US market, potential changes in sweetener mix for Coca Cola

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• David discusses US inflation outlook and sees signs of tariff-induced inflation, still maintains Fed cut only in December
• Market reacts to potential firing of Chair Powell by Trump, unlikely due to short remaining term
• Labor market and tariff-related inflation key factors in Fed decision-making, Fed cut pricing at only slightly higher than 50% for September

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• Despite the Upper House election result we are overweight Japanese equities and a buyer of the yen. 
• Business cycle indicators are positive; the profit and investment cycles in upswing. Companies are highly diversified – foreign sales account for 40% of  sales and 37% of production is abroad. 
• They are hedging their bets by expanding in the US and India while scaling back in China. These factors contribute to the resilience of corporate earnings growth.

• Anwar’s government has maintained political stability and public support in its two years thus far, but it will now have to shift gears to face voters in the next polls. 
• In the coming months, the state elections for Sabah and a looming cabinet reshuffle are key tests for whether the coalition government can maintain cohesion. 
• Economic policy missteps and a narrowly-averted judicial crisis risk distracting the government. Without remedial action, the path for the government’s re-election will narrow significantly.

• We reiterate positive momentum on iron ore pricing as mill spreads pass 100 RMB/ton and positive lending data from China increases optimism. Iron ore prices are now 103 USD/ton.
• Read: Iron Ore: Small Bounce From 96 to 100 USD/Ton As China Mill Margins Turn Positive and Iron Ore: Mill Spreads Continue to Improve, Bullish Ore To 110 USD/Ton. 
• We like Fenix Resources (FEX AU), which is about to commission the Beebyn-W11 mine and triple its production to 4.1 million tons (vs 1.4 million tons two quarters ago).

• Asia’s base oils demand shows signs of holding firmer than usual for time of year even as region’s lube demand faces seasonal slowdown in month of August.
• Lower end-user consumption and prospect of improving availability of supply curbs need to build stocks.
• Tighter-than-usual supply so far this year, lack of build-up of surplus volumes, and seasonal pick-up in demand in late-Q3 2025 could support steady demand.

• The search for candidates to replace Chairman Powell is rumoured to be underway, while political attacks have become broader, including large financial losses being incurred by the Fed.
• US equities are playing a game of chicken with President Trump, believing that threatened tariff increases will not be implemented. Total consumer spending impacted by higher tariffs is relatively small.
• Hitherto, in contrast to predictions, there is scant evidence of tariffs significantly impacting import prices or consumer prices to the potential detriment of Chairman Powell’s credibility.

• We call the stock market recovery off the April panic bottom as a “the dog that didn’t bark” market as there are few signs of speculative excess.
• Technical indicators are also supportive of higher prices in the short run
• The main risk to the bull is an unwelcome rise in inflation expectations, which could rattle the bond market as well as stock prices.

• Despite all of the dire headlines about tariffs on Canada, Mexico and the European Union, the only trade war that matters is effectively over. China has won.
• In the short run, economic policy uncertainty is receding but it’s not fully normalized. It’s time to adopt a risk-on posture.
• In the long run, equity investors should not expect the S&P 500, which trades at forward P/E of 22, to continue to outperform global stocks in the next expansion cycle.

• In our previous insight, Trump 50% Import Tariff Could Send Copper Into Stratosphere Short-Term: LME Can Breach 11k USD/Ton, we highlighted upside risk to the LME price.
• Comex-LME spreads remain elevated at $ 2,500/ton levels, reflecting the impact of tariffs that haven’t yet been imposed, amid ongoing supply disruptions. Inventories, though, have stopped depleting on the LME. 
• We remain bullish on copper in the countdown to August 1st, where it is likely that tariffs of 50% are imposed on copper. 

• A review of recent events/data impacting our investment themes and outlook
• Tariff chatter is a sideshow; the real focus should be  on the US Administration’s Fed plans
• Non-Chinese miners of rare earths and other strategic minerals will command a steep premium.

• Persistent upside inflation surprises and sticky wage growth are lifting hawkish market narratives, defying central bank and consensus hopes for a quick return to target.
• UK inflation jumped well above forecast in June, strengthening the hawkish case, while US core inflation shows tariffs adding to excessive underlying price pressures.
• Next week, attention turns to the ECB decision, July flash PMIs, and UK public finances, as markets weigh central banks’ willingness to ignore resurgent inflation.

• China’s Q2 GDP beat expectations, but nominal growth and the property sector remain weak despite strong exports and monetary support.

• Indonesia cut rates again, yet real rates are still too high to boost meaningful growth.

• Japan faces political uncertainty with likely election losses, raising concerns over its future role in global currency markets.

• Iron ore prices topped $100/ton as Beijing’s push on steel overcapacity and hopes of property support lifted sentiment, alongside tighter inventories fuelling restocking expectations.
• Rio Tinto’s early Simandou shipments from November sparked fresh interest, though RBC sees output reaching just 12 million tons by 2026, ramping up slowly.
• Prices are holding firm above key moving averages, pointing to continued upward momentum, while the MACD above its signal line reinforces the bullish trend.

• Chevron’s arbitration win over ExxonMobil unlocks Guyana’s Stabroek Block, a key asset underpinning its USD 53 billion Hess acquisition.
• SLB outperformed Q2 estimates despite YoY declines and also completed its ChampionX acquisition amid regulatory challenges.
• WTI crude found support late-week after better-than-expected economic data tempered demand fears, despite early pressure from inventory and macro concerns.

• With CPI inflation at 2.1%YoY in Jun’25, the real policy rate is +3.4% — higher than in Jan’25 (+2.19%) before the 100bp of repo rate cuts. 
• Despite a shift to a larger rate cut (accompanied by reductions in CRR), the RBI is still a bit behind the curve. We expect another 100bp of cuts by Feb’26. 
• Vegetable deflation will persist through H2CY25, so we expect headline CPI inflation to average 2.9% in FY26, obliging more rate cuts, enabling real GDP growth of 8.5%+ in FY26. 

• Dispute / Late beverage tycoon’s secret children go to war with official heir over billions
• Nvidia /: Nvidia will soon be allowed to resume sales of AI chips to China, CEO says
• AMCs /: China tightens rules for local AMCs to curb risks in bad-debt market

• As foreign automakers struggle to keep pace in China’s fast-evolving electric vehicle (EV) and smart car market, companies such as BMW are turning to top Chinese tech firms to stay in the race.
• BMW has signed a partnership with autonomous driving startup Momenta to co-develop advanced driver-assistance systems for its next-generation China-built models, which are due to launch in 2026. The deal represents a significant step in BMW’s local adaptation strategy as the German carmaker fights to reclaim its footing in its largest single market.
• Earlier this year, BMW announced collaborations with Huawei Technologies Co.