US equity futures are higher, led by Tech with the biggest overnight news being that Trump is allowing NVDA to resume its (less advanced) H2O chip sales to China; there had been chatter of a chips-for-rare earths pact to thaw US/China trade relations. As of 8:00am ET, S&P futures rose 0.3%, while Nasdaq futures rose 0.5%, with NVDA jumping another +5.3% in pre-market trading, while AMD +3.5%, MRVL +2.85, AVGO +1.4% also gained. The balance of Mag7 is mostly higher; semis are poised to be the best sub-group, and cyclicals are higher with banks with a mild bid into earnings this morning. Bond yields are lower as the curve bull flattens into CPI with JPM noting that some FICC client convos are pointing to a dovish CPI print. The USD is weaker and commodities are declining across all 3 complexes though precious, crude, and sugar remain bid. Today’s focus is the unofficial kick off 25Q2 earnings and Banks have a low bar to cross and CPI is not yet expected to reflect the expected inflation from the trade war.
In premarket trading, Mag 7 stocks were higher: Nvidia rose 4.4% as the company planned to resume sales of its H20 AI chip in China after securing Washington’s assurances that such shipments would get approved (Meta +0.6%, Apple +0.3%, Alphabet +0.2%, Amazon +0.2%, Tesla +0.2%, Microsoft -0.1%).
Outside of earnings, micro focus this am is on NVDA (+5%) with the company planning to resume H20 chip sales to China after assurances from Washington that shipments will be approved. After the White House banned exports in April, it’s a surprise reversal that may add billions to Nvidia’s revenue this year. The move may help spur easing tensions between US-China trade negotiations/furthers the "TACO" trade. TTD (+15%) set to replace ANSS in S&P 500.
For Nvidia, the approval of export licenses for the H20 chip not only boosts its earnings prospects but also bodes well for progress in trade talks between the White House and key partners. With stocks trading near record highs, investors will also gain a clearer read on corporate health as major banks mark the unofficial start of earnings season.
“The US policy reversal on selling AI chips to China clearly constitutes good news for the industry,” said David Kruk, head of trading at La Financiere de L’Echiquier. “Other than that, the upward trend is still being fueled by investors riding the TACO trade — there are threats but they have yet to materialize.”
CPI is the big macro event for today: economist estimates for m/m change range from 0.1% to 0.4%, with the median 0.3%. June report is first of three to be released before Fed’s September meeting, for which traders have priced in 15bp of easing (see our CPI preview here). Goldman warns to watch for: 1) weakness in used cars, 2) modest increase in car insurance, 3) modest rebound in airfare, 4) +0.08pp increase on core inflation from tariff pressures. After months of seeing little inflation, CPI probably experienced slightly faster growth in June as companies started to pass along higher costs of imported merchandise associated with tariffs. The options market is betting the S&P 500 will swing 0.6% in either direction after the release.
It’s still too early to gauge the impact of the Trump administration’s tariff agenda on inflation, said Arend Kapteyn, UBS Group AG’s global head of economic and strategy research. He noted that July’s data, set to be released next month, would likely provide the earliest indication of any clear effect. The lag is helping to underpin the Federal Reserve’s wait-and-see approach to cutting interest rates, with swaps pricing in less than two quarter-points of monetary easing this year.
“We’re about to go into a five- to six-month period of accelerating inflation,” Kapteyn told Bloomberg TV. “It’s a trade-off between when does the labor market starts to ease, starts to crack — and we’re already seeing some signs of that — versus how quickly is the inflation data increasing.”
The latgest Fund Managers Survey by Bank of America showed that fund managers are rushing back into risky assets at a record pace on optimism over economic growth and strong corporate profits. The share of investors taking a higher-than-normal risk level in their portfolios registered the biggest increase over a three-month span going back to 2001, the poll showed. It also pointed to strong increases in allocations to US and European stocks, as well as tech shares.
“We are still far from levels where we would advocate a short, but given valuation and positioning, it makes sense to take some chips off the table,” he said.
European stocks advance with the Stoxx 600 up 0.2%. Technology, media and auto shares are leading gains as Nvidia plans to resume sales of its H20 AI chip to China. Among individual stocks, B&M sinks to a record low following a weak first quarter. Here are the biggest European movers:
Earlier in the session, Asian stocks also advanced as Nvidia’s plan to resume some chip sales to China stoked optimism over geopolitics. Chinese shares were mixed as the latest economic data raised concerns over pressure on domestic consumption. The MSCI Asia Pacific Index gained as much as 0.7% after Nvidia said it plans to restart sales of its H20 AI accelerator to China. Alibaba, Tencent and TSMC were the biggest boosts to the gauge. Benchmarks in Hong Kong, Taiwan and South Korea advanced. Mainland Chinese shares fluctuated after macro numbers showed an uneven recovery. While economic growth exceeded expectations in the second quarter thanks to strong exports to markets outside the US, consumer demand at home remained weak. That’s bound to keep investors cautious after a recent equity rally. Elsewhere, traders are positioning for the weekend upper house election in Japan. Sentiment is cautious, as a surge in bond yields underscored mounting worries about the nation’s fiscal situation. Markets are watching the JGB yield breakout ahead of upper house elections & potential pressure on US rates.
In FX, the Bloomberg Dollar Spot Index falls 0.2% ahead of US inflation data that is forecast to show an acceleration in CPI for June. The euro and pound both add 0.2%.
In rates, Treasuries climb, pushing US 10-year yields down 2 bps to 4.41% ahead of June CPI data, supported by bigger gains in European bond markets, where curves are similarly flatter. European government bonds rise with little reaction seen in bunds to stronger-than-expected German ZEW data and a beat for euro-area industrial production. Short-dated US government bond yields rose after Treasury Secretary Scott Bessent said it would be confusing for Federal Reserve Chair Jerome Powell to remain at the central bank after his term ends, adding that a “formal process” has already begun to identify a potential successor.
In commodities, oil prices are little changed, paring earlier losses with WTI near $67 a barrel. Spot gold climbs $18 to around $3,362/oz. Bitcoin retreats 3% to near $117,000.
Looking at today's calendar, US economic data slate includes July Empire manufacturing and June CPI (8:30am). Fed speaker slate includes Bowman (9:15am), Barr (12:45pm), Barkin (1pm), Collins (2:45pm) and Logan (7:45pm).
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A more detailed look at global markets courtesy of Newsquawk
APAC stocks were ultimately mixed with the region indecisive in the aftermath of the latest Chinese GDP and activity data, while participants also awaited CPI data and the start of earnings season stateside. ASX 200 gained with strength in tech and some defensive sectors, while the positive sentiment was also facilitated by an increase in Consumer Confidence and as Australian PM Albanese met with Chinese President Xi. Nikkei 225 traded indecisively following recent currency weakness and rising JGB yields. Hang Seng and Shanghai Comp diverged following the somewhat mixed tier-1 data releases from China in which GDP figures for Q2 and Industrial Production in June topped forecasts but Retail Sales and Fixed Assets Investments disappointed, while House Prices were varied and continued to contract.
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European bourses (STOXX 600 +0.3%) are modestly firmer across the board, paring some of the pressure seen in the prior session but with gains capped ahead of today's key risk event, US CPI. European sectors hold a positive bias. Tech takes the top spot, with the chip sector boosted after NVIDIA (+5.0% pre-market) said it will resume H20 AI chip shipments to China. Telecoms is pressured by post-earning losses in Ericsson (-2.4%).
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DB's Jim Reid concludes the overnight wrap
Welcome to US CPI day and to the start of US earnings season with several banks reporting later on. I’ve just about recovered from a day out yesterday at a Theme Park where I managed to get away with just one baby rollercoaster. Maisie and the twins went on about 20! They are all now tall enough to not need me anymore for ALL the rides. My job here is done! I never have to go on a rollercoaster again. My biggest stress was trying to keep up with a very tense game of cricket between England and India without my wife knowing I wasn't paying attention to what the family were saying. The CPI print will get my full attention today though as a lot will rest on inflation in the coming months including whether the Fed can cut rates, how the Trump administration’s tariff policy will be received, and most importantly how it impacts long-end bonds with fiscal balance sheets stretched in many countries. See our US economists' preview here. They expect monthly headline CPI to come in at a 5-month high of +0.34%, with core also at a 5-month high of +0.32%. We seem to be the highest on the street with consensus at +0.27% and +0.25% respectively.
If DB is correct, that would push up the year-on-year numbers, with headline CPI up three-tenths to +2.7%, and core CPI up two-tenths to +3.0%. Consensus is a tenth lower on both. We’ll mostly be focusing on signs of tariff-related inflation in the core good categories. President Trump continued to beat the low inflation drum yesterday though, saying "we have no inflation", and that "we should be less than 1%" when referring to interest rates.
Ahead of today's big print, markets have been a bit mixed to start the week as the weekend tariff headlines reverberate, and global long-end bonds continued to edge higher. However US futures are edging up this morning (Nasdaq futures +0.3%) after Nvidia have seemingly been given the green light to resume exporting their H20 chips to China that were suspended in April.
We saw significant headlines on Russia yesterday, as Trump threatened to impose 100% “secondary tariffs” if a ceasefire deal with Ukraine isn’t reached in 50 days. Trump’s announcement was vague on details, with Commerce Secretary Lutnick referring to both “tariffs” and “secondary sanctions”. Reporting later on appeared to confirm that this would include tariffs against buyers of Russian minerals, similar to a proposed sanctions bill in the Senate that is now set to be paused. This could impact the likes of China and India, which account for most of Russia’s oil exports, though there are doubts over how practical such secondary tariffs would be to implement. For now, with any swift definitive sanctions against Russian oil being avoided, oil prices actually saw a decent slump yesterday. Brent crude fell -1.63% to $69.21/bbl, which helped to ease some of the inflationary fears after the weekend tariff announcements. Trump’s comments came during his meeting with NATO Secretary General Rutte, at which he also announced that the US will send additional Patriot air-defense systems to Ukraine that will be paid for by Europe.
Trump also made some brief remarks on trade, saying that he is “always open to talk”, including with the EU, even as he insisted the recent US letters to trading partners “are the deals" and "there are no deals to make". That left plenty of ambiguity as markets continued to digest the 30% tariff threats made to the EU and Mexico over the weekend. According to AFP, the European Commission said it would propose a new list of US goods worth €72bn that could be subject to EU tariffs should talks between Washington and Brussels fail. Our European economists yesterday published a blog on the potential impact of 30% tariffs (see here).
For the most part, markets yesterday brushed off the prospects of fresh trade escalation, with the STOXX 600 (-0.06%) recovering to little changed after opening -0.6% down. The more trade-sensitive German DAX did decline by -0.39%, alongside a -0.27% fall for the CAC 40, but the FSTMIB (+0.27%) advanced and here in the UK the FTSE 100 (+0.64%) hit a fresh all-time high. Mexican equities struggled a bit more though, with the S&P/BMW IPC index falling -0.41%. This came as President Sheinbaum confirmed that Mexico has a tariff plan should an agreement by August 1 fail.
The equity performance was more positive in the US, with the S&P 500 (+0.14%) closing within 0.2% of last week’s record high. The resilience came as Bitcoin (+2.10%) continued to climb past $120,000 and to a new record, helping fintech and payments companies like PayPal (+3.55%), Coinbase (+1.80%) and Visa (+0.74%). Bitcoin is now up nearly +75% since the US election last November. The Magnificent 7 (+0.10%) saw a modest gain yesterday, with Meta up +0.48% after CEO Zuckerberg said it will invest “hundreds of billions” in a push for AI superintelligence.
Ahead of today's CPI release, fed futures slightly dialled back their expectations for rate cuts this year, with the amount priced by December down -1.8bps on the day to 48bps, its lowest in nearly four weeks. That helped to push Treasury yields higher, with the 2yr yield (+1.4bps) rising to 3.90%, whilst the 10yr yield (+2.4bps) rose to 4.43% and 30yr closed +2.8bps to 4.98%, the highest close since May 23. Overnight, Treasury yields are flat as we go to print but 30yr JGB yields are up another +1.9bps ahead of the Upper House elections this weekend and have traded at their highest level since 1999. 10yr JGBs are around a basis point higher and earlier touched the highest level since 2008. So lots bubbling under the surface in Japan.
Meanwhile in Europe, yields also moved higher yesterday amidst growing concern about the fiscal trajectory, with those on 10yr bunds (+0.6bps), OATs (+2.0bps) and BTPs (+2.2bps) all rising. There was also a fresh rise in 30yr yields to multi-year highs, with the 30yr yields in Germany (+2.1bps to 3.24%) and France (+4.5bps to 4.24%) reaching their highest levels since 2011. For France, that followed President Macron’s announcement that the 2026 defence budget would be increased by €3.5bn in 2026, followed by another €3bn in 2027. By contrast, UK gilts outperformed, with the 10yr yield down -2.2bps on the day.
In Asia markets are mixed. Chinese stocks are underperforming, with the Hang Seng (+0.08%) struggling to maintain its initial gains despite Nvidia’s H20 announcement, while the CSI (-0.45%) and the Shanghai Composite (-0.98%) are both declining. The Nikkei (+0.12%) is seeing slight gains, and the S&P/ASX 200 (+0.54%) is also trading positively. However, South Korea’s KOSPI (-0.11%) is dipping after a good run.
Returning to China, GDP increased by +5.2% in the second quarter, outperforming Bloomberg's estimates of +5.1%, although this marks a deceleration from the +5.4% growth recorded in the first quarter. Most of the growth bias is export led over domestic, which was backed up by retail sales growth decelerating to 4.8% YoY in June (v/s +5.3% expected), down from a 6.4% YoY increase in May. Industrial output rose by +6.8% YoY though, exceeding market expectations of 5.6%. Fixed asset investment increased by +2.8% in the first half of this year, falling short of market predictions of a +3.6% rise. Simultaneously, the decline in real estate investment intensified, dropping -11.2% in the first half of the year, compared to a -10.9% decrease in the first five months, while investments in infrastructure and manufacturing also showed signs of slowing.
Finally, as I mentioned at the top, “Crypto Week” is happening in Washington D.C., where the House of Representatives are set to vote on the CLARITY Act, the GENIUS Act and the Anti-CBDC Surveillance Act. The GENIUS Act’s vote in particular could have serious implications for the rapidly growing stablecoin industry – and for US debt markets – and a vote can be expected as early as end of today.
To the day ahead now, as I mentioned look out for the US CPI release. We’ll also get the US July Empire Manufacturing Index, Germany’s July ZEW Survey, Eurozone May Industrial Production, and Canada’s June CPI. Central bank speakers include the Fed’s Bowman, Barr, Collins and Barkin, and BoE Governor Bailey. Earnings include JPMorgan Chase, Wells Fargo, BlackRock, Citigroup and BNY Mellon