- The European session was dominated by sellers, with Germany’s DAX falling nearly 1.8%. The decline was led by insurance and banking stocks. The sell-off may have been triggered by reports of Italian tax legislation that could reduce the profitability of financial institutions.
- Wall Street sentiment points to caution, although equity indices remain near all-time highs ahead of tomorrow’s Fed decision. In contrast, the U.S. energy sector is performing well today, supported by rising oil prices.
- Markets are pricing in nearly a 100% probability of at least a 25-basis-point rate cut. EUR/USD posted strong gains today, breaking above 1.1865 to reach a four-year-high. Even strong U.S. macroeconomic data failed to support the dollar, as both retail sales and industrial production exceeded forecasts:
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Industrial production MoM: 0.1% (Expected: -0.1%, Previous: 0.1%)
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Manufacturing output: 0.2% (Expected: 0.0%, Previous: 0.0%)
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Capacity utilization: 77.4% (Expected: 77.4%, Previous: 77.5%)
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Retail sales MoM: 0.6% (Expected: 0.2%, Previous: 0.5%)
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Retail sales ex autos: 0.7% (Expected: 0.4%, Previous: 0.3%)
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Retail sales ex autos & gasoline: 0.7% (Expected: 0.4%, Previous: 0.3%)
- Gold is up more than 0.2% today, driven by a weaker dollar, and for the first time in history has risen above $3,700 per ounce.
- Oil prices are also gaining, supported by geopolitical tensions and limited supply from Russia, where key refineries have come under Ukrainian drone attacks. Transneft has already warned of possible production declines.
- Bitcoin is stabilizing around $115,000, suggesting investors believe in further gains but are reluctant to take on excessive risk ahead of the Fed decision. Ethereum also remains under pressure and is consolidating.
- Tesla shares are up more than 2%, while Amazon is gaining over 1%. Uranium Energy Corp. is down more than 5% after reaching historic highs, having risen over 300% from its April low. On Monday, the U.S. announced it was ready to boost its strategic uranium reserves. Nvidia and Broadcom are down more than 1%.
- Futures on cocoa drop more than 3% despite the lowest ICE inventories since May and unfavorable West Africa weather. Markets focus on 2025/2026 season, which may be much better, for supply and demand balance. Today, futures on wheat, corn and soybean gain more than 1% on CBOT.
- Scott Bessent and Donald Trump reiterated today that significant Fed cuts as part of “policy adjustment” would be welcomed by the White House. U.S. negotiators made progress in talks with China in Madrid, and Trump said he already has a group of companies ready to acquire TikTok, following a negotiated agreement with Beijing.
- Another round of U.S.-China talks will take place in Frankfurt. According to Marco Rubio, a meeting between Trump and Zelensky could take place next week in New York.
Daily Summary: U.S.-China Tensions Trigger the Sharpest Sell-Off Since “Liberation Day” ✂️
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