- Asian shares waver, Japanese bond yields rise
Asian shares swung between small gains and losses ahead of China’s release of gross domestic product (GDP)
data, which will give investors clues on the impact from President Donald Trump’s tariffs. The MSCI Asia Pacific
gauge dipped 0.1% amid declines in Japan and South Korea. Equity-index futures for US stocks dipped 0.1%
Tuesday after the S&P 500 had eked out a gain Monday with Trump indicating he’s open to trade talks. Bitcoin
slipped below US$120,000 (RM510,720). Oil held a drop on Trump’s plan to pressure Russia. Japan’s 10-year
government bond yield climbed to its highest level since 2008 amid concerns about fiscal spending ahead of
an upper house election on July 20. Yields for long-term debt from Japan and Germany to the UK and France
rose on Monday on growing worries over widening fiscal deficits. - S&P 500 posts slim gain Monday as traders hope for lower tariffs before Aug. 1 deadline
The S&P 500 edged higher on Monday even after President Donald Trump threatened high tariffs on more
countries over the weekend. Losses were kept in check as investors bet those duties will eventually be
negotiated down and looked ahead to a busy week for second-quarter earnings season. The S&P 500 added
0.14% to close at 6,268.56, while the Nasdaq Composite rose 0.27% to settle at 20,640.33. The Dow Jones
Industrial Average gained 88.14 points, or 0.20%, ending at 44,459.65. - Oil edges down as market contemplates potential sanctions, tariffs
Oil prices edged down on Tuesday as the market digested U.S. President Donald Trump’s 50-day deadline for
Russia to end the Ukraine war and avoid sanctions on buyers of its oil, while worries continued to linger over
Trump’s trade tariffs. Brent crude futures fell 5 cents to $69.16 a barrel by 0000 GMT, while U.S. West Texas
Intermediate crude futures fell to $66.89, down 9 cents. Both contracts settled more than $1 lower in the
previous session. Trump announced new weapons for Ukraine on Monday, and threatened sanctions on buyers
of Russian exports unless Moscow agrees to a peace deal in 50 days. Oil prices had climbed at the news of
potential sanctions, but later gave up these gains as the 50-day deadline raised hopes that sanctions could be
avoided, and traders dwelled on whether the U.S. would actually impose steep tariffs on countries continuing
to trade with Russia. “The pause eased concerns that direct sanctions on Russia could disrupt crude oil flows.
Sentiment was also weighed down by rising trade tensions,” ANZ senior commodity strategist Daniel Hynes
wrote in a note to clients. Trump said on Saturday he would impose a 30% tariff on most imports from the
European Union and Mexico from August 1, adding to similar warnings for other countries and leaving them
less than three weeks to hammer out framework deals that could lower the threatened tariff rates. Tariffs risk
slowing down economic growth, which could sap global fuel demand and drag oil prices lower.
Elsewhere, oil demand is set to stay “very strong” through the third quarter, keeping the market snugly
balanced in the near term, the Organization of Petroleum Exporting Countries’ secretary general said,
according to a Russian media report. - Gold ticks higher with focus on US inflation data
Gold inched higher on Tuesday, ahead of the release of U.S. inflation data later in the day that could shed more
light on the Federal Reserve’s interest rate path. Spot gold was up 0.1% at $3,346.94 per ounce, as of 0151
GMT. U.S. gold futures were flat at $3,355.60. “Gold has shown in the past that it is an asset of choice when
tariff tensions are ratcheted up, and the precious metal’s move towards $3,350 is evidence of this pattern
playing out again,” KCM Trade Chief Market Analyst Tim Waterer said. “However, higher treasury yields and
USD appreciation have created headwinds…For gold to make further progress towards $3,400 a pullback in the
USD or treasury yields may be required in the absence of heightened geopolitical events.” U.S. President
Donald Trump on Saturday threatened to impose a 30% tariff on imports from Mexico and the European Union
starting on August 1, after weeks of negotiations with the major U.S. trading partners failed to reach a trade
deal. Traders’ focus now shifts to U.S. consumer price data for June, due at 1230 GMT on Tuesday. Economists
polled by Reuters expect headline inflation to increase to 2.7% on an annual basis, up from 2.4% in the prior
month. Core inflation is expected to rise to 3.0%, from 2.8%. Trump on Monday renewed his attacks on Fed
Chair Jerome Powell, saying interest rates should be at 1% or lower. Markets are pricing in 50 basis points of
rate cuts by year-end, with the first reduction expected in September. Gold, often considered as a safe-haven
asset during times of economic uncertainties, tends to do well in a low-interest-rate environment.
Elsewhere, spot silver gained 0.3% to $38.24 per ounce, after hitting its highest level since September 2011 on
Monday. “Silver is benefitting from supply concerns and growing industrial demand. Also, gold’s rise over the
past 18 months has had investors looking elsewhere for value and silver has been one of the metals to rise as
a result,” Waterer said. - Japan bond yields hit multi-decade highs as fiscal fears mount ahead of election
Japan’s benchmark 10-year government bond yield climbed to its highest level since 2008 on Tuesday as
concerns about fiscal spending mount ahead of an upper house election. Yields on the 10-year instrument
climbed to 1.599%, the highest since 2008, data from LSEG showed. Yields on the 30-year JGB also rose to a
record high of 3.21%, while Japan’s 20-year government bond yields spiked to their highest level since 1999.
“Japan’s long yields and super-long yields are currently rising due to expectations of fiscal expansion after the
Upper House election coming up next week,” said Ken Matsumoto, Japan macro strategist at Credit Agricole
CIB. A sizable number of Japanese politicians and parties are actively discussing consumption tax cuts ahead of
the upper house election set to take place Sunday. Japan Prime Minister Shigeru Ishiba has maintained that he
will not resort to tax cuts funded by more debt issuance, although opposition parties are calling for tax cuts
and more spending, which could lead to more debt. - China’s second-quarter growth beats forecasts but deflation fears fuel calls for stimulus, deeper reform
Retail sales growth in June slowed to 4.8% from a year earlier, compared with the 6.4% increase in May.
Industrial output beat estimates, expanding by 6.8% from a year earlier. Fixed asset investment grew 2.8% in
the first half of this year against estimates of a 3.6% increase in a Reuters poll. - Trump threatens 100% tariffs on Russian export buyers unless Ukraine peace deal is reached by September
President Donald Trump said he is “disappointed” with Russian President Vladimir Putin over his ongoing
invasion of Ukraine. “We’re going to be doing very severe tariffs, if you don’t have a deal in 50 days, tariffs at
about 100%, they call them secondary tariffs,” Trump said at the White House. Trump threatened secondary
tariffs on Russia earlier this year, but the deadline is new. - Tesla to sell Model Y cars in India, starting at $69,770
Tech billionaire Elon Musk’s Tesla has priced its Model Y at about $69,770 in India, the highest among major
markets, its website showed, as the electric carmaker geared up to open its first showroom in Mumbai on
Tuesday. With delivery estimated to start from the third quarter, Tesla will drive on to India’s busy roads,
targeting a niche premium EV segment that accounts for just 4% of overall sales in the world’s third-largest car
market. It will compete mainly with German luxury giants such as BMW and Mercedes-Benz, rather than
domestic mass-market EV players such as Tata Motors and Mahindra. Tesla’s Model Y rear-wheel drive will set
back buyers 6 million rupees ($70,000), while its Model Y long-range rear-wheel drive costs 6.8 million. That
compares with a starting price from $44,990 in the United States, 263,500 yuan ($36,700) in China, and 45,970
euros ($53,700) in Germany. Grappling with excess capacity in global factories and declining sales, Tesla has
adopted a strategy of selling imported vehicles in India, despite duties and levies running into roughly 70%. On
Tuesday, police guarded Tesla’s first showroom in India as media crowded outside the office complex where it
is located and the chief minister of the western state of Maharashtra, home to the Indian commercial capital,
arrived for the launch. - Rocket Lab Corp. shares jump as much as 9.9%, the biggest intraday gain since June 26 and on track for a
record high close, after Citi analyst Jason Gursky raised the price target on the stock to $50 from $33
Increased price target comes as Citi shifts its valuation methodology to the company’s revenue potential in
2029 from 2027. “We believe that period better reflects a more mature state of the company’s business model.
In that period, we expect revenue to grow to roughly $2.6B driven by 20 Neutron launches per year and further
satellite construction wins, particularly for US government programs,” Gursky wrote. Uses a 15x revenue
multiple to derive price target, then discounts by company’s 13% weighted average cost of capital. Maintains
buy rating. Citi moved its target to the high end of the range, implying a 28% increase from last price. Investors
who followed Gursky’s recommendation received a 591% return in the past year, compared with a 632% return
on the shares. - Alcoholic beverage stocks are tumbling on Monday after President Donald Trump declared a 30% tariff
rate for Mexico and the European Union, key markets for drinksmakers
Constellation Brands, maker of Modelo and Corona, drops as much as 5.1%, the most intraday since early
February. MGP Ingredients -3.8%, Brown-Forman -2.3%, Boston Beer -2.1%, Molson Coors -1.5%. Citi
analyst Filippo Falorni notes 100% of STZ’s beer portfolio is brewed in Mexico, while Jack Daniel’s maker BF/B
exports its American whiskey products overseas, which could be at risk from retaliatory tariffs from the EU.
Adds that TAP used to be exposed to imports with Peroni but it has moved the production of the brand to the
US. “Although the new tariffs create uncertainty for names with high import exposures from these countries,
we believe the overall tariff picture for the broader group is still slightly more favorable vs. Q1 given the
significantly lower China tariff rate”. - Zalando shares fall as much as 5.1%, the most since June, after Morgan Stanley cut its price target for the
Swedish online fashion company. Analysts say social commerce could impact Zalando’s mid-term growth
Analysts led by Luke Holbrook (underweight) cut the price target on the stock to €25.50 from €28.50 and
adjusted EBIT estimates by 3% for 2025-2027.Say social commerce such as TikTok Shop can potentially cause
a medium-term disruption risk for Zalando as “short-form video content and live streams with influencers will
drive inspiration-led purchases” further personalized by AI. Note TikTok Shop’s UK performance; the platform
generated over €4.5 billion of sales in the UK last year, according to Euromonitor, and self-reported revenues
growing +180% year-on-year. Write Zalando’s role as logistics partner of TikTok could “cannibalize demand” as
it improves TikTok’s legitimacy. Note: Shares are down 15% YTD. Note: Analysts have 24 buys, 5 holds, and 2
sells on the stock, according to data tracked by Bloomberg. - Hermes declines as much as 3.3% following a downgrade to hold at Jefferies, which currently doesn’t see
scope for the French luxury-goods maker to return to peak multiples
Analyst James Grzinic doesn’t model any significant acceleration in growth despite firmer US pricing and
reduced availability constraints. FX headwinds prompt Jefferies to lower estimates to about 3% below
consensus. Leather goods once again set to be main driver of growth. PT €2,460, implies a 1% increase from
Friday’s close; stock now has 16 buys, 10 holds and 3 sells among analysts tracked by Bloomberg. - BASF shares rise as much as 2% after a guidance cut that analysts said was well anticipated and provides
a realistic reset for the chemicals firm. Analysts also found positives around cash flow and the performance
mix of business units in preliminary second-quarter results
Deutsche Bank (buy): Analyst Virginie Boucher-Ferte says the guidance cut was widely anticipated and 2Q
Ebitda was in line with DB estimates and consensus. Says the divisional mix looks decent as higher-value
businesses are outperforming the lower-value ones. Notes free cash flow was up year-on-year, supported by
lower capital expenditure. Citi (neutral): Analyst Sebastian Satz says guidance cut was expected and appears
to be a “realistic rebase”. With 2Q in line with expectations, the new outlook should help “clear the decks”
with limited chance of a further warning. Even with lower profit expectations, free cash flow is expected to
remain positive. Bernstein (outperform): Analyst James Hooper says BASF’s guidance cut was in line with his
expectations, but the midpoint is about 2% below consensus. - CoreWeave Inc. is expanding a data center that is projected to double the electricity needs of a city near
Dallas, another example of the strains that artificial intelligence workloads are placing on the US power
supply
Local officials have grappled with how to handle the increased stress on the electricity grid from the project,
according to a late 2024 presentation and emails seen by Bloomberg. The site is being developed by Core
Scientific Inc. and will be used by OpenAI in Denton, Texas. Last week, CoreWeave announced it
would acquire Core Scientific for about $9 billion, in part, to gain direct control of its data centers aimed at
supplying AI work. Denton, about 50 miles northwest of Dallas, has almost doubled its population in the last
25 years to about 166,000 residents. To meet the spike in AI-related power demand, the city is passing on any
extra costs to the data center operator and constructing additional grid infrastructure, Antonio Puente, general
manager of local utility Denton Municipal Electric, said in an interview. “To serve the entire load from Core
Scientific, we do have some transmission challenges,” Puente said. “We will have to make some additional
transmission investments.” Data centers are consuming enormous amounts of electricity, placing new
demands on the US power grid and raising concerns about how the facilities affect reliability. Data centers are
the biggest source of new power consumption in Texas by far and a new law there requires them to use backup
generators or curtail their use during emergencies. Like some other large AI data center projects, the site in
Denton was focused on cryptocurrency mining before pivoting to AI workloads in December. This transition
means unrelenting power consumption — the site will no longer curtail operations when power prices are high
— which will increase grid strain. - AstraZeneca shares gain as much as 3% to the highest level in almost a month after the drugmaker said
its experimental hypertension drug Baxdrostat met the primary and all secondary endpoints in a late-stage
trial
Monday’s positive results suggest the drug has a competitive profile, JPMorgan analyst James
Gordon (overweight) writes in a note. JPMorgan says it derisks a multi-billion dollar peak sales opportunity.
AstraZeneca’s experimental hypertension drug Baxdrostat reduced the blood pressure of patients who have
an uncontrolled or treatment-resistant form of the condition. Data will be shared with regulatory authorities
around the world and presented in a late-breaking Hot Line session at the European Society of Cardiology
Congress in August.
Menu