U.S. Indices closed higher on Friday amid trade optimism ahead of a key risk week. Sectors were predominantly firmer with outperformance seen in Materials, Industrials and Consumer Discretionary, while Energy, Communication, and Real Estate lagged. The outperformance in Materials was largely due to a solid earnings report from Newmont (NEM), while weakness in Communication was due to the large downside in Charter (CHTR) post-earnings. T-Notes were choppy on Friday, with downside in the morning following source reports that the Bank of Japan see an environment to hike rates by year-end, with lows seen after a less bad-than-feared durable goods print in the US. Nonetheless, upside then ensued after President Trump said he got a good impression from Fed Chair Powell on Thursday that he may be ready to lower rates. The President also spoke on trade, noting they are near a deal with China while the EU has a pretty good chance of a deal, but noted they may have to buy down their tariffs (similar to how Japan is investing USD 550 billion). However, for Canada, Trump warned that it may just be a tariff, not a negotiation. US data saw the aforementioned Durable Goods. In FX, the Dollar outperformed on trade optimism and better-than-expected data, while CAD lagged on the Trump trade warning. The Pound was hit by weak Retail Sales in the UK on Friday morning. Looking ahead, there are plenty of key risk events this week, including the US/China trade talks on Monday/Tuesday, as well as the August 1st trade deal deadline imposed by Trump. Elsewhere, the FOMC, BoC and BoJ rate decisions will be released, while data in the US sees PCE, GDP, ISM Manufacturing PMI and the July jobs report. There is also front-loaded supply on Monday and Tuesday, ahead of the Quarterly Refunding Announcement on Wednesday. It is also expected to be one of, if not the busiest, weeks of earnings season. Durable Goods fell 9.3% in May (prev. +16.5%), but not as deep as the expected decline of 10.8%. The headline was weighed by notable new order declines in transport equipment (-22.4%), nondefense aircraft and parts (-51.8%) and capital goods (-22.2%). Ex-transport rose 0.2%, above the expected 0.1%, with the prior revised up to 0.6% from 0.5%, while ex-defence fell 9.4% (prev. 15.5%, rev. 15.7%). Non-defence cap ex-air unexpectedly declined 0.7% (exp. +0.2%, prev. 1.7%, rev. 2.0%). Oxford Economics notes that a pullback in durable goods reflects three main forces: 1) Boeing received fewer orders following a bumper May, 2) defence capital goods orders eased, 3) a pullback in non-defence capital goods ex-aicraft, which, “We think partly reflects trade policy uncertainty”. Ahead, Oxford expects the impact of trade policy uncertainty and tariffs will drive outright declines in the second half, before the impact of business tax cuts drives a rebound in 2026. As expected, the ECB stood pat on Interest Rates last Thursday, keeping the deposit rate at 2%. The accompanying policy statement carried little interest, noting that incoming information is broadly in line with the Governing Council’s previous assessment of the inflation outlook. Additionally, the statement repeated the Bank’s meeting-by-meeting and data-dependent approach. At the follow-up press conference, when questioned about the recent EUR appreciation and VP de Guindos’ recent remark about the complications that EUR/USD breaching 1.20 would bring, President Lagarde stated that the ECB does not target FX levels but is monitoring the situation. Thereafter, Bunds were sent lower after Lagarde stated that the ECB’s baseline scenario from June still holds despite US President Trump since threatening the EU with a 30% tariff rate. This statement, allied with Lagarde reiterating that policy remains in a good place, is suggestive that policymakers are not in a rush to adjust policy. This point was also underscored by the President emphasising that the ECB will not be swayed by a temporary undershoot in inflation (current 2026 forecast sees inflation at 1.6%), adding that inflation is still expected to stabilise at target over the medium term. Note, Thursday’s decision was unanimous. Overall, the main message was that the ECB sees itself as well-positioned to deal with short-term turbulence from the trade war and geopolitics. That being said, markets continue to price around 17bps of loosening seen by year-end (vs. 21bps pre-announcement). Following the conclusion of the rate decision and the press conference, Bloomberg and Reuters sources hit the wires, but were largely in fitting with one another. BBG noted ECB official’s baseline for September is another hold in rates, and those seeking another rate cut will face a battle. Similarly, Reuters noted ECB policymakers set a high bar for a September rate cut, and such a move would require a deterioration in data and lower projections. Elsewhere, Oil 1.32% lower which risk-on saw Gold end Friday’s session with a 1.5% fall.
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For anyone following my Platinum Service it made 170 points on Friday and is now ahead by 3405 points for July after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
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