Market Quick Take - 2 July 2025

Q3-2025 Macro Outlook: Less Chaos, More Clarity

Market Drivers and Catalysts

• Equities: Technology sector under pressure due to tariff risks; European markets remain weak; UK stocks are defensive.
• Volatility: VIX remains calm with mild jitters and sector rotation.
• Digital Assets: Bitcoin (BTC) and Ethereum (ETH) show stability; strong ETF flows and regulatory focus are evident.
• Fixed Income: US yields rebound at the front end of the curve following comments from Fed Chair Powell and job openings data.
• Currencies: The USD hit a new cycle low before rebounding, particularly against a weakening JPY.
• Commodities: Concerns over US fiscal debt support gold prices; crude oil remains near lows.

Macro Events

The Senate approved President Trump's tax-and-spending bill, which faces challenges in the House due to concerns over large deficits and cuts to healthcare. Fed Chair Powell expressed caution regarding rate cuts, citing inflation risks from tariffs. President Trump cast doubt on a trade deal with Japan, suggesting potential tariffs of 30-35%.

Macro Data Highlights

• US June ISM Manufacturing PMI rose to 49, indicating a slower pace of contraction.
• US job openings increased by 374,000 to 7.769 million, the highest since November 2024.
• Eurozone inflation met expectations at 2.0% in June.

Equities Overview

US stocks had a mixed session with the S&P 500 near record highs, while the Nasdaq 100 dropped 1% due to tech weakness. The Dow gained 0.91% led by healthcare stocks. European markets retreated amid trade uncertainties, and the UK FTSE 100 outperformed due to gains in AstraZeneca and Diageo.

Volatility

Market volatility remains low, with the VIX around 17, indicating expectations of routine market fluctuations rather than major disruptions.

Digital Assets

Bitcoin fell 2% to $106,500, while Ethereum remained stable at $2,440. Institutional interest continues, with significant inflows into ETFs despite a slight decline in crypto-linked equities.

Fixed Income

US Treasury yields rose, particularly at the front end, following Powell's comments and strong job openings data. The 2-year yield increased to 3.77%, while the 10-year yield rose to 4.25%. In contrast, Germany's 10-year Bund yield fell.

Commodities

Gold and silver prices increased, supported by US fiscal debt concerns. Crude oil prices remain low, influenced by geopolitical tensions and OPEC+ production discussions.

Currencies

The USD rebounded as treasury yields rose. The JPY weakened against the USD, while EURGBP reached a new high since late April before slightly retreating.

Earnings Events

Upcoming earnings include The Progressive Corporation, Fast Retailing, Cintas Corporation, Kongsberg, and Delta Airlines.

Conclusion

The market outlook for Q3-2025 suggests a cautious approach as various macroeconomic factors, including trade negotiations and fiscal policies, continue to influence market dynamics.