Market Quick Take - 7 July 2025 Summary

Q3-2025 Macro Outlook

The macro outlook for Q3-2025 suggests a shift towards less chaos and more clarity in the markets. Key drivers include:

• Equities: Concerns over US tariffs, a rotation out of technology stocks, weakness in Europe and the UK, and cautious sentiment in Asia.
• Volatility: The VIX remains low, with a calm options market and an expected ±36 point move in the S&P 500.
• Digital Assets: Bitcoin remains steady, with strong retail activity in focus.
• Fixed Income: US yields are softening due to trade tensions, with Treasury auctions being closely monitored.
• Currencies: The US dollar is expected to strengthen against the JPY and AUD due to tariff threats.
• Commodities: OPEC's production adjustments and pressures on wheat prices due to harvest conditions.

Macro Events and Data

Recent developments include:

• Trade tensions resurfaced as President Trump announced additional tariffs for countries aligned with BRICS policies.
• Japan's nominal wages rose by 1% year-on-year, falling short of expectations, while real wages saw a significant decline.
• China's trade surplus exceeded expectations, driven by a rise in exports and a drop in imports.
• Israel conducted military strikes on Houthi targets in Yemen.

Market Performance Overview

Equities

US stock futures dipped as tariffs were confirmed to take effect on August 1, creating uncertainty. The S&P 500 and Nasdaq reached record highs recently, but concerns over tariffs and consumer discretionary valuations may dampen sentiment.

Europe

European stocks experienced declines, particularly in banks and tech sectors, as tariff risks loom. Companies exposed to China are particularly affected.

UK

The UK market remained flat amid tariff concerns, with homebuilders facing weak demand and profit warnings.

Asia

Asian equities fell due to Trump's tariff warnings, with significant losses in Hong Kong and Chinese markets.

Volatility and Digital Assets

Market volatility is subdued, with the VIX near 16.4. Bitcoin remains strong, holding above $109k, while Ethereum and other altcoins show mixed performance but healthy retail engagement.

Fixed Income and Commodities

US Treasuries opened firmer, with yields dipping slightly amid trade tensions. Crude prices softened following OPEC+ announcements of increased production, while gold prices remain in a consolidation phase.

Currencies

The US dollar is trading higher, with notable declines in the AUD and NZD. Market activity is subdued due to the summer holiday.

Conclusion

The market outlook for Q3-2025 is characterized by ongoing trade tensions, sector rotations, and a cautious approach from investors as they navigate potential risks and opportunities.