Stock Market Update

The S&P 500 futures currently trade three points above fair value.

Equity indices in the Asia-Pacific region were mostly higher Tuesday, bolstered by some hope that the U.S. has allowed more time to negotiate trade deals. Several countries received tariff letters informing them of higher tariff rates starting August 1. Japan and South Korea will face a 25% tariff rate. That was seen as a win of sorts for Japan after President Trump said last week Japan could face tariffs up to 35%. Indonesia (32%), Bangladesh (35%), Thailand (36%), Cambodia (36%), Laos (40%), and Malaysia (25%) also got letters. Reportedly, the lines are open and are being utilized to win a reprieve from the higher tariff rates. Notably, India was not a letter recipient, as President Trump suggested it is close to a deal with the U.S. According to Reuters, China said it would take issue with the U.S. restoring higher tariffs on its goods and countries that strike deals with the U.S. that skirt the need for China's supply lines. The RBA left its cash rate unchanged at 3.85% in a 6-3 vote, surprising a market that expected a 25 basis point cut. The decision was predicated on a desire to wait for more data, yet the RBA remains inclined to cut rates further. Separately, Samsung Electronics underperformed after reporting a preliminary Q2 profit that was below expectations.

• In economic data:
  • Japan's May Current Account JPY3.436 trln (expected JPY2.940 trln; last JPY2.258 trln); June Economy Watchers Current Index 45.0 (expected 45.1; last 44.4)
  • Australia's June NAB Business Confidence 5 (last 2)

---Equity Markets---

• Japan's Nikkei: +0.4%
• Hong Kong's Hang Seng: +1.1%
• China's Shanghai Composite: +0.7%
• India's Sensex: +0.3%
• South Korea's Kospi: +1.8%
• Australia's All Ordinaries: flat

Major bourses in Europe are mixed with modest changes on either side of the unchanged line. Still, there is a measure of resilience, with investors recognizing that the EU did not receive a tariff letter from the U.S. Reuters reports that the EU may be close to a deal that would maintain the baseline tariff rate at 10% but include some exceptions below that rate for aircraft and parts, medical equipment, and spirits. Separately, Germany's exports disappointed in May, with demand weakening, particularly from the U.S., after the tariff frontrunning in March and April. 

• In economic data:
  • Germany's May Trade Balance EUR18.4 bln (expected EUR15.7 bln; last EUR 15.8 bln), with exports -1.4% (expected -0.2%; last -1.6%) and imports -3.8% (expected -0.9%; last -2.2%)
  • France's May Trade Balance EUR-7.8 bln (expected EUR-7.7 bln; last EUR-7.6 bln)

---Equity Markets---

• STOXX Europe 600: -0.1%
• Germany's DAX: +0.3%
• UK's FTSE 100: +0.1%
• France's CAC 40: -0.2%
• Italy's FTSE MIB: +0.4%
• Spain's IBEX 35: unch