1. FACE TIME
Shuttle diplomacy is in full swing with U.S. President Donald Trump set to fulfill Russia’s Vladimir Putin within the coming days – the primary face-to-face summit between a sitting U.S. president and his Russian counterpart since Joe Biden met Putin in June 2021. Trump – who has veered between admiration and sharp criticism of Putin – is on the lookout for a breakthrough to finish the 3-1/2 12 months conflict in Ukraine after voicing mounting frustration together with his Russian counterpart and threatening new sanctions.
Ramifications of the encounter are more likely to ripple by way of world markets with secondary tariffs set to harm Russia and different nations around the globe. Trump has imposed an additional 25% tariff on Indian items, citing continued imports of Russian oil, and warned that China may very well be subsequent.
In the meantime, Ukrainian President Volodymyr Zelenskiy is pushing for Europe to be concerned within the peace course of and talks.
2. CHINA TRADE
There was additional progress within the makings of a commerce deal between Washington and Beijing, or so Trump and his Treasury Secretary Scott Bessent have mentioned.
However the August 12 deadline for a tariff truce between the world’s two financial superpowers is closing in. Trump has but to signal on the dotted line after each side at talks in Stockholm agreed to hunt an extension of a pause on tariffs.
Nonetheless, issues appear considerably optimistic for now. Trump has mentioned he would meet Chinese language President Xi Jinping earlier than the top of the 12 months ought to a commerce deal be struck.
Buyers, in the meantime, are craving extra readability, remaining largely on the sidelines and leaving Chinese language markets range-bound for essentially the most half, although shares ended the week close to a 10-month excessive.
3. TEST FOR FED BETS
Firming bets that the U.S. Fed is primed to renew reducing rates of interest shall be examined by Tuesday’s launch of U.S. inflation information.
The July client worth index may also be watched for indicators of the affect of Trump’s tariffs deluge fuelling extra worth hikes. June information confirmed the most important rise in 5 months, as increased prices for some items have been beginning to chunk.
A scorching quantity might shake the narrative that the Fed will minimize charges at its subsequent assembly in September, which has gathered steam after a surprisingly weak employment report earlier this month.
The inflation report can also be one of the important U.S. financial information releases since Trump fired the pinnacle of the Bureau of Labor Statistics after the weak jobs report – a transfer that stoked fears about information integrity and credibility.
4. SEPARATE WAYS
Australia’s and Norway’s central banks have been the 2 most cautious in developed economies on this cycle of price cuts, however markets assume their subsequent strikes might see them diverge.
The Reserve Financial institution of Australia solely began easing this 12 months, and has made simply two 25 bps cuts from its 2024 peak, in comparison with a cumulative 100 bps for the Fed, and 200 bps for the ECB. Norway’s central financial institution has made only one 25 bps minimize.
In Australia, the place inflation grew at its slowest tempo in 4 years within the three months to June, markets anticipate a 25 bps discount on Tuesday with one or perhaps two extra such cuts to observe this 12 months.
The Norges Financial institution, in distinction, is about to remain on maintain on Thursday, with one other minimize not absolutely priced till November.
Be nervous with market pricing although, at their final conferences each central banks confounded market expectations with Norway making its one minimize, and Australia staying on maintain.
5. IT’S QUIET…TOO QUIET
The center of August is mostly considered as one of many dullest durations within the 12 months. Lawmakers and central bankers are on a break, there isn’t any huge information and merchants use the lull to ditch their screens.
There’s only one small drawback. August is when volatility has a behavior of exploding – and final 12 months was a working example. A pointy appreciation of the Japanese yen, mixed with a drop in U.S. tech shares ignited one of many largest one-day bursts in volatility on file.
The typical every day share transfer within the VIX volatility index in August over the past 35 years is 0.55%, the very best for any month. The least unstable month is April – even with this 12 months’s meltdown after Trump’s announcement of his “Liberation Day” tariffs – with a mean every day transfer of 0.07%.
With shares at file highs, and positioning in issues just like the greenback stretched, there isn’t any scarcity of tripwires.
