Macro Wrap

The DJIA, the S&P500, and the Nasdaq Composite Index rose 0.5%, 0.5%, and 0.8% respectively. The Eurostoxx 50 rose 1.5%. The Dollar Index rose 0.4% to 98.73 and EUR-USD fell 50 pips to 1.1600, The US 2Y yield edged up 1bp to 3.90% and the 10Y yield was little changed at 4.45%. The German 10Y yield edged down 1bp to 2.68% while the UK 10Y yield rose 2bp to 4.66%. Brent crude oil prices rose 1.5% to USD69.52 while gold fell 0.2% to USD3,339.

US headline retail sales rose 0.6% m/m in June after declines in the prior two months (consensus: 0.1%; May: -0.9%). The retail sales control group also accelerated to 0.5% m/m (consensus: 0.3%; May: 0.2%), driven by a broad-based increase across most categories. Meanwhile, US initial jobless claims fell to 221k for the week ending 12 July (prior: 228k), well under expectations of a rise to 233k. Altogether, the data consolidated that while hiring pace has slowed since early-2025, labour markets remain resilient. However, the Fed's outlook assessment remains divided, ahead of the Fed’s communication blackout next week. Sentimentally positive USD.

New York Fed President Williams reiterated Chairman Powell’s careful stance, warning that the impact of tariffs on the economy has just begun. Williams assesses that tariffs will boost inflation by 1% for 2H2025 to 1H2026 and that unemployment will rise to 4.5% by end-2025. Fed Governor Waller, however, opined that there is room to cut rates by 25bps, citing limited upside risks to inflation and greater risks of a weaker jobs market.

The US consumer sentiment will be keenly watched by markets tonight. The University of Michigan Consumer Sentiment Index is expected to improve further to 61.5 in Jul from 60.7 in Jun, underpinned by fresh highs in US stocks and still strong jobs growth. However, tariff anxiety may still keep 1-year inflation expectations uncomfortably high at 5.0% for the time being while the 5-10 year inflation may dip to 3.9% from 4.0% in the prior month.