Breakfast Bites - Firing Powell scares the markets
Trade deals are still uncertain; Large Cap earnings continue; Netflix reports tonight
Rise and shine everyone
US assets, including the dollar, sold off sharply during the US session following media reports that President Trump had circulated a letter to GOP members aiming to fire Fed Chair Powell. Trump later walked back the idea, saying it was “highly unlikely” he would go through with it. Markets managed to recover most of their losses by the close.
On the trade front, USTR Greer confirmed that China’s cumulative tariff rate now stands at 55%. Trump signaled that a deal with Japan may not materialize by the August 1 deadline, saying the US would “probably live by the [tariff] letter,” meaning the current 25% rate would hold. Japan issued a statement saying talks with the US were ongoing and involved “deep interactions.” Trump also floated a 10–15% tariff on 105 other countries, indicating broader trade action could be on the table.
Asian equities were mildly positive overall, with the ASX outperforming at +0.8%. Japan’s June trade balance dropped about 31% year-over-year, with exports to both China and the US falling due to tariff uncertainty. US-bound auto shipments were hit especially hard, though exports to Asia and Europe saw slight gains. Singapore, by contrast, posted a strong jump in exports for June.
In Australia, 3-year yields fell 9bps after the unemployment rate unexpectedly rose to 4.3%—breaking above the multi-month hold at 4.1%. Hours worked also declined by 0.9% in June, after a 1.4% rise in May. Consumer inflation expectations for July eased back into the 4% handle from 5% in June. The press is now ramping up “policy error” talk around the RBA, with a former official warning the central bank risks falling into a prolonged miscalculation.
The UK’s latest labor report was weak, showing unemployment at a 4-year high of 4.7%. Jobless claims also increased, while average earnings were in line at 5.0%, adding to concerns about the underlying health of the UK labor market.
In Washington, House Speaker Johnson announced that the GOP had secured a deal to advance stalled crypto legislation. The bills cleared a second procedural vote after nearly 10 hours of debate—breaking the prior record set earlier in July. Floor debate is now expected to begin.
On the corporate side, TSMC’s Q2 results were solid, but it was the forward guidance that stole the spotlight. The company raised its Q3 and full-year 2025 outlook, citing stronger-than-expected demand across AI, data centers, and server applications. Meanwhile, EasyJet shares dropped as its Q3 results flagged forward-looking headwinds.
Looking ahead, all eyes are on US retail sales and earnings from Netflix after the close. Before the market opens, we’ll hear from Elevance, PepsiCo, Abbott Labs, and GE Aerospace.
Calendars
(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)
