Trump Turns Up Heat on Fed and Japan as Economic Crosswinds Stir Fresh Uncertainty

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Global Sentiment: Risk-on
Factors:  Trade Deals Optimism 

• TODAY’S WATCHLIST
- Fed Chair Powell Speech
- ECB President Lagarde Speech
- Japan Gov Ueda Speech

THE BIG STORY
President Donald Trump on Monday intensified pressure on the US Federal Reserve, calling once again for steep interest rate cuts while mocking the central bank's current stance as “too late” and a drain on the economy. In a handwritten note to Fed Chair Jerome Powell—later posted on social media—Trump compared US rates unfavourably with those in Japan and Denmark and demanded a cut to “1% or better.” His renewed attacks come amid growing signs of economic fragility, with Chicago Fed President Austan Goolsbee cautioning that while a return to 1970s-style stagflation is unlikely, simultaneous deterioration in inflation and employment remains a possibility.

Meanwhile, Trump’s frustration spilled over into global trade negotiations, accusing Japan of unfair practices in ongoing bilateral talks. Citing Tokyo’s reluctance to import American rice despite a domestic shortage, Trump warned that US trading partners could soon be hit with steep new tariffs if concessions aren’t made by the July 9 deadline. Japan’s lead negotiator Ryosei Akazawa responded diplomatically, reiterating Japan’s commitment to dialogue while defending national agricultural interests. These overlapping pressures monetary, political, and trade-related are raising fresh doubts about the resilience of the global economy as Washington sharpens its tone on all fronts. 

DATA
Japan’s manufacturing sector expanded in June for the first time in over a year, with the final au Jibun Bank Manufacturing PMI rising to 50.1 from 49.4 in May, signalling a modest return to growth driven by a rebound in output. However, weak domestic and export demand persisted, with new orders continuing to decline amid uncertainty over US tariffs. In a separate Bank of Japan “tankan” survey, business sentiment among large manufacturers improved to +13 from +12 in March, surpassing market expectations of +10. Meanwhile, sentiment among big non-manufacturers edged down to +34 from +35, reflecting caution as rising living costs pressure consumer spending.

WHAT HAPPENED OVERNIGHT 
US stocks closed at record highs on Monday, wrapping up their strongest quarter in over a year as optimism around trade negotiations and potential Federal Reserve rate cuts helped ease investor concerns. The S&P 500 rose 10.57% for the quarter, the Nasdaq surged 17.75%, and the Dow advanced 4.98%. Bank stocks rallied after most major institutions passed the Federal Reserve’s annual stress tests, clearing the way for sizable share buybacks and dividend hikes. Among standout performers, Hewlett Packard Enterprise soared 11.1%, First Solar gained 8.8%, and Juniper Networks climbed 8.45%, leading the S&P 500.

US Treasury yields fell on Monday, with the 10-year note nearing a two-month low, as investors weighed the implications of President Trump’s proposed “big, beautiful bill” and rising expectations for Federal Reserve rate cuts later this year. The sweeping spending and tax-cut package, projected to add over $3 trillion to the national debt, cleared a key procedural hurdle in the Senate and heads into final debate ahead of the Independence Day recess. The yield on the benchmark 10-year Treasury note declined 4.9 basis points to 4.234%, reflecting growing investor demand for safe-haven assets amid fiscal uncertainty and dovish central bank sentiment.

The US dollar weakened on Monday, hitting a near four-year low against the euro amid growing concerns over the rising government deficit and uncertainty around trade negotiations. Market anxiety intensified as Senate Republicans prepared to push forward President Donald Trump’s tax-cut and spending bill, despite internal divisions over its projected $3.3 trillion impact on the national debt. The dollar index fell 0.41% to 96.80, with the euro climbing 0.55% to $1.1783. The greenback also lost ground against the yen, slipping 0.47% to 143.97, while the pound edged up 0.08% to $1.3725.

Brent crude oil prices ended lower on Monday as investors weighed easing geopolitical risks in West Asia and the potential for an OPEC+ output hike in August. Brent crude futures for August delivery, which expired during the session, settled down 0.2%, at $67.61 a barrel, while the more active September contract closed at $66.74. Despite Monday’s dip, both Brent and US crude benchmarks posted gains for the second consecutive month up roughly 6% and 7%, respectively even after last week’s sharp selloff marked their biggest weekly decline since March 2023.

Day’s Ledger

Economic Data:

• India Manufacturing PMI for June
• ECB Consumer Inflation Expectations for May
• Euro CPI Flash for June
• US S&P Global Manufacturing PMI for June

Corporate Actions:

• Elitecon International to consider fund raising
• Exicom Tele-Systems to consider right issue 
• Indian Infotech to consider rights issue
• Satin Creditcare to consider fund raising

Policy Events

• ECB President Lagarde Speech
• ECB Elderson Speech
• Japan Gov Ueda Speech
• BOE Gov Bailey Speech
• Fed Chair Powell Speech

TICKERS

• Addhar Housing Finance informed that CARE Ratings upgraded the company’s long-term bank facilities rating to ‘AA+’ from ‘AA’, citing improved financial and operational performance in FY25. 
• Aurobindo Pharma extended the deadline to acquire 26% in Swarnaakshu Solar Power to Sept. 30 from Jun. 30, pending Telangana government approval. Investment totals ₹104 million.
• BEL informed that  it secured fresh orders worth ₹5.28 billion since Jun. 20, including radars, communications gear, control centres, and spares, according to an exchange filing.
• Bharat Forge to transfer its defence unit to KSSL for ₹5 billion and acquire AAM India for ₹7.70 billion due to higher cash reserves.
• Can Fin Homes appointed Abhishek Mishra as CFO for three years, effective Monday. Prashanth Joishy, interim CFO, stepped down and continues as Deputy GM, the company said.
• HCL Technologies signed a strategic multi-year deal with OpenAI to scale generative AI in enterprises; will also roll out OpenAI tools internally via ChatGPT Enterprise and APIs.
• Hindustan Zinc reported ₹876.2 billion in contributions to the exchequer over five years, with ₹189.6 billion paid in FY25. Filed detailed taxes in its 8th transparency report.
• ITI bagged ₹69.56 billion in BharatNet orders across Northeast, Himachal, and West Bengal. Contract includes capex, operations, and network maintenance under Phase-3 of the project.
• Kalpataru Projects secured overseas power transmission and distribution orders worth ₹9.9 billion, taking its total order book to ₹71.5 billion. Management remains upbeat on global T&D demand.
• NCC received ₹16.91 billion worth of building segment orders in June from state government agencies and private firms. Orders exclude internal work, the company said.
• Prestige Estates launched a ₹33.50 billion premium residential project, Prestige Pallavaram Gardens, in Chennai with 2,069 apartments and a total saleable area of 3.1 million sq. ft.
• Shree Cement informed that its unit, Shree Cement East, won the bid for the Joga-IV limestone block in Rajasthan. The site holds 223.30 million tonnes of cement-grade reserves.
• Torrent Pharma expects CCI nod by mid-December for its ₹256.89 billion deal to acquire JB Chemicals. Merger and integration could conclude by early 2026, CFO said.
• United Breweries launched premium beer Amstel Grande in Karnataka, priced at ₹250 for 650 ml. The product is brewed with Dutch yeast, no sugar, and slow-matured.
• Vodafone Idea will roll out 5G in 23 more cities including Ahmedabad and Pune, and has introduced AI-based self-organising networks to boost energy efficiency and service quality.

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