Fed Cut Hopes and Trump’s Japan Tariff Rollback Lift Market Sentiment

GLOBAL MOOD: Risk-on
Drivers: Trade policy developments, Fed rate cut hopes, 

Global markets leaned risk-on with US equities hitting record highs on Fed rate-cut bets and easing trade uncertainty after Trump’s tariff rollback on Japanese cars, even as weak labour data and softer oil prices highlighted growth concerns.

TODAY’S WATCHLIST

• Euro GDP Data
• US Aug employment Data

THE BIG STORY
US President Donald Trump on Thursday signed an order implementing lower tariffs on Japanese automobiles and other products, following the announcement made in July. The move formalizes an agreement with Tokyo after months of negotiations, reducing uncertainty for Japan’s auto sector and confirming $550 billion in Japanese investment in US projects. The tariff on Japanese cars will fall from 27.5% to 15%, with the reduction taking effect seven days after the order’s publication, and some relief applied retroactively from August 7. The decision comes after Trump’s previous levies had significantly impacted Japanese carmakers, with Toyota alone expecting nearly $10 billion in costs from the earlier tariffs. 

Data Spotlight 
US Initial jobless claims jumped by 8,000 to 237,000 in the last week of August, marking the largest increase in over two months and well above expectations of 230,000. Meanwhile, continuing claims fell for a second straight week to 1,940,000, the lowest in five months and below forecasts of 1,960,000, though still above pre-April averages. Federal government initial claims edged down slightly to 515 as severance periods for DOGE layoffs conclude. 

On the trade front, US exports of goods and services rose by $0.8 billion to $280.5 billion in July, the highest in three months. Goods exports gained $0.2 billion, led by capital goods such as computer accessories, civilian aircraft, and special-purpose vehicles, offset partially by declines in industrial supplies. Services exports rose $0.6 billion, supported by transport, intellectual property charges, and government services.

Takeaway: US labour market shows signs of softening, with rising initial jobless claims supporting expectations for potential Fed rate cuts. Meanwhile, exports of goods and services remain resilient, driven by capital goods and services, despite ongoing trade uncertainties.

WHAT HAPPENED OVERNIGHT

• S&P 500 closed at record high, up 0.83%, ahead of Friday’s jobs report.
  
  • Gains driven by Broadcom (+1.2%), Amazon (+4.3%), and Meta (+1.6%).
  • Consumer discretionary sector gained 2.3%, led by Amazon and JetBlue partnership news.
  • Labor market data showed jobless claims higher and private payrolls weaker, adding to Fed cut bets.

• US Treasuries Yields dipped on softer labor market data.
  
  • ADP payrolls rose just 54,000 vs. 75,000 expected; jobless claims also higher.
  • Traders now price in near-certainty of a September Fed rate cut.

• US dollar steady to slightly firmer ahead of Friday’s payrolls.
  
  • Dollar Index up 0.2% to 98.33.
  • Traders cautious, avoiding large bets before the jobs report.
  • Fed officials reiterated support for rate cuts, reinforcing market expectations.

• Crude fell around 1% to two-week lows on surprise US stock build and OPEC+ output hike talk.
  
  • US inventories rose 2.4 million barrels vs. expectations for a drawdown.
  • OPEC+ may raise production targets again at weekend meeting.
  • Russia secured additional oil deal with China; Venezuela exports hit 9-month high.

Day’s Ledger

Economic Data

• Euro Employment Change
• Euro GDP Data
• India Foreign Exchange Reserves
• US Aug employment Data

Corporate Actions

• 7Seas Entertainment to consider fund raising 
• ACI Infocom to consider fund raising 
• Aviva Industries to consider fund raising 
• Harshil Agrotech to consider bonus share 
• LKP Finance to consider rights issue
• PNB Housing to consider fund raising 
• Saboo Sodium to consider right issue 
• Sunteck Realty to consider fund raising 

Tickers to Watch

• BHARAT FORGE unit to acquire land in Andhra Pradesh for defence complex
• BIOCON subsidiary’s Bengaluru site gets five observations from US FDA
• CONCOR inks MoU with Bhavnagar Port Infra to run container terminal
• TORRENT PHARMA to acquire stake in JB Chemicals via open offer
• JIO FINANCIAL SERVICES allots warrants to Sikka Ports and Jamnagar Utilities
• NTPC shuts down Tanda thermal plant unit in Uttar Pradesh permanently
• ZYDUS LIFE subsidiary, Synthon sign US licensing pact for Ozanimod capsules

MUST READ:

• India and Singapore Deepen AI, Chips Ties as US Tariff Risks Grow
  
• Indian Banks Said to Ask RBI for Tweaks to Bond Issuance Plan
  
• Jane Street Blindsides Regulator in Fight Over India Trades
  
• India Bets on SCO to Blunt the Edge of US Tariffs and Sanctions
  
• India Hopes GST Rate Cuts Might Have Just Triggered Its Biggest Consumer Boom
  
• RBI Must Not Outsource the Craft of Supervision
  
• Opposition’s Silence, Centre’s Smirk
  
• GST Reset Seeks Equity and Growth Amid Fiscal Knot
  
• Fed is independent, but could markets be right about Trump's push for cuts?

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

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