GLOBAL MOOD: Cautious Risk-OffDrivers: US Trade Deficit, Fed Rate Cut Bets Markets leaned risk-off as US stocks slipped on earnings warnings tied to tariffs and stalling services activity. Weak macro data, Fed leadership uncertainty, and falling oil prices added to caution, despite rate cut hopes supporting bonds. TODAY’S WATCHLIST - RBI MPC Interest Rate Decision - Earnings: Trent, Hero Motocorp, Bajaj Auto, BHEL THE BIG STORYPresident Donald Trump said on Tuesday he will nominate a replacement for outgoing Federal Reserve Governor Adriana Kugler by the end of the week, as speculation intensifies over the future leadership of the US central bank. Kugler, who is stepping down on Friday to return to academia, leaves a short-term vacancy on the Fed Board until January. Trump said he has narrowed his list of candidates to replace Fed Chair Jerome Powell to four. These include economic adviser Kevin Hassett, former Fed Governor Kevin Warsh, and two unnamed individuals, one of whom is believed to be current Fed Governor Christopher Waller. Trump ruled out Treasury Secretary Scott Bessent, saying Bessent wished to remain at Treasury. “We’re also looking at the Fed chair, and that’s down to four people right now... Two Kevins and two other people,” Trump told reporters. DATA SPOTLIGHTThe US trade deficit narrowed sharply by 16% to $60.2 billion in June, the lowest level since September 2023, driven by a steep decline in consumer goods imports. Notably, the trade gap with China shrank to its smallest in over 21 years, underlining the impact of President Trump’s aggressive tariff policies on global trade flows. Meanwhile, the US ISM Services PMI dropped to 50.1 in July from 50.8 in June, reflecting a near-stalling of activity in the sector that comprises more than two-thirds of the US economy. New orders were little changed, employment weakened for a fourth straight month, and input costs rose at the fastest pace in nearly three years, highlighting the lingering effects of tariff-related business uncertainty. Takeaway: Trade tariffs are reshaping US trade flows, sharply narrowing the deficit, especially with China while squeezing imports. At the same time, services activity is stalling, with rising input costs and weakening employment, pointing to growing strain on the broader economy. WHAT HAPPENED OVERNIGHT US stocks dip as tariff impact weighs on earnings US Stocks closed lower on Tuesday as investors digested earnings reports highlighting the growing burden of trade tariffs. Caterpillar warned tariffs could cost up to $1.5 billion in 2025, though its shares eked out a 0.1% gain. A key services sector gauge showed near-stall conditions in July, with businesses blaming rising costs from new import taxes. US Treasury yields mixed as services data fuels rate cut bets The 10-year US Treasury yield dipped to 4.22%, near a three-month low, extending its slide after last week’s weak jobs data. Economic slowdown concerns were reinforced by stalling ISM services data and a fourth straight contraction in the employment gauge. The 2-year yield, more sensitive to Fed policy, edged up 3.9 basis points to 3.72%, reflecting some uncertainty about the timing of rate cuts. US dollar firms as market digests Fed speculation The Dollar Index rose 0.2% to 98.81 on Tuesday, staying close to Friday’s lows after last week’s weak jobs report boosted Fed rate cut bets. Traders monitored President Trump’s upcoming nominations to the Federal Reserve Board and his plans to replace outgoing Governor Adriana Kugler. Crude oil prices dip to 5-week low on supply and demand worries Brent crude oil prices fell 1.63% to $67.64 a barrel, while WTI slid 1.7% to $65.16 — both closing at their lowest since late June. Prices declined for a fourth straight session as rising OPEC+ output and global demand concerns weighed on sentiments. President Trump’s threats of punitive tariffs over India’s Russian oil purchases offered only limited support to prices Day’s Ledger Economic Data: Canada July Global Composite, Services PMI India M3 Money Supply Corporate Action: Earnings: Trent, Pidilite Industries, Power Finance Corporation, Hero Motocorp, Fortis Healthcare, UNO Minda, Jindal Stainless, HUDCO, KPR Mill, Krishna Institute, SKF India, Jyoti CNC Automation, Ircon International, Godrej Agrovet, Kirloskar Oil, RITES, PVR INOX, Gujarat Narmada, Raymond Lifestyle, Raymond, Bajaj Auto, Divis Laboratories, Bajaj Holdings, BHEL, Bharat Forge, Blue Star, Bayer CropScience, EID Parry, Cera Sanitaryware. Esha Media to consider fund raising HSIL to consider fund raising Policy Events: RBI MPC to announce Interest Rate Decision US Fed Cook Speech Tickers to Watch Adani Enterprises sets up a new subsidiary to offer cybersecurity solutions. Bharti Airtel consolidated PAT halved QoQ to ₹59.48 billion. Bharti Hexacom PAT fell 16% QoQ to ₹3.92 billion. BHEL: Crisil revised BHEL’s long-term outlook to 'stable' from 'negative'. Britannia consolidated net profit rose 3% YoY to ₹5.21 billion. CONCOR net profit rose marginally to ₹2.58 billion from ₹2.55 billion YoY. EIH consolidated net profit plunged 63% YoY to ₹338.6 million. Godawari Power will build a 700,000-tonne/year cold rolling mill in Chhattisgarh. Gujarat Gas net profit slipped slightly to ₹3.27 billion from ₹3.30 billion YoY. ICICI Bank appointed Anubhuti Sanghai as MD & CEO of I-Sec PD for five years. IRCTC RBI approved IRCTC's arm to operate as an online payment aggregator. Lupin consolidated net profit rose 52% YoY to ₹12.19 billion. Navin Fluorine signed a pact to supply 6.60 MW hybrid power. Prestige Estates consolidated PAT rose 25.7% YoY to ₹2.93 billion. Torrent Power consolidated PAT dropped 25% YoY to ₹7.31 billion. MUST READ Defence Ministry clears ₹670 billion military upgrade for armed forces ₹170 billion loan fraud case: ED likely to summon Anil Ambani again in 10 days SEBI issues new norms for MIIs to review or waive regulatory penalties Don't burn ties with India, says Nikki Haley; slams China tariff pause Leadership call, control, and continuity; what's brewing at the Tata group Trump vows 'very substantial' tariff hike on India within 24 hours US trade gap narrows to tightest since 2023 on drop in imports Brazil Central Bank says US tariffs amplify need for caution Trump says pharma, chips tariffs coming in ‘next week or so’ See you tomorrow with another edition of The Morning Edge. Have a great trading day. Almost two decades after the 2008 crisis, calls to ease financial regulation grow louder, risking return to the same policy mistakes that once shook the global system. Rabi Narayan Mishra writes: Why History Keeps Rhyming: The Return of Light-Touch Regulation
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