KBC Sunset Market Commentary 10/07/2025 via Trader Talent

KBC Sunset

Thursday, July 10, 2025

Daily Market Overview

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Markets

• This week was supposed to be a pivotal one but the July 9 deadline for the US import tariff reprieve eventually turned out to be just another TACO event. President Trump did sent out letters stating the applicable tariff this week, including a 25% levy for major trading partners South Korea and Japan, but the kick-off date is August 1. That offers another three weeks for negotiations, which is an age in market terms. Trump juggled with a 50% copper and a 200% pharmaceutical tariff, but other than a sharp price increase in the former (and even that is only on the US exchange), there’s little impact to be found of Trump’s announcements elsewhere. “Not credible” is what some European manufacturers are saying. The same goes for the Brazilian 50% politically motivated levy treat overnight. The Brazilian real slipped in a kneejerk reaction to above USD/BRL 5.6 but is already stabilizing the day after, let alone that fear spilled over to other markets. Neither do markets bother to take note of Trump’s umpteenth attack on Fed chair Powell. What started as a call for a 100 bps cut morphed into a 250 bps one before demanding a 300 bps lower policy rate recently. Public finances fought back in the center of attention too, originating from Japan at the start of the week and easily affecting other core markets that are facing similarly tricky budgetary issues. Yesterday’s solid US 10-yr auction and a Japanese 20-yr auction that wasn’t as bad as some feared took a little steam out of the long-term bond yield surge over the recent days. Yet, it’s interesting to see that from the initial 6 bps drop in Japan’s 30-yr yield this morning, for example, nothing remains left. It suggests being one of the market subjects that actually stick. Tonight’s US 30-yr auction most certainly will draw some additional attention to the matter. Yields elsewhere rise between 1-2.5 bps in a gentle flattening move in the US amid lower-than-expected jobless claims. The 227k print helped lower the 4-week MA from a 2-year high to the lowest since May of this year. European swap rates add about the same amount but in a bear steepener. Both stock and FX markets trade super quietly. The US dollar has a slight edge over the euro (EUR/USD 1.1707) and most other G10 peers (DXY 97.64) but it’s barely worth mentioning. Cyclicals including AUD and NZD are relative outperformers, CHF lags.

News & Views

• In its 2025 World Oil Outlook report, OPEC said that global oil demand is set for a continued robust growth, rising almost 123mn bpd in 2050 compared to 103.7mn bpd in 2024. In a medium term perspective, OPEC sees demand rising by +/- 9% between 2024-2030. India, other Asia, the Middle East and Africa are set to be the primary sources of long-term long term oil demand growth, with India being the most important driver. China’s oil demand is projected to increase by less than 2m b/d over the same time horizon. Oil consumption in various transportation modes constitutes the backbone of global oil demand throughout the forecast period as this sector accounted for more than 57% of global oil demand in 2024 and is projected to retain this. Within this sector, the largest incremental demand is expected in road transportation and aviation. A significant demand increase also projected in the petrochemical sector. In a more short-term perspective, Bloomberg reports, referring to delegates familiar with the matter, that OPEC+ is discussing a pause in production increases from October after a next (tentative) monthly hike of 550k bpd (Sept) would complete a 2.2m bpd revival plan. Brent oil currently trades just below $70 p/b.

• June CPI headline inflation in Norway rose by 0.2% M/M and 3.0% Y/Y. Underlying inflation, adjusted for taxes and ex. energy products rose 0.5% M/M and 3.1% Y/Y (was 2.8% in May). The outcome was close to expectations. The Norges Bank unexpectedly cut its policy rate by 25 bps in June to 4.25% as it saw inflation declining since March and as the inflation outlook indicated lower inflation than previously expected. Today’s data support the NB guidance for the policy rate to be reduced to near 4.0% by the end of the year. Markets see a next step possible at the September meeting. The krone intraday gained modest ground after the release with EUR/NOK 11.81 compared to a close of near 11.84 yesterday.