SIFs Higher Ahead of Big Tech Earnings

STOCK INDEX FUTURES

Stock index futures are higher ahead of a busy week of earnings and a relatively light week of economic data. Earnings results from the Magnificent Seven will kick off with Alphabet (Google) and Tesla on Wednesday. So far, earnings season has provided markets with a largely positive picture; tariff-driven volatility has boosted profits at banks and brokerages. 83% of the S&P 500 companies that have reported earnings have posted higher-than-expected earnings per share.

Investors continue to monitor tariff negotiations ahead of the August 1 deadline, while reports that the European Union is readying a retaliatory set of tariffs in case trade talks fail continue to make headlines. President Trump reportedly wants a minimum of a 15%-20% tariff on EU goods as part of any deal, while threatening the bloc with 30% tariffs in the meantime. Trump said last week he would soon send letters to over 150 smaller US trade partners, setting blanket tariff rates for that large group.

Provisional purchasing managers surveys on US manufacturing and services sector activity during July will be published this week and will be watched for signs of any economic fallout from President Trump’s tariffs, although recent data has shown that the economy is holding up relatively well with a limited impact on prices for the time being. Other US data includes existing home sales on Wednesday and new home sales on Thursday, both for June. Weekly jobless claims are released Thursday, followed by June durable goods figures on Friday.

CURRENCY FUTURES

The USD index is lower as markets remain focused on trade deals coming out of the US. Markets also await economic data out of the US, which could offer a leading indication into the broader economic outlook. The dollar lost against the yen following the election in Japan.

Euro futures are higher. The EU is reportedly readying plans for retaliation incase trade talks with the US fail. President Trump has reportedly been pushing for a 15%-20% baseline tariff, higher than the 10% baseline that had been the center of months of talks. On Friday, Germany signaled it could support the EU using its so-called anti coercion instrument, a legal tool that lets the bloc hit back at economic bullying with a range of restrictions on trade and investment. The European Central Bank is widely expected to leave its policy rates on hold on Thursday, with the deposit rate staying at 2.00%. Market participants will be looking for any clues on when it might cut interest rates again, though the central bank will likely try to avoid giving signals for the next meeting in September.

British pound futures are higher ahead of a list of economic data that will provide a snapshot of how the UK economy is doing. Provisional purchasing managers’ surveys on manufacturing and services activity during July are released on Thursday. Retail sales data for June and the latest GfK consumer sentiment survey for July will be published on Friday. Recent data has pointed to a weak UK economy, with GDP contracting in April and May. High inflation in the country means the Bank of England is expected to stick to a gradual, quarterly reduction to its interest rates. Focus from the PMI data will be paid to the employment components for any clues on how hiring held up in the manufacturing and services sectors. Payroll data showed that payroll in the UK fell for the fifth straight month last week. The unemployment rate in May ticked up to 4.7%, up from 4.6% in April. Bank of England Governor Andrew Bailey recently told The Times that more aggressive rate cuts were possible if the jobs market slows too quickly. UK public finances data for June on Tuesday will also be watched given recent rises in UK government bond yields due to concerns about the country’s fiscal health.

Japanese yen futures are higher after Japan’s ruling coalition suffered a significant loss in a parliamentary election Sunday. The election risks derailing delicate trade negotiations with the US just weeks before punishing tariffs are set to take effect. The yen rallied against the dollar following the election while Prime Minister Shigeru Ishiba pledged to stay on and try to strike a US trade deal. Ishiba’s weakened position means his government may struggle to persuade enough lawmakers to back any agreement it does manage to make with Washington, especially if it involves concessions on sensitive sectors such as agriculture or autos. Government data due Friday is expected to show inflation remains above the BOJ’s 2% target. Core consumer prices excluding fresh food in the Tokyo metropolitan area are expected to have risen 2.9% in July from a year earlier, slowing slightly from June’s 3.1% gain. Markets are expecting the Bank of Japan to keep rates steady at its July 30-31 meeting, given the uncertainty surrounding the trade and fiscal picture in the country.

Australian dollar futures are higher on a weaker US dollar. The Reserve Bank of Australia will publish minutes from its July 8 policy meeting on Tuesday, when the board voted six to three to hold rates steady, disappointing markets that had fully priced in a cut. The minutes are expected to reiterate the RBA’s view that it wants to review second-quarter inflation data, due at the end of the month, before considering a further rate cut in August.

INTEREST RATE MARKET FUTURES

Futures are higher across the curve as markets continue to focus on trade developments and upcoming economic data. US Commerce Secretary Howard Lutnick reaffirmed that August 1 is a “hard deadline” for countries to begin paying tariffs, though negotiations are expected to continue. On the policy front, Federal Reserve Governor Christopher Waller reiterated his backing for a July rate cut, pointing to a weakening labor market and subdued inflation risks. He emphasized that any inflationary effects from tariffs would likely be short-lived and said inflation expectations remain stable, giving the Fed flexibility to ease.

The Treasury will auction $13 billion in 20-year bonds on Wednesday and $21 billion in inflation-protected TIPS on Thursday.

The 10-year Treasury yield is 4.37%, and the 30-year yield is 4.93%. The spread between the two- and 10-year yields fell to 51 bps from 55 bps on Friday.

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