Key Highlights

• President Trump to impose a 35% tariff on Canadian goods, except those covered by USMCA, from August 1. Blanket tariffs of 15-20% are planned for most trading partners, against 10% today.

• Chinese Foreign Minister Wang Yi meets US Secretary of State Marco Rubio at ASEAN conference in Malaysia amid ongoing trade tensions; first face-to-face meeting since their January call.

• IEA forecasts slowest non-pandemic oil demand growth since 2009, doubts Russia can sustain production capacity.

Chart of the Day

EXHIBIT #1: ELEVATED MATERIALS AND MINING EQUITY HOLDINGS IN EM

^{Source: BNY}

Recent tariff announcements have thrust industrial commodity producers into the spotlight. U.S. copper tariffs drove the largest price swings in over fifty years, while additional duties on Brazilian exports threaten one of the globe’s leading iron ore suppliers. Simultaneously, rumors of a Chinese government meeting to bolster real estate markets briefly buoyed equity markets and industrial metals alike. Despite these event-driven rallies, underlying demand remains weak across the U.S., China and other major economies. So far this year, every short-term price uptick has been swiftly reversed by persistent economic headwinds, and we see no reason to expect a durable shift without a material change in growth prospects. Consequently, although commodity-exposed assets are temporarily benefiting from price spikes, they face significant downside risk in what is a top-heavy environment for FX carry trades dominated by producers. In equities, mining stocks are similarly stretched: the global metals and mining sector is trading 15% above its one-year average, led by developed markets. Emerging market regions such as EMEA and LatAm are displaying even greater overexposure, signaling that companies in South Africa, Chile and Brazil have been repriced beyond fundamentals. Unless growth or other supportive factors emerge, a sharp pullback remains likely, mirroring the broader equity landscape’s divergence from earnings potential.

What's Changed?

Risk sentiment has turned negative. Tariffs are being blamed for the reversal, as the EU prepares for its “letter” from President Trump detailing the rates on its goods, which suggests talks have faltered ahead of the August 1 deadline. Canada’s letter, with its 35% figure, has added to concerns that tariff rates are not benign, nor to be ignored. The week of “numbness” is ending on a double prime number, 7/11, with the focus on U.S. retail, from Amazon sales to Q2 earnings that start next week. Pressure on oil is highlighted by the IEA and by the EU’s push for rolling oil caps on Russia. The focus of economic news overnight was on weaker growth from the U.K., the South Korean trade outlook weakening, Norway’s trade surplus narrowing and the warning from Japan’s Uniqlo over the impact of US tariffs on its earnings. The primary hope overnight came from China, on speculation of further stimulus. However, in the land of prime numbers locked on trade, hope is not a strategy. Next week will test the mettle of investors in China with the Q2 GDP, trade and retail sales reports, along with housing prices and CNY loan demand. The focus in the U.S. session will drift north to Canada, where the country’s jobs and housing markets are key to whether the Bank of Canada cuts further and in advance of any FOMC moves. CAD weakness is persisting but looks modest compared with JPY, which is flirting with 148 again ahead of next week’s upper house elections and further trade talks with U.S. Treasury Secretary Scott Bessent. The other focus will be on the success of the U.S. coupon supply sales this week, as everything looks under water now. Rates remain the Trump administration’s big worry, given the debt servicing costs, the block against leverage In light of the volatility across markets, and the restriction on faster growth implied by real yields. Primary numbers are clustering together like markets to price levels. However, the next number, like the next island of market stability, could be far away.

What You Need to Know

U.K. monthly real GDP fell 0.1% in May 2025, after a 0.3% decline in April and a revised 0.4% rise in March (previously +0.2%). Over the three months to May, GDP grew 0.5%, driven by sectoral shifts. Services output rose 0.1% in May following a revised 0.3% contraction in April (from -0.4%), delivering 0.4% growth for the quarter. Production output plunged 0.9% in May – worse than April’s 0.6% fall – but posted 0.2% growth over the quarter. Construction output slid 0.6% in May after a 0.8% April gain (revised down from 0.9%) but achieved 1.2% growth across the three-month period. These trends underpin the modest quarterly GDP advance. FTSE 100 -0.119% to 8964.98, GBPUSD -0.419% to 1.3542, 10y gilt +2.1bp to 4.616%.

In June 2025, the French Consumer Price Index (CPI) rose by 0.4% m/m, after a 0.1% decline in May, and climbed 1.0% y/y (from +0.7% in May). The monthly increase was driven by services (+0.6% from -0.2%), led by accommodation (+8.4% vs. +3.2%) and transport services (+3.7% vs. -5.2%), and by a rebound in energy (+0.6% from -1.4%), notably petroleum products (+1.9% from -1.7%). Food prices were stable (-0.1% from +0.5%), while manufactured goods edged up +0.1%. Core inflation (ISJ) stood at +1.2% y/y (from +1.1%), and the harmonized index of consumer prices (HICP) rose 0.4% m/m and 0.9% y/y. Seasonally adjusted CPI also gained 0.4% in June. CAC40 -0.515% to 7861.53, EURUSD -0.316% to 1.1691, 10y OAT +2.5bp to 3.423%.

German wholesale prices rose by 0.9% in June 2025 versus June 2024, after increases of 0.4% in May and 0.8% in April, and edged up 0.2% m/m. The annual gain was driven by food, beverages and tobacco (+4.2%), notably coffee, tea, cocoa and spices (+26.2%), sugar, confectionery and bakery products (+18.2%), and milk, dairy, eggs, edible oils and fats (+8.8%). Prices for non-ferrous ores, metals and semi-finished products jumped 20.5%. In contrast, wholesale prices fell for solid fuels and mineral oil products (-5.9%), waste and scrap (-6.1%), iron, steel and semi-finished products (-5.4%) and data processing and peripheral equipment (-5.0%). DAX -0.609% to 24307.89, EURUSD -0.316% to 1.1691, 10y Bund +2.3bp to 2.728%.

The Central Reserve Bank of Peru (BCRP) has voted to keep its reference rate steady at 4.50%. It cited that inflation is expected to remain within the lower band of the target range and then settle around the center of that range; core inflation is expected to remain around 2% over the projection horizon. Economic activity expectations indicators deteriorated relative to the previous month, but almost all remained in optimistic territory, in a context where economic activity is around its potential level. The BCRP is maintaining its forward-looking statement that it will be “attentive to new information on inflation and its determinants, including the evolution of core inflation, inflation expectations, and economic activity, to consider, if necessary, changes in the monetary stance.” It has reaffirmed its commitment to adopt the necessary actions to keep inflation within the target range. BVL PGI +0.08% to 32772.49, USDPEN -0.105% to 3.546, 10y PGB +2bp to 6.4%.

What We're Watching

Canada June net change in employment is forecast flat vs. 8.8k in May. June’s employment rate is expected to rise to 7.1% from 7.0%.

Canada May building permits are expected to decline for the second straight month, at -6.6% vs. -5.3% in April.

What iFlow is Showing

Mood: Sentiment has improved with a pick-up in demand for both equities and core sovereign bonds.

FX: Relatively light and mixed flows. Notable flows were continued strong demand for DKK and SGD. There were muted flows in majors, with light USD, GBP and CNY outflows vs. inflows into JPY and EUR.

FI: Sovereign bonds posted broad buying interest globally, led by Eurozone government bonds, U.K. gilts, U.S. Treasurys and Chinese sovereign bonds. Elsewhere, iFlow showed good-sized selling in New Zealand, Peruvian, Eurozone and Japanese corporate bonds.

Equities: DM America was the only region with outflows, against inflows in the rest, led by EM EMEA. Poland, Brazil and Singapore posted the most demand. Within DM America, the energy sector was most sold, against buying in the utilities sector.

Quotes of the Day

“Prime numbers are what is left when you have taken all the patterns away. I think prime numbers are like life. They are very logical but you could never work out the rules, even if you spent all your time thinking about them.” – Mark Haddon

“Prime numbers are made to be multiplied, not added.” – Lev Landau

Economic Details

In June 2025, Norway’s goods exports totaled NOK 139.4bn, up 0.9% from May but down 9.5% y/y. Crude oil exports fell 5.7% m/m and 24.0% y/y to NOK 32.9bn, while natural gas exports fell by 1.8% m/m and 7.3% y/y to NOK 41.5bn. Mainland exports rose 7.5% m/m and 15.1% y/y to NOK 65.0bn. Imports edged down 0.1% m/m but increased 5.2% y/y to NOK 92.0bn. The trade surplus widened 2.9% from May to NOK 47.4bn but narrowed 28.8% versus June 2024. Year-to-date, exports reached NOK 926.2bn (+4.6%) and imports NOK 545.0bn (+3.7%), yielding a cumulative surplus of NOK 381.2bn (+5.9%). The mainland trade balance was -NOK 26.9bn (+14.8% m/m; +12.9% y/y). OSE -0.486% to 1624.49, EURNOK -0.338% to 11.8322, 10y NGB +1.9bp to 3.934%.

In June 2025, Norway’s construction cost index for residential buildings rose by 0.2% m/m and 4.8% y/y to 153.9 (2015=100). The labor cost measure stood at 135.3 (unchanged m/m), while the materials cost index reached 182.7 (+0.5% m/m; +5.9% y/y). Costs for detached wood houses and related materials climbed 0.9-1.0% m/m (y/y gains of 6.8-7.3%), while multi-dwelling house costs eased 0.3% m/m (+4.1% y/y). Meanwhile, the price index for existing dwellings fell 0.6% seasonally in Q2 vs. Q1 but rose 4.5% annually nationwide. Regional annual increases ranged from 1.8% in Østfold etc. to 13.9% in Stavanger, with Oslo down 1.7% q/q but +4.3% y/y.

In June 2025, the Swiss SECO consumer sentiment index stood at -32.2 points, marking a 4.4-point increase from -36.6 in June 2024. Three of the four component indices, “Past financial situation” (-36.4 vs. -56.4), “Expected financial situation” (-27.4 vs. -35.9) and “Timing of major purchases” (-27.0 vs. -35.5), improved y/y, while the “Expected economic development” subindex deteriorated further to -38.0 from -18.8 a year earlier. The continuous survey of 2,411 participants aged 16+ highlights a cautious consumer backdrop, with households feeling better about their finances but uncertain about broader economic prospects. SMI -0.87% to 12026.45, EURCHF +0.109% to 0.93083, 10y Swiss GB -0.3bp to 0.451%.

U.K. monthly services output was estimated to have grown by 0.1% in May 2025, following a 0.3% fall in April and a 0.4% rise in March. Ten of the fourteen sectors saw monthly gains, led by information and communication, which rose 2.0%. These increases were partially offset by four sectors, with wholesale and retail activities down 1.5%. At industry level, legal services (+6.1%) and computer programming, consultancy and related activities (+3.0%) were the main positive contributors; retail trade (-2.7%) was the biggest detractor. Over the three months to May 2025, services output rose by 0.4%, with growth in eight sectors and administrative and support service activities contributing 3.2%. FTSE 100 -0.119% to 8964.98, GBPUSD -0.419% to 1.3542, 10y gilt +2.1bp to 4.616%.

U.K. monthly construction output fell by 0.6% in May 2025, ending three successive monthly gains, including a 0.8% rise in April. The decrease was entirely due to a 2.1% drop in repair and maintenance, while new work rose 0.6%. At sector level, output in five of the nine sectors declined, with non-housing repair and maintenance down 2.4% and private housing repair and maintenance down 1.8%. Despite the May fall, total construction output grew by 1.2% in the three months to May 2025; new work increased by 0.9% and repair and maintenance rebounded by 1.5% over the quarter, reflecting resilient underlying demand.

U.K. goods imports rose by £0.6bn (1.2%) in May 2025, driven by increases from both EU and non-EU markets. Goods exports also grew by £0.6bn (2.2%) across EU and non-EU destinations. Exports to the U.S., including precious metals, rebounded by £0.3bn in May after a steep decline the prior month, though levels remained subdued. Over the three months to May 2025, the combined goods and services trade deficit widened by £6.7bn to £13.2bn, reflecting a sharp rise in goods imports and a drop in exports. In this period, the goods deficit expanded by £6.1bn to £61.0bn, while the services surplus narrowed by £0.6bn to £47.8bn.

Türkiye’s foreign trade indices for May 2025 show the overall export unit value index up 3.1% y/y, led by food, beverages and tobacco (+10.5%), crude materials excluding fuels (+5.8%) and manufactured goods (+3.2%), while fuels fell 16.3%. The export volume index decreased by 0.5%, with food, beverages and tobacco down 9.5% and fuels down 8.9%, though manufactured goods rose 2.7%. On the import side, the unit value index slipped 0.3% y/y despite an 18.9% gain in food, beverages and tobacco, and falls for fuels (-14.4%), crude materials (-1.1%) and manufactured goods (-0.1%), while import volume grew 2.9%. Terms of trade improved to 89.1 from 86.2 a year earlier. BI 100 +0.797% to 10413.68, USDTRY -0.283% to 40.174, 10y TGB +4bp to 31.69%.

In May 2025, Türkiye’s trade sales volume index (2021=100) rose 19.2% y/y and 3.3% m/m. Wholesale and retail trade and repair of motor vehicles and motorcycles increased by 17.8% y/y and 1.5% m/m; wholesale trade climbed 20.2% and 4.3%; retail trade rose 17.7% and 1.6%, respectively. Among retail sub-sectors, annual gains were led by computers, books and telecommunications equipment (+36.1%) and medical goods and cosmetics (+17.2%). Monthly retail growth was strongest for medical goods and cosmetics (+4.7%) and mail orders/internet retail (+4.6%), while computers and telecoms equipment fell 0.2%. These data reflect continued expansion in trade sales. The next release will be on August 12, 2025.

New Zealand’s June PMI for the manufacturing sector continued to show contraction but stabilized at 48.8 after plunging to 47.4 in May from 53.1 in April. Four of the five main subindex values were in decline. New orders (51.2) improved the most from May to June, providing some optimism for the months ahead, while production (48.6) inched closer to the no-change mark of 50. Finished stocks (46.9) dipped to its lowest value since December 2024 after five consecutive months of expansion, while employment (47.9) remains in contraction after a sizable drop in activity the month before. Comments indicate that manufacturers report a major slowdown due to weak consumer demand, high living costs and economic uncertainty. Falling construction activity, rising input costs and global instability are reducing orders and cashflow, while supply chain issues are adding further pressure. NZX 50 -0.576% to 12686.68, NZDUSD -0.216% to 0.6022, 10y NZGB +0.9bp to 4.525%.

In May 2025, Malaysia’s manufacturing sector posted a sales value of MYR 158.7bn, up 2.4% y/y but down 1.1% m/m (seasonally adjusted sales +0.5%). Growth was led by food, beverages and tobacco (+13.0%), electrical and electronics (+5.0%) and non-metallic mineral products, basic metal and fabricated metal products (+3.7%). Employment reached 2.40 million, a 0.9% annual rise (-0.1% m/m), driven by the same three sub-sectors. Total salaries and wages paid rose 1.6% y/y to MYR 8.3bn (+0.2% m/m). The average wage per employee was MYR 3,470 (+0.7% y/y; +0.3% m/m), while sales per employee hit MYR 66,163 (+1.6% y/y; -1.0% m/m). Year-to-May, sales totaled MYR 794.7bn (+3.8%), employment 2.40 million (+0.9%), wages MYR 41.9bn (+1.9%) and sales per employee MYR 331,327 (+2.9%).KLCI +0.196% to 1539.53, USDMYR +0.262% to 4.2603, 10y MGB -1.3bp to 3.427%

Malaysia’s industrial production index (IPI) rose 0.3% y/y to 128.5 in May 2025, though seasonally adjusted output fell 1.3% m/m (index 133.0). Year-on-year growth was driven by manufacturing (+2.8%), led by electrical and electronics (+5.6%), food, beverages and tobacco (+11.1%), non-metal minerals and basic metals (+3.5%) and electricity (+0.4%), while mining declined by 10.2% (natural gas -16.6%; crude oil & condensate -1.6%). Export-oriented industries grew 2.9% y/y (oils & fats +15.9%; computers and electronics +6.0%), and domestic industries rose 2.6% (food processing +10.3%; fabricated metals +3.7%). From January to May 2025, IPI advanced by 2.0% y/y, supported by manufacturing (+4.1%), despite contractions for mining (-5.1%) and electricity (-1.3%).