Today marks the end of the three-month tariff relief extension, but the reality is that there is still time to negotiate before nations "start to pay" on August 1st. Markets are in a wait-and-see mode, with the S&P 500 sitting 1% below last week’s record highs. Investors are waiting to see if there is any sign of further escalation in trade tensions following the tariff warning letter.
The main story overnight surrounds copper, where Trump announced a 50% tariff on copper products being sent into the US. Trump has frequently advocated for bringing copper production back to the US, and traders have been sending record volumes of the metal into the country to get ahead of any levy. Regardless, the risk of an imminent tariff sent contracts on the Comex to a 25% premium over LME prices. Copper climbed 17% in New York but has fallen more than 4% in early trading. More volatility is expected as further details are announced.
Negotiations with the EU are said to be progressing, but there are still frustrations around local taxes and fines targeting US tech firms. Announcements of a new tariff rate could be used to pressure the EU on these fronts.
Earlier today, the RBNZ kept rates on hold as expected. Expectations for the next meeting in August hang in the balance, with a 67% probability of a 25bps cut priced in. Later today, we have the FOMC minutes released.
