Tariff Accord Spurs Rally, Risk Assets Heat Up

Market Overview

Markets rallied as trade tensions eased following a finalized U.S.-Japan agreement and reports that the U.S. and EU are nearing a deal on a 15% tariff accord. Investor sentiment turned more risk-on, driving major U.S. indices to fresh record highs. Small-cap stocks led the charge with outsized gains. In after-hours trading, earnings reports triggered price swings—Alphabet (Google) surged as much as 3.5%, while Tesla fell over 5%.

In the bond market, U.S. Treasury yields rose across the curve, with the 10-year yield climbing nearly 4 basis points, fully reversing the previous sessions decline.

Commodities saw mixed action: gold prices dropped nearly 1.7% from their intraday high, while crude oil—despite a steep inventory draw—staged a V-shaped rebound and ended the session roughly flat.

Hot Topics to Watch

● Japans 40-Year Bond Auction Tanks, Demand Hits 14-Year Low

The weak auction came amid a complex backdrop: Japan‘s ruling coalition failed to secure a majority in the upper house election, and the U.S. announced a 15% tariff on Japanese goods. These developments heightened concerns about Japan’s economic outlook. As a result, Japanese government bond yields surged across the curve, with the 40-year yield jumping nearly 10 basis points and the 10-year yield hitting its highest level since 2008.

● U.S. Existing Home Sales Drop to Lowest Level in Nearly 15 Years

Americas housing market remains deeply disjointed. Sales activity continues to be hampered by high borrowing costs and economic uncertainty, while prices defy gravity. According to the National Association of Realtors (NAR), existing home sales in June fell 2.7% month-over-month to a seasonally adjusted annual rate of 3.90 million units—the lowest since September 2023 and below consensus estimates of 4.00 million. The data point marks yet another sign of ongoing weak demand.

Key Events to Watch (GMT+8)

• 14:30 Initial Jobless Claims (Week Ending July 19, US)

• 15:45 S&P Global Manufacturing and Services PMI Flash (July, US)

• 16:00 New Home Sales Annualized (June, US)