Report - 21 jully, 2025Executive Summary – Multi-Event Market Pulse
UK Retreats on Encryption Order: Facing U.S. tech retaliation risk, London softens its demand that Apple create backdoor access. Apple and WhatsApp resist, Washington defends encryption integrity. → Positive for U.S. tech (Apple, Meta), bullish Nasdaq, bearish UK regulatory credibility.
EU Confronts Italy and Spain Over Bank M&A Blocks: Brussels says national vetoes breach merger law. Push to consolidate banking into “EU champions.” → Bullish for European bank stocks if deal-making resumes. EUR volatility risk if tensions escalate.
Japan’s PM Under Fire After Upper House Loss: LDP loses majority amid cost-of-living and immigration backlash. PM Ishiba struggles to reach tariff deal with U.S. → Bearish for JPY near-term, pressure on USDJPY to rise. Uncertainty weakens Japanese equities.
Trump’s First 6 Months: Tariffs, ICE Raids, Fed Tensions, and Executive Rule:
DXY at risk as dollar has worst year since 1973.
Tariffs at 8.8% effective rate; targeting copper, autos next.
170 executive orders destabilize governance and investor sentiment.
“One Big Beautiful Bill” cuts taxes, axes Medicaid, boosts ICE funding.
→ Supports short-term U.S. GDP but structurally negative for dollar and fiscal outlook.
Audit Regulator Shakeup: PCAOB chief removed; deregulation wave begins. → Increased risk for audit quality in U.S. equities. Long-term trust implications.
London Stock Exchange Eyes 24-Hour Trading: In response to retail and crypto-driven demand. → Bullish for UK capital markets infrastructure long-term; potential tech strain and regulatory pushback.
Copper Markets Shaken by Tariff Uncertainty: Codelco warns of U.S. demand disruption. Supply chain anxiety for EVs, data centers. → Copper price volatility likely; bearish short-term if tariffs confirmed.
ECB Focused on Euro Strength’s Disinflation: Unlikely to comment amid tariff fog. → EUR strength may persist absent pushback; pressure on export-reliant EU names.
U.S. PMI and UK Retail Data Awaited: PMIs expected to cool modestly. UK data may worsen amid inflation and tax burdens. → Short-term equity volatility possible. GBP faces downside bias.
Strategic Forecast & Market Reaction
1. US–UK Encryption Clash
The UK government is being forced to retreat from its encryption crackdown targeting Apple’s most secure cloud services after escalating pressure from U.S. leadership, including Vice President JD Vance and President Trump. With Apple and Meta resisting surveillance backdoors and withdrawing services from the UK, tech-sector alignment with U.S. privacy norms is reaffirmed. Britain’s attempt to enforce decryption via the Investigatory Powers Act triggered transatlantic diplomatic strain, risking bilateral tech partnerships.
Market Impact: Bullish for large-cap U.S. tech (especially Apple, Meta), supportive of Nasdaq (NDX) and S&P 500 (SPX) tech sector weight. UK regulatory credibility weakens, negative for UK-listed tech firms. Expect near-term outperformance of U.S. tech relative to EU/UK peers. U.S. surveillance policy divergence also solidifies investor bias toward Silicon Valley over European counterparts.
2. EU–Italy/Spain Banking Intervention
Brussels’ direct challenge to Italian and Spanish interference in major bank mergers marks a potential turning point in European financial consolidation. Legal warnings to Meloni’s government and formal notice to Spain over BBVA–Sabadell freeze signal EU commitment to a unified capital market.
Market Impact: Bullish for EU bank equities (e.g., UniCredit, BBVA, Banco BPM) if mergers are unblocked. EUR may gain if consolidation expectations rise. Sovereign risk premium in Italy/Spain could briefly widen. European bank ETFs (e.g., EUFN) may attract inflows.
3. Japan’s Political Shakeup
Prime Minister Ishiba faces an internal leadership challenge after losing the LDP’s upper house majority. Tariff tensions with the U.S., especially affecting Japan’s auto sector, add pressure. The rise of populist and xenophobic parties adds volatility.
Market Impact: Bearish for JPY (USDJPY bullish bias). Risk-off sentiment may suppress Nikkei momentum. Japanese auto stocks face downside on unresolved U.S. tariff risks. Foreign investors may pause equity allocations pending leadership clarity.
4. Trump’s Institutional Shockwaves
Six months into his second term, Trump’s sweeping executive agenda — including $64B in tariff revenue, Fed destabilization, mass ICE arrests, and the “One Big Beautiful Bill” — is reshaping U.S. macro dynamics. Dollar weakness (-12% YTD), structural fiscal erosion, and regulatory disintegration (PCAOB ouster, Musk-led “Doge” agency cuts) risk undermining long-term asset trust.
Market Impact:
DXY: Structural weakening pressure → 🔻
XAUUSD: Supported by institutional instability → 🔼
SPX: Volatile with upside if GDP stays strong, but institutional drag rising → 🔁
2Y/10Y Yields: Sticky inflation + fiscal dysfunction = steeper curve → 🔼
Copper (HG1): At risk from U.S. tariff uncertainty → 🔻 short-term
Key Global Asset Reactions
XAUUSD (Gold):
Institutional erosion and rising CPI expectations support gold. If Powell is forced out or dollar drops further, gold likely reclaims $3,400+.
Direction: 🔼 Medium-term
S&P 500 / SPX:
Rotation into financials, M&A resurgence, and U.S. tech resilience provide upside offset. But tax/reform volatility raises headline risk.
Direction: 🔁 Near-term; 🔼 if earnings beat
USDJPY:
LDP instability + Fed yield premium = weak yen. Unless Ishiba resigns and risk-off returns, 150–152 in play.
Direction: 🔼 Short-term
DXY:
Threatened by executive overreach, weakening investor trust, and fiscal imbalance. Could breach 103 to the downside if data turns.
Direction: 🔻 Structural bias
Crude Oil (WTI):
Geopolitical bid (Japan, copper disruption) offset by global macro risk. Could trade $65–$70 range.
Direction: 🔁 Neutral for now
Dow Jones:
Outperformance due to dividend bias, financials strength, and lower tech exposure. Value rotation continues.
Direction: 🔼 Steady upside
