Augur Digest #49

1. Headlines
2. Charts of the Day
3. Global Economics
   1. United States
   2. Canada
   3. Europe
   4. Asia-Pacific
   5. China
   6. Emerging Markets ex China
4. Global Markets
   1. Equities
   2. Fixed Income
   3. FX

Headlines

• The United States and South Korea reached a trade agreement that entails a $350 billion investment and $100 billion in energy purchases by South Korea, in exchange for which South Korean imports will face a 15 percent tariff while US exports will be tariff-free.
• The US administration announced it will extend the current tariff rate on goods from Mexico for an additional ninety days to allow for continued negotiations.
• A 25 percent tariff on all imports from India is set to take effect on August 1.

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Charts of the Day

• NVIDIA’s weighting in ACWI—the ETF that tracks the MSCI All Country World Index—is now over 5% and 38 bps ahead of Japan's. In other words, if NVIDIA were considered a country, it would rank as the second-largest in ACWI, behind only the United States.

• The World Container Index, which measures spot freight rates, declined for the 7th consecutive week.

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Global Economics

United States

• The US Core PCE Price Index rose 0.3% M/M in June, in line with consensus, while prior months were revised higher. Year-over-year, Core PCE held at 2.8%, slightly above the 2.7% consensus. The key “supercore” measure (core services ex-housing) was soft, rising just 0.19%. Headline PCE also rose 0.3% M/M, pushing the annual rate to 2.6% from 2.4%.

• Personal spending increased by 0.3% M/M in June, slightly below the 0.4% consensus but up from a flat reading in May. In real terms, spending rose a tepid 0.1%, with a rotation back towards services consumption. The personal savings rate was unchanged at 4.5%, indicating that consumer momentum remains steady but is not accelerating.

• US Personal Income rose 0.3% in June, beating the 0.2% consensus and rebounding from a 0.4% decline in May. The increase was driven by a 1.0% jump in government transfer payments rather than wage growth.

• Initial jobless claims for the week ended July 26 were 218,000, below the 224,000 consensus, while the 4-week average fell. Continuing claims were stable at 1.946 million after a downward revision. The data continues to point toward a very tight and resilient labor market with few signs of loosening.

• The US Employment Cost Index (ECI) rose 0.9% Q/Q in the second quarter, slightly stronger than the +0.8% consensus.

• The Chicago PMI rose to 47.1 in July, significantly exceeding the 42.0 consensus and up from 40.4 in June, marking a notable improvement in regional manufacturing activity.

• US Challenger Job Cuts rose to 62,075 in July, up from 47,999 in June. Year-to-date, job cuts are the highest they’ve been since 2009.

• US mortgage rates edged lower week-over-week. The 30-year rate fell to 6.72% from 6.74%, while the 15-year rate declined to 5.85% from 5.87%.

• The Atlanta Fed's initial GDPNow model estimate for Q3 GDP is 2.3%.

• The Dallas Fed's Daily News Sentiment Index has risen to its highest level since March.

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Canada

• Canada's GDP contracted by 0.1% M/M in May, matching both the consensus and the prior month's reading. Preliminary data for June indicates a modest rebound, with GDP estimated to have grown 0.1% M/M.

• Growth in Canada's average weekly earnings slowed to 3.3% Y/Y in May from 4.26% in April. This marks the lowest reading since April 2023.

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Europe

• The Euro Area unemployment rate held steady at 6.2% in June, below the 6.3% consensus and matching the all-time low for the series.

• Germany's preliminary inflation rate for July held steady at 2.0% Y/Y, matching the prior month's reading, while M/M inflation accelerated to 0.3% from 0.0%. The HICP measure came in at 1.8% Y/Y, slightly below the 1.9% consensus, with weaker core inflation pressures from package holidays and transport services offsetting higher energy and food costs.

• Germany's unemployment rate was unchanged at 6.3% in July, beating the 6.4% consensus. This is the lowest rate since February 2025.

• The number of unemployed persons in Germany fell by 2,000 in July to 2.97 million, its lowest level since June 2011.

• German import prices were flat M/M in June, above the -0.2% consensus. The Y/Y rate fell 1.4%, a deceleration from the prior -1.1% reading.

• Since the end of 2019, Germany's GDP has risen by just 0.3%, vastly underperforming its peers in the Eurozone.

• France's preliminary July CPI held steady at 1.0% Y/Y, in line with consensus. The monthly rate rose 0.2%, above the 0.1% forecast. On a harmonized (HICP) basis, the annual rate was 0.9%, with falling energy prices offset by stronger services and food inflation.

• Italy's preliminary July CPI was unchanged at 1.7% Y/Y, above the 1.5% consensus. However, M/M inflation accelerated to 0.4% from 0.2%, beating expectations for a 0.1% rise and marking the strongest monthly reading since January 2025. Sequential core inflation also showed accelerating underlying momentum, rising 0.36% M/M from 0.24% in June.

• Italy's unemployment rate fell to 6.3% in June from 6.5%, below the 6.4% consensus and marking the lowest reading since April 2025.

• Spain's current account surplus widened to €6.44 billion in May from €1.36 billion in April, marking an all-time record high.

• Switzerland's real retail sales surged in June, rising 3.8% Y/Y and 1.5% M/M. The annual figure vastly outpaced the 0.3% prior reading and consensus of 0.2%, reaching its highest level since February 2022.

• Portugal's preliminary July inflation accelerated to 2.6% Y/Y from 2.4% in June. The M/M reading showed a 0.4% decline.

• Portugal's retail sales value grew 6.9% Y/Y in June, accelerating from 5.3% in May. The M/M rate, however, slowed to 1.8% from 2.8%.

• Greek retail sales fell 5.6% Y/Y in May, a sharp reversal from the 7.4% gain in April.

• Belgium's producer price index fell 0.6% Y/Y in June, reversing a 0.3% gain in May.

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Asia-Pacific

• The Bank of Japan held its policy rate at 0.5%, as expected. However, the accompanying outlook was hawkish, with policymakers upgrading the FY2025 Core CPI forecast to 2.8%. The move makes the October meeting “live” for a potential rate hike, with markets now watching for a key board member to signal the next move in a speech beforehand.

• Japan's preliminary industrial production for June unexpectedly rose 1.7% M/M, well ahead of the -0.7% consensus. The monthly strength was led by electronic parts and devices, though it masked an 11.8% M/M fall in passenger vehicle output. Manufacturers' forecasts point to renewed weakness in July and August.

• Japanese retail sales rose 2.0% Y/Y in June, slightly beating the 1.8% consensus. Month-over-month sales rebounded 1.0% after a 0.6% decline in May. The annual strength was broad-based, though a 40.6% collapse in duty-free sales dragged down overall department store performance.

• Japan's consumer confidence index fell to 33.7 in July from 34.5 in June, missing the 35.1 consensus and marking its lowest reading since May 2025.

• Japanese housing starts improved in June, with the Y/Y decline narrowing to -15.6% from -34.4% in May. The result was slightly better than the -15.8% consensus. The data continues to be heavily distorted by a rush by builders and developers to obtain permits ahead of major changes to Japan's Building Standards Law and the Energy Conservation Act, which took effect on April 1.

• Weekly data showed Japanese investors turned net sellers of foreign bonds to the tune of ¥331.6 billion, while foreign investors were net buyers of Japanese stocks, adding ¥743.3 billion.

• Australian retail sales jumped 1.2% M/M in June, far exceeding the 0.4% consensus. However, the strength was largely driven by a post-flood rebound in Queensland and a major video game console launch, suggesting weak underlying consumer momentum as volumes excluding Queensland grew a much softer 0.1% for the quarter.

• Australian building permits surged 11.9% M/M in June, crushing the 2.0% consensus. The headline strength was driven entirely by a volatile 33.9% jump in high-density dwellings, masking underlying softness as approvals for detached houses fell for a second straight month (-2.0%).

• Australia's private sector credit grew 0.6% M/M and 6.8% Y/Y in June. The stable monthly headline figure masked a compositional shift, as a slowdown in business credit was offset by a pickup in personal credit, while housing credit held steady.

• Australian housing credit was unchanged at 0.5% M/M in June, with both owner-occupier and investor lending holding steady.

• Australian private house approvals fell 2.0% M/M in June, the second consecutive monthly decline.

• South Korea's June activity data showed a rebound, but underlying trends were mixed. Industrial production rose 1.6% M/M, driven entirely by strong external demand for semiconductors and autos. Retail sales also gained 0.5%, snapping a three-month losing streak. However, investment was weak, with equipment investment falling for a fourth consecutive month.

• Taiwan's advance estimate for Q2 GDP showed a surge of 7.96% Y/Y, significantly beating the 5.7% consensus and marking the strongest growth since Q2 2021. The boom was driven by a massive 35.1% increase in exports, fueled by AI-related demand and front-loading ahead of US tariffs, which masked weak domestic private consumption (+0.6% Y/Y).

• Hong Kong's advance Q2 GDP grew 0.4% Q/Q and 3.1% Y/Y, beating consensus forecasts of -0.2% and 2.8%, respectively. The annual growth was the strongest since Q4 2023.

• Hong Kong retail sales fell 0.3% Y/Y in June, reversing a 1.9% gain in May. The decline was driven by a sharp drop in consumer durables, and key categories like department store sales remain roughly 50% below pre-pandemic levels, indicating a highly uneven recovery.

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China

• China's official NBS Manufacturing PMI fell to 49.3 in July from 49.7, missing the consensus of 49.7 and indicating a contraction in activity. The decline was driven by lower new orders and output. Notably, despite lower production, both input and output price sub-indexes rose, reflecting government efforts to curb overcapacity and excessive price competition.

• Incorporating the latest PMI data, our proprietary tracker for China's underlying growth is running just shy of 5%.

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Emerging Markets ex China

• Brazil's central bank held its key interest rate at 15.0%, in line with expectations. The rate remains at its highest level since July 2006.

• Brazil's unemployment rate fell to 5.8% in June, below the 6.0% consensus and down from 6.2% in May, marking a new all-time low for the series.

• Brazil's nominal budget deficit narrowed to R$108.1 billion in June from R$125.9 billion in May. However, the primary deficit was wider than consensus, and with significant "catch-up" spending expected in H2, the fiscal outlook continues to deteriorate, with the 12-month overall deficit now at 7.3% of GDP.

• Thailand's current account swung to a $2.4 billion surplus in June from a $0.3 billion deficit in May.

• Thailand's private consumption fell 0.3% M/M in June, following a 0.2% rise in May.

• Turkey's trade deficit widened to $8.2 billion in June from a $6.6 billion deficit in May.

• Poland's preliminary July inflation came in at 3.1% Y/Y, a hawkish surprise compared to the 2.8% consensus. The miss was driven by a smaller-than-expected pass-through from a large household gas price cut and stronger food inflation, making a September rate cut less likely. M/M inflation was 0.3%.

• The South African Reserve Bank cut its benchmark interest rate by 25 basis points to 7.0%, in line with consensus. This is the first rate change of the year and brings the policy rate to its lowest level since November 2022.

• South Africa's trade surplus widened to ZAR 22.04 billion in June from ZAR 20.03 billion in May.

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Global Markets

Equities

• Global equities were mixed, with US markets paring strong pre-market gains to close modestly lower after an initial surge driven by strong tech earnings. The S&P 500 and Dow Jones Industrial Average fell, while the Nasdaq managed a slight gain. US markets finished a third consecutive day lower. European markets were broadly negative, with Germany, France, and the UK all closing down. In Asia, Chinese equities extended their losing streak to six days.

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Fixed Income

• The US Treasury yield curve flattened as the front end rose while longer-dated yields fell. The 2-year yield climbed 0.8 bps, while the 10-year yield fell 1.7 bps and the 30-year yield dropped 1.8 bps. Markets continue to digest the Federal Reserve's hawkish hold from the prior day, where Chair Powell offered no clear signal for a September rate cut and highlighted uncertainty around tariffs' impact on inflation.

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FX

• The US dollar strengthened against all G10 peers amid ongoing trade tensions and a hawkish Federal Reserve. The Japanese yen was the weakest performer, falling 1.0% against the dollar. The Australian dollar, Canadian dollar, British pound, Swiss franc, and Japanese yen have all fallen against the USD for at least five consecutive days.

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