Japan's Factory Activity Slips Into Contraction In July, PMI Shows

Summary:

Japan's manufacturing activity slipped into contraction in July, weighed down by uncertainties over U.S. tariffs, a private-sector survey showed on Thursday.

At the same time, Japan's service sector continued to outshine the struggling manufacturing industry, with activity growing at the fastest pace in five months, helped by robust demand.

"Business activity across Japan's private sector continued to expand at the start of the third quarter, fuelled by stronger growth of the service sector," said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, which compiles the PMI.

The S&P Global Japan manufacturing purchasing managers' index (PMI) dropped to 48.8 in July from June's final reading of 50.1, which was the first time the index exceeded the 50.0 threshold separating expansion from contraction in 13 months.

The key sub-indexes of output and new orders dropped at the fastest pace in four and three months, respectively, as businesses assessed the impact from U.S. tariffs, the survey showed.

"Uncertainty over future trade policy weighed on expectations regarding the year-ahead," Fiddes said.

U.S. President Donald Trump on Tuesday announced a trade deal with Tokyo that he said would result in Japan investing $550 billion into the U.S. and a 15% tariff on imports from the Asian country.

Meanwhile, the S&P Global Japan services PMI increased to 53.5 in July from 51.7 in June, thanks to new business growth.

However, new export business saw its first contraction in seven months and employment growth rose at the slowest rate in nearly two years.

Combining both manufacturing and service activity, the S&P Global Japan composite PMI in July remained unchanged from June's 51.5, the data showed.

Source: Reuters

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Olivia Brooks

Economic

Political

China–U.S. Trade War

The Trump administration and the European Union are racing to clinch a trade deal by the White House's self-imposed Aug. 1 deadline, with economists warning that a sharp hike in tariffs could raise costs for consumers and businesses.

As the clock ticks down, a series of pacts with other U.S. trading partners in recent days have raised hopes of avoiding a potentially damaging trade war with Europe, with experts saying a deal with Japan announced on Tuesday could serve as a template for a deal with the EU.

The U.S. has also recently announced the outlines of trade deals with China, Indonesia, the Philippines and U.K., though with many details still remaining to be finalized.

For consumers and businesses on both sides of the Atlantic, much is riding on the outcome of the trade talks. Absent a deal, President Trump has threatened to hit imports from the EU's 27 member countries with a 30% tax. In preparing possible countermeasures, the European Commission has said it would impose tariffs on more than $100 billion worth of U.S. goods starting Aug. 7, AFP reported on Wednesday.

Negotiations are ongoing and a U.S.-EU trade war could yet be avoided. Citing EU diplomats, AFP also said officials with the trading block could be open to a 15% U.S. tariff rate, with potential carveouts for key sectors, according to the wire service.

The White House did not immediately respond to questions about the status of talks with the EU, including whether the Trump administration expects to reach a trade deal by the Aug. 1 deadline.

President Trump on Tuesday struck a trade deal with Tokyo that calls for a 15% tariff on Japanese imports. In return, the deal calls for Japan to invest $550 billion in the U.S. and further open its domestic market to U.S. exports, including cars and certain farm products.

The 15% tariff rate on Japanese goods is five percentage points higher than a baseline tariff the Trump administration imposed on all foreign imports on April 2. But it is lower than the 25% he threatened against Japan earlier this month and the 24% duties his administration proposed in early April.

"The Japan deal solidifies this pattern we've seen thus far, which is some market access relief, a commitment to purchase U.S. goods, and a slightly lower, but above the universal baseline, tariff level," Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, a public policy research firm, told CBS MoneyWatch.

"The Japan deal certainly provides a framework of what [Mr. Trump] looking for," Jacquez said. "It's about accepting a baseline tariff at or above 10%, and then making purchase commitments."

Source: Yahoo Finance

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Manuel

Cryptocurrency

Stocks

Block joined the S&P 500 on July 23, replacing Hess after the oil producer’s $54 billion acquisition by Chevron, a reshuffle that sent Block’s stock up 10.7% from the July 18 open of $72.01 to $79.69 by press time.

The company announced the addition on July 18, prompting investors to position ahead of index-tracking funds that must purchase shares to mirror the benchmark.

Block called the move “a milestone that reflects the strength of our business and the work of thousands of people building tools to increase access to the economy,” citing products across Square, Cash App, Afterpay, TIDAL, Proto, and Bitkey.

Despite the price increase, Block’s shares are still 13% in the year-to-date timeframe.

Another Bitcoin holder in the index

Block now becomes the third publicly listed entity to join the S&P 500 that holds Bitcoin (BTC) in its treasury, alongside Tesla and Coinbase.

According to Bitcoin Treasuries data, Tesla is the tenth-largest BTC holder among publicly listed companies, with a stash of 11,509 BTC worth nearly $1.4 billion as of press time. The company has the ninth-largest weight of the index.

Coinbase holds the spot as the 12th-largest treasury, with 9,267 BTC valued at approximately $1.1 billion. It has a 0.18% weighting in the S&P 500, alongside companies such as Intel and DoorDash.

Block joins with a 0.09% weight and 8,584 BTC in reported holdings, making the company founded by Jack Dorsey the owner of $1 billion worth of Bitcoin.

Changes in perceived risk

The rally in Block’s shares highlights how index mechanics can intersect with sentiment around fintech names, which have lagged behind the broader tech-led market this year.

S&P 500 membership can lower perceived risk, broaden the shareholder base, and attract mandate-limited institutional investors.

Still, execution on core businesses will determine whether the company sustains the rerating. Square’s merchant services, Cash App’s consumer finance suite, and the Buy Now, Pay Later arm, Afterpay, remain key revenue drivers.

At the same time, newer initiatives such as self-custody wallet Bitkey and music platform TIDAL contribute to diversification.

Source: Cryptoslate

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Olivia Brooks

Economic

Political

China–U.S. Trade War

US President Donald Trump suggested that he would not go below 15% as he sets so-called reciprocal tariff rates ahead of an Aug. 1 deadline, an indication that the floor for the increased levies was rising.

“We’ll have a straight, simple tariff of anywhere between 15% and 50%,” Trump said Wednesday at an AI summit in Washington. “A couple of — we have 50 because we haven’t been getting along with those countries too well.”

Trump’s comment declaring that the tariffs would begin at 15% represented the latest twist in his effort to impose duties on nearly every US trading partner, and the latest indication that Trump was looking to more aggressively impose the levies on exports from countries outside the small group that so far has been able to broker trade frameworks with Washington.

Trump earlier this month said that more than 150 countries would receive a letter including a tariff rate of “probably 10 or 15%, we haven’t decided yet.” Commerce Secretary Howard Lutnick told CBS News on Sunday that small countries including “the Latin American countries, the Caribbean countries, many countries in Africa” would have a baseline tariff of 10%. And at the first announcement of the tariffs in April, Trump unveiled a universal tariff of 10% on nearly every country.

While Trump and his advisers initially expressed hopes of securing multiple deals, the president has been touting the tariff letters themselves as “deals” and suggesting that he is uninterested in back-and-forth negotiations. Still, he has left the door open for countries to make agreements that could lower those rates.

On Tuesday, Trump announced he was reducing a threatened 25% tariff on Japan to 15% in exchange for the country removing restrictions on some US products as well as offering to back a $550 billion investment fund. Other nations, including South Korea, India, and members of the European Union, are still pushing for an agreement before the heightened tariffs go into effect.

On Wednesday, Trump said he would “have a very, very simple tariff for some of the countries” because there were so many nations that “you can’t negotiate deals with everyone.” He said talks with the European Union were “serious.”

Source: Yahoo Finance

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Manuel

Central Bank

Economic

The European Central Bank was set to keep interest rates on hold on Thursday, pausing after seven straight cuts as it waited for the fog surrounding Europe's trade relations with the United States to clear.

The ECB has halved its policy rate from 4% to 2% in the space of just one year after taming a surge in prices that followed the end of the COVID-19 pandemic and Russia's invasion of Ukraine.

With inflation now back at its 2% goal and expected to stay there, euro zone central bankers were likely to stay put this week and observe what kind of tariffs President Donald Trump's U.S. administration would impose on the European Union after an August 1 deadline for talks.

"The ECB is widely expected to keep policy on hold this week, as uncertainty prevails with no trade deal yet on the horizon between the U.S. and EU," Christophe Boucher, chief investment officer at ABN AMRO Investment Solutions, said.

The tense and unpredictable trade talks between Washington and Brussels have made policy-making difficult.

Trump's threat to impose a 30% duty on EU goods exported to the United States - a steeper tariff than the ECB had anticipated under even the most negative of three scenarios it released last month - has forced President Christine Lagarde and her colleagues on the ECB's Governing Council to contemplate lower outcomes for growth and inflation.

However, two diplomats said on Wednesday the EU and the U.S. were heading towards a deal that would result in a broad tariff of 15% applying to EU goods.

"Even in the case of a benign outcome (i.e. U.S. tariffs around 10%) we still see scope for further easing as the disinflation process broadens," MUFG's Europe economist Henry Cook said.

Investors generally expect one more ECB rate cut by the end of the year, most likely in December.

Among the deals that have been struck so far and could serve as a template for the EU, Japan negotiated a 15% tariff rate, Indonesia 20% and Britain, which runs a trade deficit with the United States, 10%.

"The key point is that tariffs look likely to be higher and more varied across countries than the 10% flat baseline that many had assumed would be the end-point of tariff negotiations," BNP Paribas's head of developed markets economics Paul Hollingsworth said.

The ECB assumes that U.S. tariffs will push down growth and, if there is no EU retaliation, inflation over the medium term.

The euro zone economy is already barely growing and companies, while still optimistic about an upturn ahead, are starting to feel the pinch from tariffs on their profits.

"The risks are still weighted towards weaker growth outcomes for Europe," economists at Deutsche Bank wrote. "This in turn points to disinflationary risk, particularly if a trade shock were to become a labour market shock."

On the other hand, banks have seen rising loan demand and policy uncertainty has not yet translated into an economic or market downturn.

After a short-lived selloff in April investors have taken the trade turmoil in their stride, with European equity indices close to new highs also thanks to Germany's newly found appetite for spending.

In fact, erratic policy-making in the United States, including Trump's relentless criticism of the Federal Reserve, has lured foreign investors to euro zone assets, briefly pushing the euro to the highest level against the dollar since September 2021 at $1.1829 earlier this month.

ECB board member and outspoken hawk Isabel Schnabel even said the central bank should watch out for price hikes caused by tariffs and the bar for further cuts was "very high".

But the euro's appreciation has unnerved other policymakers, who fear a stronger currency would make European exports less competitive and contribute to pushing down inflation.

"On that front, we would expect Christine Lagarde to strike a reassuring tone, reminding people that the ECB does not target exchange rates but that any resulting downward pressure on inflation will be addressed, if necessary," Julien Lafargue, chief market strategist at Barclays Private Bank, said.

Source: Reuters

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Manuel

Economic

Central Bank

U.S. Treasury Secretary Scott Bessent on Wednesday suggested without evidence that the Federal Reserve's widely followed economic forecasts are motivated by politics, as the Trump administration steps up pressure on the U.S. central bank to cut interest rates.

"The Fed publishes something called a summary of economic projections, and it's pretty politically biased," Bessent said, summarizing the projections as forecasts for one to two quarter-point interest-rate cuts this year. President Donald Trump has demanded the Fed deliver an immediate 300 basis-point rate cut.

The Fed publishes interest-rate forecasts from each of its 19 policymakers each quarter and does not identify which policymaker made which forecast. In June, eight projected two quarter-point interest-rate cuts this year, seven projected none, two saw one interest rate cut and two saw three.

Two of the Fed Board's Trump appointees - Governor Christopher Waller and Fed Vice Chair for Supervision Michelle Bowman — have each articulated economic reasons for supporting a rate cut this month. Fed Chair Jerome Powell, also a Trump appointee, has not signaled such support.

Fed policymakers universally reject the idea that politics have any role in their monetary policy decisions, and say that to suggest they do undermines the central bank's credibility and its ability to do its job fighting inflation and promoting maximum employment.

Source: Reuters

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Manuel

Cryptocurrency

Solana-based tokenized stocks surpassed $100 million in market capitalization less than one month since their official launch on June 30.

According to rwa.xyz data, the tokenized stock market on Solana is valued at nearly $102 million as of July 22, representing a 242% increase from its $29.8 million size at the debut date. This market is fueled mainly by xStocks, issued by Backed Finance.

As a result, Solana now accounts for 20.4% of the tokenized stock market. Notably, Ethereum and its layer-2 blockchains Arbitrum, Polygon, and Base account for $11.8 million, which makes Solana’s tokenized stock market over eight times larger.

The largest tokenized stock is TSLAx, representing Tesla’s shares, with a market capitalization of $13.6 million and 11,073 holders.

Tokenized S&P 500 are also in the tens of millions, with SPYx showing a market capitalization of just over $10 million and 9,886 holders.

The tokenized shares of Circle trail closely, with CRCLx reaching a $9.1 million market cap, distributed among 5,746 holders.

Furthermore, the official xStocks profile on X shared that the tokens have surpassed $300 million in on-chain trading volume.

Assessing composability

Despite the explosive growth of tokenized assets issued on Solana, xStocks investors are not interacting with DeFi protocols that have made these assets composable.

Solana-based money market Kamino offers support for eight xStocks tokens as collateral: TSLAx, SPYx, Nvidia’s NVDAx, Robinhood’s HOODx, Strategy’s MSTRx, Apple’s AAPLx, Nasdaq’s QQQx, and Alphabet’s GOOGLx.

Although their collective market cap stands at nearly $50 million, only $585,000, roughly 11%, has been used as collateral so far.

The numbers fare slightly better when it comes to liquidating providing. On Raydium’s pools, the largest TSLAx pool has $1.1 million in liquidity, of which $423,600 represents the amount of tokenized stock deposited per GeckoTerminal data.

The SPYx with most liquidity also displays a significant amount of $1.9 million in liquidity, with $502,000 worth of tokenized stocks on it.

Nevertheless, the ratio remains short. The roughly $637,000 worth of TSLAx tokens used on DeFi is just 4.7% of its market cap. For SPYx, the ratio is 7%.

Crypto to traditional, not the other way around

The relatively low usage of tokenized stocks on DeFi applications occurs mainly because money is mostly flowing from crypto to traditional products, rather than the other way around.

Michael Cahill, CEO and co-founder of Douro Labs, explained in an interview with CryptoSlate that holders from the traditional market who are entering the crypto space are not yet ready to utilize DeFi composability.

He used the Apollo Diversified Credit Securitized Fund (ACRED), launched by Pyth and created by Apollo Global Management and Securitize, as an example to illustrate that the issue of wasted composability still affects the entire tokenization industry.

ACRED has over $100 million in net asset value, yet its on-chain lending pool represents only a small fraction of this value.

However, Cahill also said he sees growth potential. He added: “But it’s just getting started. We didn’t have xStocks last year. The last time we saw anyone making a meaningful attempt at stocks was Mmirror back in the Terra days, and it wasn’t even that big either. It’s taken a really long time for people to get comfortable with this, but I think that that’ll start very gradually and then people will get a little bit more and more comfortable.”

Furthermore, he believes a Strategy-style “big company moment” could help, but thinks the real catalyst will be the product experience with a traditional finance interface for on-chain products.

Cahill concluded: “When you get one of those barriers to fall, then you can start to really see it grow together and explode way faster than that whole ramp-up we had with Strategy. It could happen very, very quickly in my mind.”