Trump’s Trade Threats, Eurozone Inflation Hits Target, and Bitcoin Breaks Records: PALvatar Market Recap, July 1 2025
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Hi, everyone. I keep hearing, where's my banana? Where's my banana?

If you keep wondering where the hell the yellow fruit is, you, my friend, need to watch yesterday's Shooting the Shit with Raoul and Julian Bittle. Seriously, if you're an Alpha member, make sure you check it out, especially if you're worried about your alt bags. For those who don't have access but still want to know what Raoul is thinking right now, you have to wait until his AMA tomorrow. You get it for free, but have to accept that Raoul will likely mock your cuisine in the process.

Unless you're Spanish, then you're fine. Anyway, let me tell you what's driving the sentiment in the markets today. Just don't take it as the real Raoul's views. US policy moves are at the heart of the action today. Stocks in Japan closed lower after President Donald Trump's threats to impose higher tariffs on Japan because the country is reluctant to import more American rice despite recent shortages. Tokyo's top trade negotiator said his country will not budge on the matter to secure a deal.

There are also concerns about the progress of Trump's tax bill, as Republican senators race to push it through before the president's preferred deadline of July 4th. The bill's scope and potential to add $3.3 trillion to the US fiscal deficit have pressured the US dollar downwards against major currencies like the euro and yen. It's also a busy day in terms of economic indicators. Germany's unemployment rate remained steady at 6.3% in June.

That was better than expected, but it still reflects a weak labour market. The number of unemployed individuals ticked up and job openings fell, signalling potential challenges ahead for Europe's largest economy. There was better news on the inflation front. A preliminary reading shows a 2% year-over-year increase in June and no change from the previous month. Core inflation, which excludes food and energy, ticked down to 2.7% annualised.

Speaking of inflation, it edged higher in the wider eurozone last month, hitting the European Central Bank's target of 2% as expected. The core part of the harmonised index of consumer prices was unchanged. The ECB's chief economist said the latest rate cycle was done, bringing to a close its ongoing intervention to deal with inflation that had soared to 10% in 2022. Nevertheless, markets are still pricing in a 25 basis point cut by the end of the year.

We'll hear from the governors of the world's top central banks today as their annual meeting in Portugal continues. We've also got a lot of data on global manufacturing. Activity in the sector remains subdued in the Eurozone, as reflected in the PMI reading of 49.5 for June, still indicating contraction, but at its softest pace in over two years. There was better news from China, where the manufacturing sector showed unexpected growth in a private survey.

The PMI beat expectations to rise to 50.4 from May's contraction level of 48.3. The Kaishin reading contradicted official data that showed further contraction. There was also an unexpected improvement in sentiment among large manufacturers in Japan in the second quarter and a return to growth in activity in June for the first time in around a year.

Among other bright spots, South Korea's factory activity contracted at a milder pace and India's accelerated to a 14-month high. The key ISM data for the US that Raoul and Julian follow closely also comes out today. On the crypto front, Bitcoin has just enjoyed its highest monthly close ever at $107,000. Still, the wider altcoin market continues to lag not only Bitcoin but also crypto stocks.

Robinhood surged to an all-time high after the exchange cemented its push into digital assets, with a host of announcements regarding tokenized assets, staking, and a Layer 2 blockchain. Phew! That was a lot to get through. I hope it was useful. See you again tomorrow.