Date: 18th July 2025.


Wall Street Hits New Highs Amid Strong Data, Optimism Over Fed Stability, and Tech Earnings Boom.



Trading Leveraged products is Risky


Wall Street continued its record-breaking rally as stronger-than-expected US retail sales and jobless claims data reinforced confidence in the resilience of the US economy. Investor sentiment was further boosted by solid corporate earnings and easing fears over potential leadership changes at the Federal Reserve.


The Nasdaq surged 0.74% to close at a new all-time high of 20,884, driven by gains in major tech stocks, while the S&P 500 climbed 0.54% to reach a record 6,297. The Dow Jones Industrial Average also advanced 0.52%, contributing to a broadly positive session across US equities.


FOMO Drives Rally; Tech, Crypto, and Earnings in Focus


Momentum was further fueled by FOMO (fear of missing out) as investors piled into the rally. Nvidia and Lucid led gains in the tech sector, with Lucid jumping 36% on bullish sentiment. Taiwan Semiconductor (TSMC) reported record-breaking profits, adding to the enthusiasm.


PepsiCo shares also surged following better-than-expected revenue and earnings figures, while United Airlines rose 3.1%. After the bell, Netflix reported robust quarterly results, likely setting the tone for the next trading session.


Cryptocurrencies also moved higher after the US Congress passed the stablecoin regulation bill, injecting fresh optimism into the digital asset space.





Bond Market Stabilises Amid Fed Leadership Clarity


Treasury yields initially declined as concerns over a potential dismissal of Fed Chair Jerome Powell subsided, although the broader risk-on environment eventually erased some of the early gains in bonds.


Japan’s Markets on Edge Ahead of Key Upper House Election


Investors are closely watching Japan’s upcoming upper house election, which could have far-reaching implications for financial markets, government policy, and the direction of fiscal stimulus. The coalition led by Prime Minister Shigeru Ishiba is facing mounting pressure, with opinion polls indicating a possible defeat.


Japanese Government Bonds Tumble; Yen Weakens Sharply


Japanese government bonds (JGBs) experienced a sharp sell-off, sending 30-year yields soaring to a historic high of 3.20%, while the yen dropped to multi-month lows against the US dollar and euro. This market turbulence reflects growing concern that a new government may accelerate fiscal spending through increased JGB issuance.


Three Key Election Scenarios for Markets:


1. LDP Retains Majority – Bullish for Bonds and Yen
A victory for Ishiba’s Liberal Democratic Party (LDP) coalition could stabilise the bond market and support the yen. Analysts believe that such an outcome would reduce expectations for aggressive fiscal spending.
1. LDP Loses Majority – Policy Shift and Leadership Change?
If the ruling coalition fails to secure 50 seats, Ishiba could be replaced. One potential successor, Sanae Takaichi, supports renewed monetary easing, an outcome that could spark volatility in both the yen and Japanese equities.
1. Opposition Surge – Market Disruption Likely
A strong performance by populist and reformist parties such as Sanseito could upend markets. Proposals to cut or eliminate Japan’s consumption tax may result in sharply higher long-term yields and further sell-offs in JGBs.


Crude Oil Extends Gains as US Resilience and Tight Supply Lift Sentiment


Oil prices rallied for a second straight session amid signs that the US economy remains resilient despite ongoing trade tensions. Brent crude approached the $70 mark, while West Texas Intermediate (WTI) hovered near $68.


Backwardation in the oil futures market, where near-term prices are higher than future contracts, suggests tight supply conditions. This comes even as OPEC+ continues to unwind production cuts.





Japan Slides into Trade Deficit as US Tariffs Bite


Japan posted a trade deficit of 2.2 trillion yen (€13 billion) in the first half of the year, driven by a decline in exports amid ongoing US tariff pressure. June exports fell 0.5% year-over-year, following a 1.7% drop in May. Shipments to the US were particularly hit, declining 11%, with auto exports plunging 26.7%, following a 25% tariff introduced in April.


With nearly 20% of Japan’s exports heading to the US, the country is pushing for favourable trade agreements. Meanwhile, Japan prepares for Upper House elections this Sunday. Weak public support for Prime Minister Shigeru Ishiba could jeopardise the ruling party’s majority unless a new coalition is formed.


Recession Fears Mount in Japan


Japan’s economy contracted in Q1 and may be headed for another contraction in Q2. Falling exports and weakening global demand are raising fears that the country may officially enter a recession in the coming months.


Oil Prices Rebound Amid Supply Risks and Diesel Shortages


After three consecutive days of losses, oil prices edged higher. Traders are weighing lower-than-usual crude and diesel inventories in the US and Europe against broader concerns about future supply gluts. Diesel shortages in particular have supported prices in the short term.


‘The market is currently buoyed by tight diesel supplies, but if OPEC+ production ramps up, we may see a bearish shift,’ said Zhou Mi, an analyst at Chaos Ternary Futures Co.


US distillate stockpiles remain at their lowest seasonal level since 1996, despite a modest weekly increase. The futures spread between low-sulfur gasoil and Brent for September—a key indicator of diesel refining profitability—has jumped 7% this month.


Geopolitical Risks in Kurdistan Add to Supply Concerns


Drone strikes targeted several oil fields in Iraq’s semi-autonomous Kurdistan region on Wednesday. While the region has not exported crude since a pipeline closure over two years ago, the attacks highlight growing risks to global energy infrastructure.


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Please note that times displayed based on local time zone and are from time of writing this report.


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Andria Pichidi
HFMarkets


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