• Gold futures hit a record high this morning, over $3,500 per troy ounce, after it was reported that gold exports from Switzerland would face a 39% tariff rate. The U.S.’s rough treatment of its former allies is one explanation for the weakening dollar, according to Macquarie analyst Thierry Wizman. S&P 500 futures are also rising.

The U.S. dollar rose marginally on the DXY foreign currency index over the last 24 hours, but even then few analysts really believe it will work its way back to where it was at the start of the year. The greenback is down 9.4% YTD.

That’s no surprise, as President Trump openly admitted a few days ago that he wants “a weaker dollar.”

“Now it doesn’t sound good, but you make a hell of a lot more money with a weaker dollar—not a weak dollar but a weaker dollar—than you do with a strong dollar,” he said on July 25.

The rest of the world has taken him at his word.

“Perhaps what’s happening with the USD’s weakness in the past few sessions is a renewed loss of faith in U.S. leadership, especially with the slew of super-high tariff rates that have been announced in recent days: 50% on Brazil, 50% on India, 100% on semiconductors, etc. This has certainly caused another round of deep consternation toward the U.S. in foreign capitals (Brasília, and New Delhi, for sure), and perhaps without any benefit of solid political-economic goals being achieved by the U.S. administration,” wrote Thierry Wizman, Global FX & Rates Strategist at Macquarie Group, in a recent note.

Wizman believes this will have negative political consequences for the U.S., by driving the BRICS nations further into each others’ arms.

“Brazil may simply drift further toward China, as may India, if the tariff issue is not resolved amicably. The prospect that the BRICS will have even more willingness to ‘gang up’ on the USD and thereby move the needle away from the use of the USD as a reserve currency, is what may be getting more palpable, in the traders’ views, with each new tariff attack on some emerging markets,” he wrote.

It may not stop there. Consider the case of Swizterland, which until recently was a neutral country independent of the EU, and an ally of the U.S. Trump placed a 39% tariff rate on its exports, which will be catastrophic for its exports of pharmaceuticals, watches, and machine technology.

Gold is one of Switzerland’s main exports and gold futures hit a record high this morning after the Financial Times reported that its gold exports, previously exempt, would also face the 39% rate. It briefly topped $3,500 per troy ounce.

“The worst-case scenario has become a reality,” a lobbying group for Swiss corporations told The New York Times. “If this exorbitant customs burden is maintained, the Swiss tech industry’s export business to the U.S.A. will be effectively annihilated.”

The Swiss have a fairly obvious way of moving their tariff rate down to 15%: They can join the EU. That would be a victory for the EU and an odd outcome for Trump, given that he once said “the European Union was formed in order to screw the United States.”

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were up 0.34% this morning, premarket, after the index closed flat yesterday. 
• STOXX Europe 600 was up 0.15% in early trading. 
• The U.K.’s FTSE 100 was down 0.11% in early trading.
• Japan’s Nikkei 225 was up 1.85%. 
• China’s CSI 300 was down 0.24%. 
• The South Korea KOSPI was down 0.55%. 
• India’s Nifty 50 was down 0.77%. 
• Bitcoin rose to $116.5K.

This story was originally featured on Fortune.com

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• U.S. economic data is “uniformly bad to ugly” right now, and the country stands “at the precipice of recession,” according to Moody’s Mark Zandi, but investors are bullish, driving up stock prices—especially in tech—because they are anticipating that the Fed will cut interest rates later this year. However, the Fed may be forced to hold back owing to inflation from President Trump’s tariffs. Traders seem to be ignoring the macro risks today; global markets were broadly up, as were S&P 500 futures this morning.

S&P 500 futures were up 0.74% this morning after the index itself closed up 0.73% yesterday. A lot of that jump came from tech stocks: The Nasdaq Composite closed up 1.21% after a blowout earnings call from Palantir, which added another 3.62%.

The current bullishness on Wall Street is a stark contrast to what economists are seeing in the macro data. Last week’s dismal jobs report being the most recent aspect of that. “We got what I would call an economic data dump last week, lots of data. And they were all uniformly bad to ugly,” Mark Zandi, chief economist of Moody’s Analytics, said on the Concord Coalition podcast Facing the Future.

Zandi added later, “I set off the alarm bells this weekend in that post, just because once I really sat down and started looking at all the data, I go, ‘Oh, gosh! This economy is really struggling to move forward.’ And thus, ‘at the precipice of recession,’ I think, applies.”

So if the economy is fragile, why are investors buying? Because they are expecting the Fed to step in with interest rate cuts to rescue their bets. (Cheaper money generally turns into stronger demand for equities.)

Goldman Sachs is currently predicting there will now be three rate cuts this year: “A weak U.S. labor market report last Friday (Aug. 1) has raised market concerns over the U.S. economic outlook, driving a significant front-end-led rally in U.S. rates. We see room for this repricing to continue, as our baseline expectation remains for the Fed to cut rates three times this year, and two more times in H1 next year, and we see room for market pricing to shift in excess of that,” Tadas Gedminas told clients in a note seen by Fortune.

His colleague Vickie Chang says that the fundamentals—a bad labor market and declining consumer enthusiasm—are essentially being ignored by stock traders today. “The core risk to growth pricing is something that threatens the market’s belief that it can look through current weakness and discount the prospect of recession,” she said in a research note.

So, cuts from the Fed are in the mail, right?

Not so fast. Zandi is gloomy about that, too. President Trump’s tariffs and his restrictive immigration policy “raise inflation and weaken economic growth. So if you’re at the Fed and you have a dual mandate to maintain full employment, economy, and low and stable inflation, that gets pretty difficult. How do you respond to that? And the answer is, you do nothing, and that’s exactly what the Fed’s doing.”

He’s also predicting a bond market selloff, so … fingers crossed, everybody!

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were up 0.48% this morning, premarket, after the index closed down 0.73% yesterday. 
• STOXX Europe 600 was up 0.5% in early trading. 
• The U.K.’s FTSE 100 was down 0.33% in early trading.
• Japan’s Nikkei 225 was up 0.65%. 
• China’s CSI 300 was flat. 
• The South Korea KOSPI was up 0.92%. 
• India’s Nifty 50 was down 0.48%. 
• Bitcoin rose to $114.9K.

This story was originally featured on Fortune.com

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• HPE’s $14 billion Juniper Networks acquisition faces renewed uncertainty despite DOJ approval, amid online conspiracy theories and political objections. A federal judge may review whether the merger is in the public interest, the result of controversy over a reversal of the DOJ’s initial opposition. Also, somehow Laura Loomer is involved, and no one knows why. HPE’s stock is down, and CEO Antonio Neri remains under pressure from activist investor Elliott Investment Management, which holds a $1.5 billion long position in the shares.

When Hewlett Packard Enterprise CEO Antonio Neri won a reversal from the U.S. Department of Justice, allowing HPE’s $14 billion acquisition of Juniper Networks to go ahead, he could have been forgiven for thinking his troubles were behind him.

Instead, HPE has been dragged into one of those weird MAGA conspiracy theories that orbit President Trump’s White House. Even Laura Loomer, the vituperous online Trump activist, somehow got involved.

Given that the DOJ dropped its opposition to the merger (it previously complained it would reduce market competition), Neri could reasonably have expected the federal judge overseeing the litigation to wave the deal through.

But because the DOJ’s sudden reversal got the gears whirring inside the brains of multiple online sleuths, resulting in an objection letter from Sen. Elizabeth Warren, it is suddenly more likely—perhaps not probable, but plausible—that Judge P. Casey Pitts will hold a “Tunney review” that may overturn the deal.

A “Tunney review” is a judicial proceeding that asks whether a proposed merger is in the public interest. The Tunney Act was created in the 1970s in reaction to President Nixon’s meddling in the M&A market.

A negative Tunney review would be a defeat for Neri, who is fending off activist Elliott Investment Management, which bought a $1.5 billion stake in the company and demanded seats on the board in part because it believes HPE stock is being held down by execution errors on Neri’s watch. Neri could lose his job if things do not go his way, sources have told Fortune.

How did HPE get here?

For its part, HPE believes it has done nothing wrong, and that it has simply prevailed in a routine judicial process.

“HPE is confident our acquisition of Juniper Networks is in the public interest and will promote further competition in the enterprise WLAN [wireless local area network] market,” the company told Fortune. “The transaction was appropriately approved with certain remedies by the U.S. Department of Justice, and it was unconditionally approved by 13 other antitrust regulators around the world.  We respect the role our regulators play in maintaining competitive markets and appreciate the professional and constructive way in which the DOJ engaged with us in approving the deal.”

But several online corporate dirt-diggers, including Matt Stoller, Francine McKenna, The Lever, and The Capitol Forum, drew attention to personnel changes at the DOJ immediately prior to its approval of the deal. Two DOJ lawyers on the case appear to have been removed from it, according to Semafor. Now HPE is on the front page of the Wall Street Journal as Exhibit 1 in the narrative that lobbyists are undercutting the MAGA antitrust agenda by making off-the-record promises about new jobs in the U.S. (HPE denied that, too.)

In a filing on the federal court docket, HPE listed its advisors on the deal. They included a person whom Sen. Warren’s letter described as “MAGA-aligned antitrust thought leader Mike Davis,” quoting from a Capitol Forum article.

It is this person that Stoller and his online colleagues believe is a lobbyist responsible for changing the minds of Attorney General Pam Bondi and her chief of staff, Chad Mizelle, and thus reversing their opposition to the deal.

Following that, Loomer used X to insist that HPE had paid consultants allied to President Trump $1 million each to engage in “influence peddling.” Loomer later deleted the post. Sources previously told Fortune they didn’t understand why Loomer was paying attention to the deal.

The Lever published a claim that “in a last-minute effort to save face … intelligence authorities intervened to rubber-stamp the deal because of national security reasons, a claim that never appeared in any of the DOJ and HP’s legal briefs.” In fact, HPE did cite national security in its July 7 certification of the proposed judgment approving the deal. (You can see it here on page 2.) The national security angle is that by combining HPE and Juniper it creates a larger market share for a U.S. company in places where the alternative might be Huawei, which many Western governments regard as a Chinese Communist Party asset. (Huawei has repeatedly denied that allegation.)

The next step is up to Judge Pitts. It is not clear-cut that Pitts will rubber-stamp the DOJ’s decision. Pitts is a Biden appointee who previously worked at a public interest law firm—and he may therefore be skeptical that Trump’s DOJ went from fierce opposition to “whatever” so quickly.

His ruling is likely months away.

The DOJ told Fortune: “The Department has consistently reiterated that resolution of this merger was based only on the merits of the transaction,” according to spokesman Gates McGavick.

Meanwhile, HPE stock has not reacted well to all the gossip. It remains down 5.7% year to date compared with the S&P 500, which is up 8%. Elliott’s stake is a long position—meaning it wants shares to rise. And it is more than willing to replace the CEO if it does not get what it wants. Hence the pressure on Neri.

This story was originally featured on Fortune.com

© Courtesy of HPE

• S&P 500 futures are ticking upward this morning, but Starbucks’ stock is underperforming the market owing in part to an incoming 50% U.S. tariff on Brazilian coffee. Analysts estimate a 3.5% annual cost increase for the company, reducing earnings. While U.S. coffee prices rise, the impact on Brazil is small, and global coffee prices are falling, benefiting other markets.

S&P 500 futures are up 0.23% this morning, after the index closed down 0.49% yesterday. The blue-chip ranking has gained 7% year to date and remains near its all-time high, but there is one major name that isn’t benefiting from the risk-on attitude on Wall Street right now: Starbucks.

SBUX is down 1.15% year to date, and is down 8% over the past five trading sessions. It is not difficult to figure out why. President Trump is sitting on the stock. Or rather, his 50% tariff on Brazil—the world’s largest producer of coffee—isn’t investors’ preferred cup of tea.

On its Q2 earnings call, the company reported a 2% decline in same-store sales, even as per customer sales rose 1%. That suggests coffee price increases are already percolating through the company.

Starbucks’ costs could rise 3.5% annually, according to TD Cowen analyst Andrew Charles. That would wipe two cents a share off Starbucks’ earnings, Charles said.

The U.S., of course, grows close to zero coffee. Thus the tariff on Brazil will result solely in price increases for American coffee drinkers.

Counterintuitively, it won’t hurt Brazil that much. Goldman Sachs projects that the Brazilian economy will still grow by 2.3% this year.

The rest of the world is likely to benefit. There are plenty of markets for coffee. If U.S. demand goes down, the extra supply for foreign customers is likely to depress price growth.

That’s already happening. Global arabica coffee futures have declined by 30% this year and currently sit at around $2.96 per tonne. In sum, coffee in America is getting more expensive, but for everyone else it’s getting cheaper.

Chart from Trading Economics

That dynamic—that the tariffs are going to hurt global economies less than first thought and may contain advantages for some foreign markets—goes some way to explaining why markets are largely up across Asia and Europe this morning.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were up 0.2% this morning, premarket, after the index closed down 0.49% yesterday. 
• STOXX Europe 600 was flat in early trading. 
• The U.K.’s FTSE 100 was up 0.18% in early trading.
• Japan’s Nikkei 225 was up 0.6%. 
• China’s CSI 300 was up 0.24%. 
• The South Korea KOSPI was flat. 
• India’s Nifty 50 was down 0.23%. 
• Bitcoin sank to $113.9K.

This story was originally featured on Fortune.com

© Jeffrey Greenberg—Universal Images Group/Getty Images

• Palantir’s blowout earnings, with revenue up nearly 50% and net income up 144%, are sparking a tech rally as investors bet on AI-driven headcount reductions. Broader markets show gains, buoyed by expectations of early Fed rate cuts and a decent Q2 earnings season. However, Goldman Sachs warns the U.S. economy is “near stall speed” owing to sharply declining job growth. Lurking in the background: Trump’s war on the BRICS.

Tech company earnings appear to be driving the stock markets upward today after Palantir delivered a massive quarter after the markets closed in the U.S. last night. S&P 500 futures were up 0.27% this morning, premarket. Europe and Asia were broadly up this morning, too.

But lurking in the background, as always, are the big macro questions about whether President Trump’s tariff deals have hobbled the U.S. economy in the long run.

Palantir first: Revenues were up almost 50% to nearly $1 billion, beating expectations. Net income was $327 million, up 144%. CEO Alex Karp lifted guidance for Q3. The stock closed up 4% yesterday and rose another 5% in overnight trading. “We’re planning to grow our revenue … while decreasing our number of people,” CEO Alex Karp told CNBC. “This is a crazy, efficient revolution. The goal is to get 10x revenue and have 3,600 people. We have now 4,100.”

That prospect—the idea that tech companies can grow by replacing employees with AI—appears to have energized investors in tech stocks broadly. Palantir’s call was “eye-popping,” Wedbush’s Daniel Ives said this morning.

Look at the closing prices of this selection of tech darlings:

Credit: Google Finance

Goldman Sachs reported that its Risk Appetite Indicator was above zero for July, indicating a general risk-on attitude for equities.

Investors are also assuming that the U.S. Federal Reserve’s next interest rate cut will come in September and not December, as previously assumed. The CME’s Fed funds futures market is showing an 88% likelihood of a cut in September and a 60% likelihood of a cut in October. Cheaper money = higher stock prices, of course.

“The mood has been helped by a decent Q2 earnings season so far,” Jim Reid’s team at Deutsche Bank said this morning.

In the long term, there are obvious problems ahead. Goldman Sachs said today that new job creation—yes, the jobs number that was so controversial on Friday—is now so meager that the U.S. economy is in danger of stalling. 

“Friday’s jobs numbers reinforced our view that U.S. growth is near stall speed—a pace below which the labor market weakens in a self-reinforcing fashion. So far, the unemployment rate has only risen modestly, from an average of 4.1% in Q1 to 4.248% in July. But our estimate of underlying monthly job growth—which is based on moving averages of real-time gains in the establishment survey and the household survey—has plummeted from 206K in Q1 to just 28K in July, well below our 90K estimate of the current break-even pace,” chief economist Jan Hatzius told clients.

DOGE cuts knocked 0.3 percentage points from GDP growth in Q2, according to Pantheon Macroeconomics’ Samuel Tombs and Oliver Allen. Their estimate for GDP growth was dragged down by “an enormous 11.2% drop in federal nondefense spending, dragging down headline GDP growth by 0.3 percentage points,” they told clients.

Coming down the pipe: more tariff deadlines. The average effective tariff rate for the U.S. is now around 19%, according to Piper Sandler, a rate that matches that of the 1930s:

Credit: Piper Sandler

Trump has specifically targeted the BRICS countries (Brazil, Russia, India, China, South Africa, and allied regimes) for high tariffs. The China tariff deal—not yet done—is the big kahuna in all of this. If China also gets a high percentage rate, investors will down-rate stocks, Chris Turner’s team at ING told clients.

“An early extension of the currently benign trading conditions would very much be welcomed by the market. If not, and the U.S. does ratchet up pressure on China again, then it would look like President Trump was opening up a new campaign on the BRICS nations after all,” they said.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were up 0.27% this morning, premarket, after the index closed up 1.47% yesterday. 
• STOXX Europe 600 was up 0.3% in early trading. 
• The U.K.’s FTSE 100 was up 0.35% in early trading.
• Japan’s Nikkei 225 was up 0.65%. 
• China’s CSI 300 was up 0.8%. 
• The South Korea KOSPI was up 1.6%. 
• India’s Nifty 50 was down 0.46%. 
• Bitcoin remains above $114K.

This story was originally featured on Fortune.com

© Thomas Barwick—Getty Images

• The dollar, which has lost value all year against foreign currencies, had been making a comeback in recent weeks. But Friday’s jobs number from the BLS—and the downward revisions to previous numbers that accompanied it—“knocked the stuffing out of the dollar’s rally,” ING says.

The U.S. dollar fell off a cliff on Friday after the Bureau of Labor Statistics dramatically revised downward its estimates of how many jobs the American economy was creating. The economy, it turned out, was far weaker than everyone had assumed.

The dollar has lost value all year. It is currently down nearly 9% YTD against the DXY, an index of foreign currencies, as investors flee President Donald Trump’s tariff barriers. In June, the USD hit a low of more than 10%, but in recent weeks, the dollar has been gaining ground.

Until Friday. 

The dollar fell from 100.22 on the DXY on Friday to 98.82 this morning—a relatively large move for a currency the size of the dollar.

Credit: Google Finance

“The dollar index suffered its biggest one-day drop since May 23 as markets swiftly reassessed the outlook for rates and growth,” George Vessey of Convera told clients in a note.

In notes to clients from ING, analyst Chris Turner called it: “The dollar’s handbrake turn.”

“Friday’s soft jobs report knocked the stuffing out of the dollar’s rally. Investors now attach an 80% probability to a 25bp rate cut from the Federal Reserve in September,” he wrote. “Uncertainty about the quality of U.S. data is not a good look for U.S. asset markets and could add some more risk premium both into the dollar and Treasuries.”

Goldman Sachs called it “USD: Whiplash week.” The bank also published a subdued note from chief economist Jan Hatzius that forecast U.S. GDP growth would be only 1% in the second half of the year.

His colleague Kamakshya Trivedi argued that although the “media narrative” suggested that Trump had somehow won deals that were “negative” for the U.S.’s trading partners, most foreign exports—which go to other countries—won’t be affected.

“We expect that the U.S. will bear most of the cost of the tariffs, which will weigh on its terms of trade. This is partly because of the breadth of the tariff increases, which will make it difficult for U.S. firms and consumers to find suitable substitutes,” he wrote.

That’s why the dollar is so much weaker on foreign exchanges this morning.

This story was originally featured on Fortune.com

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