T&Q Morning Briefing

Markets showed resilience on Tuesday, but caution is creeping in as trade tensions flare, bond markets flash inflation warnings, and geopolitics remain volatile. While tech continues to lead, the broader tape is sending a more mixed message. CPI was largely as expected, but investors are bracing for what comes next, especially as earnings ramp up and tariffs re-enter the conversation.

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1. The Trump Trade Era 2.0
Tariffs are back on the front burner. Trump’s surprise deal with Indonesia (19% tariff for them, 0% for the U.S.) signals a reassertion of his trade agenda. While the economic impact of the Indonesia deal is limited, the symbolism is strong. Meanwhile, Europe is preparing countermeasures on U.S. goods worth $84 billion, and China’s tariff truce deadline looms. Investors may be underpricing the geopolitical risk premium embedded in supply chains and corporate margins.

2. The Market’s Inflation Anxiety
Despite CPI coming in as expected, bond markets are getting nervous. Real yields are rising and breakevens are widening, indicating the market is questioning whether inflation is really under control. The 30-year Treasury yield hit 5.01%, its highest since May. As the Fed weighs its next move, expectations for rate cuts continue to drift further into the future.

3. Europe’s Geopolitical Gambit
A WSJ report suggests that behind the scenes, Europe has been quietly wooing Trump away from his previous support of Putin. With the EU increasingly vocal about its own trade retaliation toolkit, and growing alignment on energy security and defense spending, the transatlantic axis may be shifting — and not necessarily in lockstep. Investors with exposure to European multinationals should pay close attention.

4. Resilient but Narrow Market Leadership
The Nasdaq’s climb masks broader fragility. Market breadth remains poor, with decliners outpacing advancers by over 3:1 on the NYSE Tuesday. Without the support of mega-cap tech, indexes would likely be meaningfully lower. Fund managers are putting cash to work, but whether this represents conviction or fear of missing out is still up for debate.

5. ASML and the Semiconductor Barometer
ASML narrowed guidance on tariff uncertainty, citing potential downside for 2026. While Q2 results were better than feared, management noted that visibility remains clouded. Semiconductor momentum has carried markets higher this year, but earnings revisions and macro headwinds suggest this tailwind could fade if trade issues worsen or AI demand fails to meet lofty expectations.

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Inflation data for June was in line with expectations, showing headline CPI rising 0.3% month-over-month and 2.7% year-over-year. Core CPI came in slightly cooler than expected at 0.2% for the month. Treasury yields initially dipped but climbed throughout the session, with the 10-year closing near a four-week high at 4.48%. The dollar also strengthened, hitting a four-month high versus the yen.

Earnings season kicked off with a split reaction: Citigroup beat estimates and rallied, but shares of State Street, BlackRock, and Wells Fargo fell sharply despite solid prints. Mega-cap tech provided cover, with Nvidia and AMD leading on news of resumed China chip sales. Crypto cooled from record highs, and commodities drifted lower, with gold and oil both falling on easing sanctions concerns.

Investors are staring down a tricky stretch with earnings, inflation, and trade risk all colliding at once. Despite strong tech leadership and mostly constructive inflation data, the market appears to be at an inflection point. The resilience has been impressive, but the real test may come not from data, but from geopolitics.