EU threatens tariff retaliation

EU leaders have threatened to impose retaliatory tariffs on US goods worth up to EUR 72bn in response to US President Donald Trump’s announcement of 30% tariffs on imports from the EU and Mexico starting August 1. This escalation follows stalled trade discussions, with European Commission officials cautioning that the new tariffs could make trade with the US “nearly impossible” and might severely impact bilateral ties. President Trump noted that his administration remains open to negotiating a deal with the EU, adopting a milder stance on tariffs shortly after declaring the 30% duties on the bloc.

China’s economy grew by 5.2% y/y in Q2, ahead of expectations but cooler than growth in Q1. Exports to markets beyond the US were a primary contributor to growth in the second quarter while industrial production at the end of the quarter was also stronger than expected. However, the domestic picture from China’s economy remains soft with retail sales rising by 4.8% y/y in June, below market forecasts.

India’s CPI moderated to a more than six-year low of 2.10% in June 2025, down from 2.82% in May, mainly due to a 1.06% y/y decrease in food costs, providing the Reserve Bank of India with more leeway for possible interest rate reductions.

Today’s Economic Data and Events

16:30 US CPI: Forecast 2.6%

16:30 Canada CPI: Forecast 1.9%

Fixed Income

US Treasuries displayed modest weakness amid lingering trade uncertainties, with the 10-year yield climbing 2bps to 4.43%. The 2-year yield rose by about 1bps to close at 3.8998%. Markets have pared back rate cut expectations for the rest of this year with fewer than two 25bps cuts now fully priced in by the end of 2025.

GCC credit markets were broadly weaker overnight though the losses were muted.

Moody’s revised their outlook on National Bank of Oman to stable from positive.

FX

The US dollar extended its gains against peer currencies at the start of the week with a 0.2% rise in the DXY index. Much of the dollar strength was concentrated in USDJPY which rose by 0.8% to 147.43 while EURUSD was lower by 0.1% to 1.1689. GBPUSD also showed weakness overnight with a 0.6% loss to 1.3493.

In emerging markets, USDTRY pushed higher to 40.1747 while Indian rupee also depreciated with USDTRY up 0.2% at 85.8025.

Equity Markets

The S&P 500 advanced 0.14% to close at 6,268.56, the Nasdaq gained 0.27% to 20,640.33, and the Dow Jones rose 0.2% to 44,459.65. European markets showed mixed results, with the EuroStoxx declining 0.23% and the FTSE 100 up 0.6%.

Locally, both ADX General and DFMGI closed flat at 10,074.9 and 5856.58.

Saudi Arabia’s Tadawul closed down 0.35% on Monday.

Commodities

Oil prices retreated on Monday after Trump’s threats to impose secondary tariffs on Russia by 100% if there is no deal reached between Ukraine and Russia in 50 days. Brent crude closed at USD 69.26/b down 1.56%, while WTI settled at USD 66.97/b down 2.16%.

Gold edged down 0.3% to USD 3,344.20 per ounce and silver declined 0.7% to USD 38.14.