Trump escalates trade tensions with India

President Donald Trump threatened that he will substantially raise tariffs on India, accusing the country of buying massive amounts of Russian oil and reselling it on the open market for big profits. This represents an escalation from last week’s announcement of 25 percent tariffs on Indian goods .

CPI inflation in Turkey slowed to 33.5% y/y in July, down from 35.1% the previous month. This was slower than the predicted 34.1%. Core inflation stood at 34.7%, down from 35.6% previously and just above the consensus forecast of 34.6%. The slowdown in annual inflation came despite an uptick in monthly price growth which accelerated to 2.1% in July, from 1.4% in June, driven by tax hikes and higher energy prices. The ongoing slowdown in annual inflation, which has fallen for the past 14 months from last year’s peak of 75.5% in May, will allow the TCMB to cut the benchmark one-week repo rate more aggressively through the remainder of the year from the current 43.0%.

China’s services activity hit a 14-month high in July, with the S&P Global Services PMI rising to 52.6. The expansion was driven by strong domestic and export demand, especially in tourism, and services firms increased hiring at the fastest pace since July 2024.

The IMF’s latest report highlights Saudi Arabia’s strong economic resilience, noting robust non-oil sector growth, contained inflation, and record-low unemployment. While lower oil revenues and increased investment-related imports have led to fiscal and current account deficits, the country continues to maintain substantial financial buffers. The IMF projects Saudi Arabia’s fiscal deficit will rise to 4% this year, a level deemed appropriate considering the nation’s ample foreign reserves. The IMF further assesses that prior spending cuts have been sufficient and does not recommend additional reductions, even if oil prices decline further, since this year’s higher-than-budgeted deficit remains suitable given the strength of reserves. In late 2024, Saudi Arabia announced plans to reduce 2025 expenditure to USD 342 billion.

Today’s Economic Data and events

16:30 US Trade Balance Forecast: -61 USD bn

18:00 US ISM Services Index Forecast: 3.1%

Fixed Income

Yields on US Treasuries were little changed, stabilizing after last week’s volatility and amid ongoing market uncertainty. The 2-year Treasury yield inched up 2bps to close at 3.71%, while the 10-year yield ticked up 1bp to 4.21%. Both yields are holding near multi-month lows as investors await key economic releases and monitor trade policy developments.

FX

The dollar index (DXY) recovered slightly, closing up 0.08% at 98.84. The Euro retreated, ending down 0.14% at 1.1567. GBP was steady, closing at 1.3277, while the Japanese yen eased 0.2% to 147.09.

Equity Markets

US equity indices posted strong rebounds after last week’s selloff. The S&P 500 surged 1.5%, recovering from a four-day decline, the Dow Jones added increased 1.3%, and The NASDAQ rose 2%

Locally, DFM closed up 0.22%, ADX lost 0.17%, and Saudi Arabia’s Tadawl closed flat.

Commodities

Oil prices remained under pressure after OPEC+ decision and the ongoing geopolitical tensions. Brent declined 1.3% to USD 69.02/b and WTI closed down 1.54% to 66.29/b.

Gold prices continued to rise, increasing 0.3% to USD 3,373.59 per ounce. Silver also continued to making gains, closing 1% higher at 37.41 per ounce.