Global financial media outlets highlighted the following key stories overnight and this morning.
1. US Rejects Extending North American Trade Pact, Starts Countdown to Termination and Seeks Changes
2. US Official Says Strait of Hormuz Oil Flow Exceeds 10 Million Barrels Daily, Undermining Iran's Negotiating Leverage
3. Musk Denies Report of SpaceX Showcasing AI Handheld Device Prototype Before IPO
4. BofA: Institutional Clients Sell Tech Stocks, Net Sellers of US Equities for Fourth Consecutive Week
5. Fed Chair Warsh Says Recent Inflation Risks Have Eased, Reiterates Commitment to Price Stability
6. Inflation Retreats with Oil Prices, ECB Shows Unusually Large Divisions Over Next Rate Move
US Rejects Extending North American Trade Pact, Starts Countdown to Termination and Seeks Changes
The Trump administration on Wednesday declined to extend the United States-Mexico-Canada Agreement (USMCA), initiating a ten-year countdown to the trade pact's potential termination. The US aims to seek modifications to bring manufacturing jobs back to America and reduce its trade deficits with its North American neighbors.
This decision was disclosed following a six-year review of the North American free trade zone. Unless the three nations agree to a modified renewal, the agreement will remain in effect for ten years before its expiration and will undergo annual reviews.
"The United States does not agree to renew the USMCA in its current form," US Trade Representative Greer said in a statement. "Consequently, the USMCA has not been renewed. The United States will continue to engage with Mexico and Canada to address the agreement's shortcomings and our trade deficit issues with these countries."
US Official Says Strait of Hormuz Oil Flow Exceeds 10 Million Barrels Daily, Undermining Iran's Negotiating Leverage
A US official stated that commercial traffic through the Strait of Hormuz has surged over recent weeks, with oil shipments exceeding 10 million barrels per day, supported by US military presence.
Shipping through the strait has increased significantly since President Trump signed an interim peace deal with Iran, completely reversing the previous paralysis caused by war. The official, who requested anonymity to discuss internal assessments, said Tehran was somewhat caught off guard, which also exposes Iran's limited current capacity to fully blockade this vital waterway, while stimulating its recent attacks on vessels in the surrounding area.
Musk Denies Report of SpaceX Showcasing AI Handheld Device Prototype Before IPO
Elon Musk on Wednesday denied a report from a prominent financial media outlet that claimed SpaceX showcased a prototype of an AI-powered handheld device to investors before its IPO, calling the report "completely false."
The media outlet had previously cited sources saying that SpaceX demonstrated a phone-like AI handheld device prototype to investors and other stakeholders ahead of a June IPO. The device was said to run a proprietary operating system integrating xAI's technology, powered by a Qualcomm Snapdragon chip, and designed to be slimmer than an iPhone. The report also noted that SpaceX informed investors the project was still in its early stages, the design was still evolving, and it was uncertain whether it would ultimately go into production.
BofA: Institutional Clients Sell Tech Stocks, Net Sellers of US Equities for Fourth Consecutive Week
Bank of America strategist Jill Carey Hall noted in a report that the firm's clients were "notable net sellers" of US stocks for the fourth week in a row as they reduced holdings in technology shares.
The bank's clients sold stocks in nine of the 11 S&P 500 sectors last week, with technology and financials leading the outflows. Citing client data for the week ending June 26, Hall stated that the four-week average net flows into the tech sector had fallen to a record low.
The consumer staples sector recorded net outflows for a seventh consecutive week, the longest such streak on record.
Institutional clients sold stocks for a fourth straight week, following a record outflow the prior week. The four-week rolling average net flow into US equities is also at a historically low level.
Fed Chair Warsh Says Recent Inflation Risks Have Eased, Reiterates Commitment to Price Stability
Federal Reserve Chair Kevin Warsh stated that inflation risks have moderated in recent weeks and reiterated the central bank's resolve to bring inflation back to its 2% target.
Speaking at the European Central Bank's Forum on Central Banking in Sintra, Portugal, on Wednesday, Warsh said, "Inflation expectations have declined over the first four weeks of this period, and inflation risks have also eased." He echoed the message he delivered last month during his first press conference as Fed Chair, affirming the Fed's commitment to achieving price stability.
Following his remarks, the yield on the 2-year US Treasury note fell to the day's low.
Warsh did not specify which price measures he was referring to. The Fed's preferred PCE price index rose 4.1% year-over-year in May, while the core PCE price index, excluding food and energy, increased 3.4% year-over-year.
Inflation Retreats with Oil Prices, ECB Shows Unusually Large Divisions Over Next Rate Move
Just three weeks after the European Central Bank (ECB) unanimously decided to raise interest rates in response to the conflict in Iran, consensus on the next course of action has already broken down.
As officials gathered in Sintra, Portugal, over recent days for the ECB's annual forum, divisions emerged over whether further increases in borrowing costs are needed to return inflation to the 2% target. Markets have also begun to doubt whether another rate hike will occur this year.
On one side are policymakers, including Chief Economist Philip Lane, who warn that inflationary pressures triggered at the onset of the Iran conflict are still unfolding and their effects could manifest in various ways, including stronger wage demands and lagging increases in food and service costs.
On the other side, officials are encouraged by the significant retreat in oil prices alongside progress in peace talks and believe significant second-round inflationary effects are unlikely. This view is supported by the sharp drop in eurozone inflation for June, with Bloomberg Economics also suggesting inflation has peaked.
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