MARKET SNAPSHOT
U.S. stocks started the week on a mixed note amid weakness in chip shares. Treasury yields were mixed as markets braced for the Treasury's reported plan to tap its $1 trillion General Account to fund increased long-term bond buybacks starting next month. Oil prices fell after the U.S. said it would sanction countries or companies that do business with Iran. Gold prices advanced as the dollar strengthened.
MARKET WRAPS EQUITIES
Sliding shares of chip makers and signs of intensifying geopolitical tension weighed on major stock indexes Monday, delivering a muted start to a jam-packed week for markets.
Stocks tied to the artificial-intelligence trade dropped, extending their bumpy stretch ahead of Wednesday's all-important earnings update from Nvidia.
The S&P 500 fell 0.3%, and the Nasdaq composite declined 0.8%. The Dow Jones Industrial Average edged 0.3% higher.
The week began with strong U.S. rhetoric on two fronts: the ongoing war with Iran, and a continuing trade war with Canada.
Treasury Secretary Scott Bessent outlined plans to inflict an "economic D-Day" on Iran. Bessent said the U.S. was sanctioning more than 60 entities, individuals and vessels across the world that enable the regime to procure nuclear and missile technology, collect oil revenue and carry out cyber operations.
"The actual announcement came across as much less dramatic than anticipated, with a wide gap between the rhetoric and the substance," Jorge León, head of geopolitical analysis at Rystad Energy, wrote in a note. "What we have seen so far looks much more like an expansion of the existing sanctions regime than a fundamentally new economic weapon."
Trade tensions between the U.S. and Canada were still running high, with President Trump saying the U.S. would impose 50% tariffs on automobiles and parts from Canada starting in January. Over the weekend, Canadian Prime Minister Mark Carney said his government would respond to a separate set of Trump's tariffs with levies on U.S. goods.
Traders largely shrugged off each of those headlines. "These grand assertions that the Trump administration makes-they get reversed very quickly," said Mike O'Rourke, chief market strategist at JonesTrading. "From a market's perspective, they tend to get ignored."
Those moves followed a tumble in major tech shares in Asia, including Alibaba after it launched a $10.2 billion share sale to fund its AI spending.
Earlier Monday, China's Shanghai Composite Index shed 0.6% while the Shenzhen Composite Index was down 1.7%. The tech-focused ChiNext Price Index slumped 3.2%.
In Hong Kong, Chinese chip foundries SMIC and Hua Hong Grace gave up 7.5% and 5.4%, respectively. Hong Kong's Hang Seng Index dropped 1.9%.
South Korea's Kospi shed 3.1%.
Japan's Nikkei Stock Average was down 0.7%.
Stocks in Australia rose, as the S&P/ASX 200 gained 0.5%. New Zealand's S &P/NZX 50 Index declined 0.6%.
COMMODITIES
Oil futures lost ground after six straight sessions of gains as the U.S. launched a plan to sanction countries or companies that do business with Iran.
"The immediate measures look less dramatic than the rhetoric," Jorge Leon, Rystad Energy's head of geopolitical analysis, said.
Iranian oil exports are already down with the U.S. blockade and unless China reduces purchases further, the additional impact on Iranian oil revenues could be limited.
"The biggest oil-market risk may not be the sanctions themselves, but Iran's response to them," he said. "Iran still has considerable capacity to disrupt everybody else's exports."
WTI settled down 2.4% at $85.01 a barrel and Brent fell 2.4% to $92.17.
Front month Comex gold for August delivery gained 0.4% to $4640.80 per troy ounce.
TODAY'S TOP HEADLINES
Bessent Launches 'Operation Economic Outcast' to Isolate and Squeeze Iran
WASHINGTON-Treasury Secretary Scott Bessent said the U.S. is launching a new campaign to isolate the Iranian regime, warning that countries and companies that do business with Tehran will face the wrath of the Trump administration.
"Let there be no ambiguity as to the position of the United States: An economic engagement of any kind with this murderous regime will expose those responsible to the full reach of American power," Bessent said Monday during a press conference.
As part of the new effort, which he called "Operation Economic Outcast," Bessent said his department has "mapped every node, every facilitator and every network that Iran has used to smuggle oil and evade sanctions." He said the U.S. was sanctioning more than 60 entities, individuals and vessels across the world that enable the regime to procure nuclear and missile technology, earn revenue from oil and carry out cyber operations.
Trump Threatens 50% Tariff on Automobiles and Parts From Canada
President Trump said the U.S. would impose 50% tariffs on automobiles and parts from Canada starting in January, the latest escalation in a tit-for-tat trade conflict that erupted over the weekend.
"On January First, 2027, Tariffs on all Cars, Trucks, both large and small, Automotive Parts, and Steel, will be increased to 50%," Trump said Monday on Truth Social. U.S. tariffs on Canadian automobiles now stand at 25%, with discounts for the U.S. content in cars, while steel tariffs are at 50%.
The threat came after Canadian Prime Minister Mark Carney said his government would respond to a separate set of Trump's tariffs with levies on U.S. products. Trump imposed those new tariffs-effective on about 5% of Canadian exports to the U.S.-early on Saturday, after last-minute talks fell apart.
Global Bond Yields Fall on Declining Oil, Prospects of Further Treasury Action
Global government bond yields fell Monday, helped by declining oil prices and as investors anticipate that further measures from the U.S. Treasury are possible to tame high yields.
The U.S. Treasury last week doubled the volume of long-end debt buybacks after yields rose to multiyear highs. Yields declined overnight but the fall intensified after CNBC reported, citing anonymous sources, that the Treasury could use its General Account to fund the increased buybacks announced last week.
Meanwhile, Treasury Secretary Scott Bessent is expected to give details on U.S. plans to increase economic pressure on Iran in a press conference on Monday.
California Attorney General Cancels Paramount Meeting, Citing Leaks
California Attorney General Rob Bonta's office canceled a planned Monday meeting with Paramount Chief Executive David Ellison where the parties were expected to discuss settling a lawsuit the state led seeking to block the company's purchase of Warner Bros. Discovery.
California and 11 other states filed an antitrust suit last month to block an $81 billion deal to combine Paramount and Warner, a transaction that would bring together two of Hollywood's biggest producers and distributors of entertainment and news content.
Bonta was expected to ask Paramount to divest some cable channels and commit to keeping its movie studio separate from Warner Bros., The Wall Street Journal reported. Lawyers from the two sides met on Friday to set an agenda and talking points for the two sides, the Journal reported.
EV-Maker Polestar Says Trump Administration Strung It Along Before U.S. Ban
Two months after Chinese-owned electric-vehicle maker Polestar was forced to exit the U.S. market, the company is telling its American dealers that it was blindsided by the decision.
Polestar said in an Aug. 18 letter to dealers, seen by The Wall Street Journal, that it still doesn't have an explanation for why it must cease U.S. sales while Volvo Cars-a corporate cousin that sells a nearly identical car-was allowed to remain.
The decision was issued June 24 by the U.S. Commerce Department as part of a wider crackdown on Chinese vehicle technology.
Canada's Big Banks Expected to Log Another Strong Quarter While Valuations Stretched
OTTAWA-Canada's biggest banks face a high bar ahead of their latest quarterly readouts, as recent strong trends have stretched market valuations.
Third-quarter earnings for Canada's Big Six lenders are set to be released over three days this week, beginning with numbers Tuesday from Bank of Montreal and Bank of Nova Scotia.
Analysts broadly anticipate a continuation of the trends seen in recent quarters, with growth driven by capital markets activity, wealth segment revenue and credit losses that have been held in check.
Expected Major Events for Tuesday 05:00/JPN: Jul Supermarket sales
05:00/JPN: Jun Indexes of Business Conditions - Revision
05:30/JPN: Jul Tokyo area department store sales
05:30/JPN: Jul Nationwide department store sales
08:00/TAI: Jul Industrial output
08:30/HK: Jul External Merchandise Trade
10:59/THA: Jul Trade data
21:00/SKA: Sep Business Survey Index
23:50/JPN: Jul Services Producer Price Index
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