Treasury Secretary Scott Bessent’s plan to squeeze Iran’s economy via sanctions on countries and entities financing Tehran was shorter on detail than many had expected and essentially amounted to a warning shot to those still engaged with the country. The timeline for action also seems uncertain, but Iran said it would not be cowed and would retaliate against any measures.
Meantime, U.S.-Canada trade tensions ratcheted up further after 50% tariffs on $20 billion worth of Canadian goods came into effect. President Trump responded to Canadian retaliation with a threat to slap 50% levies on Canadian-made cars, trucks and automotive parts.
Both sets of headlines had little impact on markets, although Canada’s dollar did slip and Wall Street did end lower on Monday. A softer oil price kept a lid on Treasury yields.
Speaking of the bond market, Secretary Bessent's recent announcement of increased bond-buying got another negative review, this time from billionaire investor Stanley Druckenmiller, a former colleague of Bessent's at Soros Fund Management. In a Wall Street Journal opinion piece, Druckenmiller said debt management calculated to cosset the bond market around the midterm elections "spends the one asset that took two centuries to accumulate: the credibility of the Treasury market."
Back to equities, the U.S. stock retreat was led by weakness in tech, ahead of Nvidia’s results tomorrow. Tech ructions were felt in Asia as well, after a $10 billion share sale by China’s Alibaba to fund its AI plans knocked its stock down by 10%. Recent spectacular IPOs in China also backtracked, with robot maker Unitree’s shares losing almost half of the 600% rise clocked on its first day of trading earlier this month.
Wednesday is the first big macro day of the week, with Nvidia’s update preceded by U.S. PCE data for July. Today, investors get the August U.S. Consumer Confidence survey from the Conference Board, and 2-year Treasury notes come under the hammer.
With that, onto today's column.
