Tariff Heat Hits Markets

Daily Updates:

• US equities ended yesterday’s trading session 0.49% lower than where they opened as ISM Services PMI data showed the services sector effectively stagnated in July. 
• The Institute for Supply Management’s Index of Services undershot all economist’s expectations, dropping to 50.1%, 0.7 percentage points lower than the June figure of 50.8%, while the Employment Index fell to 46.4 – the fourth contraction in five months. For both indexes, readings above 50 indicate expansion. 
• While the services sector slowed down, the Prices Index, the group’s measure of prices paid for materials and services, rose 2.4 percentage points from June to 69.9% in July. The index has exceeded 60% for eight straight months, and July’s reading was the highest since October 2022 (70.7 percent).

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• The report adds to a growing list of other macro data that suggests a slowdown in the US economy:

1. Weak payrolls report for July, which showed the US economy added fewer jobs than expected in July, and downwardly revised 258,000 jobs in May and June. 
2. GDP growth in the first half of 2025 averaged 1.25% annualised, a percentage point less than the pace in 2024. 
3. Consumer spending, which accounts for two-thirds of GDP grew at a 1.4% annualised in Q2. That’s an acceleration from the 0.5% in Q1, but far below the 2.8% growth in spending in 2024. Chair Powell recently said “Consumer spending had been very, very strong for the last couple of years and repeatedly forecasters, not just us, had been forecasting it would slow down and now maybe it finally has”.

• The S&P Global US Composite PMI rose to 55.1 in July, beating the preliminary 54.6 and June’s 52.9, marking the fastest growth since December 2024. 
• Expansion was driven by a strong services sector, with manufacturing output rising modestly. New orders accelerated, supporting a slight increase in employment, while selling prices jumped at the quickest pace since August 2022 amid robust demand. Business confidence eased to a three‑month low despite continued optimism for future output.

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• Eurozone retail sales rose 0.3% month‑on‑month in June 2025, rebounding from a 0.3% decline in May but slightly below the 0.4% market forecast. Growth was supported by recoveries in food, non‑food, and fuel sales, with increases across most major economies except France (-0.9%). Year‑on‑year sales climbed 3.1%, the strongest since September 2024.

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• In an interview with CNBC yesterday, President Trump confirmed that US tariffs on semiconductor and pharmaceutical imports will be announced by his administration “within the next week or so”. 
• He said “We’ll be putting an initially small tariff on pharmaceuticals, but in one year, one and a half years, maximum, it’s going to go to 150% and then it’s going to go to 250%”. Regarding semiconductors and chips, the President stated they will be in “a separate category”. 
• He also once more emphasised plans of imposing secondary tariffs on nations purchasing Russian oil. In particular, he stressed that tariffs on India would increase: “We settled on 25% but I think I’m going to raise that very substantially over the next 24 hours, because they’re buying Russian oil… They’re fueling the war machine. And if they’re going to do that, then I’m not going to be happy.”

• With China, the president said the US is “getting along with China very well” and that “it’s not imperative, but I think we’re going to make a good deal”. 

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• Since falling from $118K and reaching a low of $112K last weekend in the fallout from the weaker-than-expected jobs report, BTC has been trading rangebound between $112K and $115K. Similarly, ETH too traded rangebound yesterday between $3,500 and $3,700. 

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• Japan-based financial services company group, SBI Holdings, has released plans for two ETFs to launch on the Tokyo Stock Exchange: a “crypto-assets ETF,” which mentions XRP and Bitcoin exposure, and a “digital gold and crypto ETF”.

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• The US SEC have expanded their clarity on the ruling of staking practices and have clarified that liquid staking, where crypto assets are staked via a provider and depositors receive redeemable Staking Receipt Tokens, does not constitute the offer or sale of securities.
• They clarify that Staking Receipt Tokens, received in liquid staking, derive their value from the underlying assets and thus do not meet the Howey test’s “managerial or entrepreneurial efforts” requirement unless tied to an investment contract, where the issuers' efforts provides an additional value.

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• Brazil is set to hold its first public hearing on Aug 20, 2025 to discuss Bill 4.501/2024, which proposes adding Bitcoin to the nation’s state-controlled reserves.
• The bill proposes that Brazil must diversify its reserves, adding bitcoin, at a 5% target rate and other “secure” cryptocurrencies. If passed at this level, Brazil would accumulate around $17B worth of BTC, positioning them as one of the top holders worldwide. 

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• BitBridge Capital Strategies, a bitcoin‑focused treasury firm, will begin trading under the ticker BTTL by the end of Q3 2025 following its merger with Green Mountain Merger Inc., with plans to uplist to NASDAQ thereafter, according to Tuesday’s release.
• The company also plans to launch the Bitcoin Respect Loan, a proposed low‑interest, multi‑year BTC‑backed lending product aimed at “reshaping how the financial system treats bitcoin collateral.” The program is designed to generate sustainable annual revenue and support the firm’s long‑term bitcoin strategy.

This Week’s Calendar:

Charts of the Day:

Figure 1. BTC at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

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Figure 2. ETH at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

Figure 3. BTC 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes

Figure 4. ETH 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes