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US equity index futures are trading on Globex, with both the S&P 500 and Nasdaq showing gains.
US equity index futures show a slight rise, with S&P 500 eminis up by 0.15% and Nasdaq futures increasing by 0.2%. Nvidia and AMD are expected to send 15% of their chip sales in China to the US government.
Japan’s Mountain Day holiday has closed markets there, which impacts US bond trading. Fed Board Governor Bowman suggests a rate cut in September due to wider economic factors.
US equity index futures poised for a negative opening following Nvidia and AMD’s government deal
US equity index futures are set to open with significant news. Nvidia and AMD have agreed to pay the US government 15% of their revenue from chip sales in China.
This deal allows them to get export licenses for semiconductors in China. The arrangement was negotiated with the Trump administration and got approval last week.
Impact On Technology Sector
Sources, including a US official reported by the Financial Times, shared this information. The news about Nvidia and AMD poses a serious threat to the technology sector. The 15% revenue fee on sales in China will squeeze profit margins and likely lead analysts to reduce future earnings estimates. We expect both stocks and the broader semiconductor ETF (SMH) to open sharply lower when US markets start this week. The best immediate strategy is to buy near-term put options on NVDA and AMD. This strategy benefits from a decline in the stock price. Because this deal has come as a surprise, we anticipate a strong wave of selling that might last for several days. To put this into perspective, Nvidia’s reports from early 2025 indicated that the Greater China region made up 21% of its total revenue. A 15% tax on that revenue means a 3.15% reduction in the company’s total global revenue, hitting the bottom line hard. This makes Nvidia’s earlier optimistic guidance, which helped boost the stock over 80% in 2025, look unrealistic now.Options Strategy And Historical Context
Implied volatility will likely rise due to this news, driving up options prices. Another strategy for us is to sell bear call spreads, which profit if the stock price drops, remains stable, or increases slightly. This strategy also benefits from the higher premiums and from the eventual drop in volatility after the initial reaction. Reflecting on previous events, when the first major US chip export restrictions were imposed in October 2022, semiconductor stocks saw significant declines for weeks as the market adjusted to geopolitical risks. This historical context suggests that the negative market reaction will persist rather than just last for a day. Given Nvidia’s large presence in the market, this situation will likely pull down the entire Nasdaq-100 index. As a result, we are also considering buying puts on the QQQ ETF as a hedge against a broader market decline. This news may act as a catalyst for the larger market correction that many have expected throughout the summer of 2025. Create your live VT Markets account and start trading now.Japanese markets are closed for Mountain Day, leading to reduced trading in US bonds and yen.
Japanese markets are closed today for Mountain Day. This closure means stock markets are shut, and yen trading activities are lower. It coincides with the United States following guidelines from the Securities Industry and Financial Markets Association (SIFMA).
US bond trading stops for U.S. dollar-denominated government securities as part of SIFMA’s holiday recommendations. This includes mortgage- and asset-backed securities, as well as various corporate and municipal bonds.
Impact On Secondary Market Trading
Trading in secondary money markets, like bankers’ acceptances and commercial paper, is also paused. This extends to Yankee and Euro certificates of deposit. These halts might lead to wider implications due to limited trading in these areas. With Japanese and some US markets quiet for the holiday, we can expect low liquidity soon. This can create a challenging situation where even small orders might lead to big price changes, especially in yen-related currency pairs. Derivative traders should consider lowering their position sizes or staying out to avoid sudden price spikes. The USD/JPY pair is currently around the critical 158.50 mark, which concerns Japanese authorities. We recall the major currency interventions in spring 2024 when the yen also weakened. Traders might want to buy short-term options to protect against sharp moves when Tokyo traders return and liquidity increases.Market Anxiety And Strategies
This quiet phase in the US bond market comes right before key economic data releases. With US inflation at a steady 3.1% year-over-year, the market is anxious for what the Federal Reserve might signal next. Surprises in forthcoming data could lead to significant shifts in interest rate futures and swaps once trading fully resumes. Market worry is high, with the CBOE Volatility Index (VIX) around 18. This is much higher than calmer times last year, showing that investors are on edge. In this low-volume setting, using hedging strategies with index options could be wise to protect portfolios from unexpected changes. The main focus for tomorrow is preparing for the return of full market activity. We should watch for price gaps when the Japanese stock market reopens and bond desks are back to full staff. This holiday pause offers a chance to plan entry and exit points for the anticipated higher volume sessions later this week. Create your live VT Markets account and start trading now.Nvidia and AMD required to pay 15% of China chip revenues to the US, reports say
Nvidia and AMD could be required to send 15% of their chip sales in China to the US government, according to a report from the Financial Times. Other news sources have not been able to confirm this claim.
US equity index futures will open at 6 PM Eastern time, and sales to China may influence these stocks. The possible new payments could negatively affect the companies’ finances.
Impact On Market Volatility
Due to the uncertain nature of this report, we are seeing changes in expected market volatility. This uncertainty signals traders to think about strategies that could profit from market price changes, no matter which way they go. Buying straddles or strangles on Nvidia and AMD could be a smart move in the coming days. The stakes are high because a 15% charge would significantly impact earnings for both companies. In the second quarter of 2025, reports indicated that China made up about 19% of Nvidia’s data center revenue and 22% of AMD’s total sales. This news introduces a big, measurable risk for two key stocks in the market. The options market is already responding to this potential issue. Implied volatility on weekly options for Nvidia and AMD has risen over 25%, according to overnight trading data. This indicates that traders are expecting a much larger price swing than usual before the week ends.Strategies For Traders
For those who think the reports will be confirmed, buying put options or setting up bear put spreads can allow them to profit from a possible sharp decline. A loss of a fifth of their revenue would likely push these stocks below their recent support levels. A similar situation occurred in early 2024 with export restrictions, causing a temporary 10% drop in AMD before more details were released. On the other hand, if you believe this is just a baseless rumor, buying call options is a smart strategy. A quick and official denial from the companies or the US government would likely lead to a relief rally, punishing short-sellers and benefiting those who are ready for a quick rebound. In the end, this situation presents a binary event where the outcome is still unknown. Traders should brace for rapid changes once US markets open and officials begin to comment. Until there is confirmation, expect higher option premiums for both companies. Create your live VT Markets account and start trading now.The United States plans to finalize trade agreements with Canada, Mexico, and Switzerland by October.
The United States is set to wrap up trade talks with countries that don’t have formal agreements by the end of October. This announcement was made by Treasury Secretary Scott Bessent in an interview with Nikkei Asia.
Key Partners Involved
Current discussions involve important partners like Canada, Mexico, and Switzerland. These nations want to secure better deals to lessen the impact of new US tariffs and keep their access to the US market. In some cases, the US is using tariffs as a negotiation tool to gain leverage on issues not related to trade. With the deadline for these trade talks fast approaching, we can expect increased market uncertainty. This uncertainty is likely to boost implied volatility, especially in options contracts linked to the affected markets. We saw this trend during the 2018-2019 trade disputes when the VIX index frequently rose above 20 as tariff deadlines came closer. The currencies of countries still negotiating, particularly the Canadian dollar and Mexican peso, are now facing added uncertainty. Traders should think about using options to protect against or profit from sharp movements in currency pairs like USD/CAD and USD/MXN. During the last major trade renegotiation in 2018, the Mexican peso experienced weekly fluctuations over 2%, a level of volatility that could easily return in the near future. We should also pay attention to equity sectors that are vulnerable to tariff risks, such as industrials and materials. Buying put options on ETFs that track these sectors, like the Industrial Select Sector SPDR Fund (XLI), could be a useful protection against potential negative outcomes from the negotiations. The latest jobs report from July 2025 showed a minor slowdown in manufacturing employment, indicating that these sectors are already sensitive to further economic pressures.Opportunities in the Options Market
For those anticipating volatility but unsure of the direction, option spreads provide a way to trade the news with defined risk. A long straddle on a broad index purchased now could yield profits from substantial market swings, whether a deal is struck or talks fall apart. The key is to enter these positions before implied volatility increases too much, making them pricier. Switzerland’s involvement adds a “safe haven” dynamic for traders to consider. If global risk appetite declines due to these trade discussions, we might see money flow into the Swiss franc for safety, causing it to appreciate. Therefore, call options on the franc could serve as a good hedge against broader market chaos resulting from a breakdown in US negotiations. Create your live VT Markets account and start trading now.FX week review: Minimal changes with slight yen strengthening
Monday morning shows thin liquidity in the market, but this is likely to improve as more Asian markets open. Consequently, foreign exchange prices may experience some volatility during this time.
Current currency rates are relatively stable compared to late Friday, with the yen showing slight strength. Here are some opening levels for Monday: EUR/USD at 1.1645, USD/JPY at 147.57, and GBP/USD at 1.3439.
Currency Pairs Overview
– USD/CHF: 0.8080 – USD/CAD: 1.3755 – AUD/USD: 0.6521 – NZD/USD: 0.5946 These numbers provide a quick look at the current FX market as we start the week. In related news, Fed Board Governor Bowman has indicated a possible rate cut in September, along with two additional cuts by the end of the year. Meanwhile, China’s July data shows year-on-year consumer price inflation remains flat, but the month-on-month increase was higher than expected. With the market reacting to Fed Governor Bowman’s statements, we think the most likely movement for the US dollar is downward. The expectation for a September rate cut aligns with recent economic data. This data showed that US job growth slowed more than expected in July 2025, and core inflation decreased to 2.8%. This sets the stage for the Federal Reserve to start easing policy. For traders dealing in derivatives, this points to a strategy of buying call options on currencies likely to strengthen against the dollar, such as the Euro. The European Central Bank has been cautious about signaling cuts, while Eurozone data indicates stubborn service inflation, creating a favorable divergence for a rising EUR/USD. The current level of 1.1645 could be the starting point for a significant upward movement.Analysis of Market Trends
We witnessed a similar scenario in late 2023 when the market began to factor in Fed rate cuts for the following year, resulting in a multi-month decline in the Dollar Index. Historical patterns suggest that these early signs of a policy shift can signal the beginning of a bigger trend. We should prepare for a potential repeat of this cycle, with ongoing dollar weakness expected through year-end. However, the situation with the Australian dollar at 0.6521 calls for caution. The flat year-over-year consumer inflation in China, combined with reports indicating factory gate prices (PPI) have been in a deflationary phase for nearly a year, signals ongoing economic challenges. These difficulties from China, Australia’s largest trading partner, may restrict the Aussie’s upside potential even as the US dollar weakens overall. Focusing on long positions in GBP/USD and EUR/USD appears to be a more prudent approach. The Bank of England has maintained a relatively hawkish position compared to the Fed, making the pound at 1.3439 a favorable option. As the September Fed meeting approaches, we can expect increased volatility, which may raise option costs but also enhance profit potential. Create your live VT Markets account and start trading now.Key economic data releases and potential geopolitical meetings next week may significantly impact markets.
Next week, several important economic reports will be released, including the US Consumer Price Index (CPI), Retail Sales, China’s inflation, and activity data. The Reserve Bank of Australia (RBA) and Norges Bank will announce their decisions, and jobs data from the UK and Australia is also expected. A potential summit between the US and Russia may aim to discuss a ceasefire in Ukraine, amidst concerns from Kyiv and European leaders about giving up territory.
On Monday, Japan will observe Mountain Day, and Norway will release its CPI data for July. Tuesday will highlight the end of the US-China truce deadline, the RBA announcement, the UK Jobs Report, and US CPI for July. Additionally, we expect the German ZEW Survey, EIA Short-Term Energy Outlook, and OPEC’s Monthly Oil Market Report.
Economic Reports and Central Bank Announcements
On Wednesday, Germany and Spain will release final CPI data for July. Thursday will bring reports, including the Norges Bank announcement, Australian jobs data, and UK GDP. We will also see the Eurozone Flash GDP and Employment data, Swedish CPIF, and US PPI for July. By Friday, Japan’s GDP for the second quarter, Chinese activity data, and US retail sales will be announced. With rising inflation and tariff concerns, central banks are making tough decisions. The RBA is expected to cut rates, while Norges Bank is likely to keep rates steady. Economic data on jobs and inflation from Australia and the UK will play a crucial role in guiding monetary policy. We are keeping an eye on the August 12th US-China truce deadline, with a 90-day extension being the most likely outcome. However, without a formal announcement from the White House, uncertainty remains, which could lead to significant market movements. This event is essential for options traders aiming to benefit from potential volatility, especially in Chinese stocks and currency pairs. A possible meeting between Trump and Putin may happen soon, but details are unclear. The discussion will focus on Ukraine, but if it lacks important outcomes, new sanctions against Russia could emerge. This uncertainty might influence oil prices and the ruble, suggesting that traders consider protective puts or volatility strategies on related assets.Key Economic Indicators and Market Impact
All eyes are on Tuesday’s US CPI data, with predictions that the annual rate will rise to 2.8%. Previous releases this year show that a higher-than-expected number might change market expectations for a rate cut in September. Derivative traders may look for opportunities to capitalize on volatility in short-term interest rate futures around this release. The RBA is widely expected to lower its cash rate to 3.60% on Tuesday. With a 98% probability already priced into the market, a surprise hold could cause the Aussie dollar to rise sharply. While we see limited upside from the anticipated cut, options traders might consider low-cost calls on the AUD as protection against a hawkish surprise. After the RBA’s decision, the Australian jobs report will be released on Thursday. Following a disappointing rise in unemployment to 4.3%, another weak report would strengthen the case for further easing, potentially putting downward pressure on the Aussie dollar. This report is crucial for currency futures traders. In the UK, the June jobs report on Tuesday will be scrutinized for wage growth, which is expected to stay high. Despite unemployment rising to 4.7%, ongoing wage pressures make the Bank of England’s decisions more complex. This situation suggests that UK gilts and the pound sterling may experience continued volatility. UK GDP for Q2, projected to slow down to 0.1% quarterly growth from 0.7% in Q1, will be announced on Thursday. A weaker result could put pressure on UK fiscal policy and lead to the market believing that the next Bank of England rate cut won’t happen until early 2026. This ongoing economic weakness could challenge UK equity markets. Recent inflation data from China indicates ongoing deflationary pressures, with CPI at -0.1% year-on-year. Friday’s activity data is likely to show further slowdowns in industrial production and retail sales. The market’s reaction to this data will depend largely on the results of the US tariff truce deadline. To finish the week, US Retail Sales will be announced on Friday, providing insight into consumer strength. After a recent jobs report showed weaknesses through downward revisions, a miss here could raise concerns about a slowdown. This might bolster expectations for a September Fed rate cut and affect trading in both stocks and bonds. Create your live VT Markets account and start trading now.China’s consumer prices stayed stable year-on-year in July, surpassing monthly expectations amid ongoing deflation concerns.
In July, China’s consumer prices stayed the same as last year, thanks to government efforts to reduce competition. This helped ease some deflationary pressures. However, analysts warn that getting past deflation may take time and could need stronger stimulus actions.
The Consumer Price Index (CPI) for July showed no change compared to the previous year, avoiding the expected small drop. This is the second month in a row without negative readings, while expectations had been for a slight decline of -0.1% after a previous +0.1%.
China’s Economic Indicators
On a month-to-month basis, the CPI increased by 0.4%, which was higher than the expected 0.3%. This also reversed the previous month’s decline of -0.1%. Meanwhile, the Producer Price Index (PPI) fell by 3.6% year-on-year in July, marking 34 months of decreasing factory prices. To address price wars affecting company profits and wages, authorities have put measures in place, but analysts highlight ongoing problems. People are less optimistic about future prices, and the GDP deflator has dropped for nine straight quarters, the longest such decline in decades. The latest inflation figures from China show ongoing economic weakness, despite consumer prices not falling. The 34 consecutive months of declining producer prices indicate a significant lack of demand from factories, suggesting any recovery will be slow and challenging.Investment Implications
This situation looks negative for Chinese stocks, as companies are still facing strong profit pressures. Traders may want to buy put options on indices like the FTSE China A50 or the Hang Seng Index to protect against or benefit from a possible downturn. The ongoing price wars, which the government is trying to control, will keep impacting corporate profits. The extended deflation in factory prices signals weak demand for industrial goods. We’ve already seen key commodity prices, like iron ore, fall below $100 per tonne this year, reflecting a poor appetite in the industrial sector. Shorting commodity futures linked to industrial metals or buying puts on related ETFs could be wise strategies. This economic strain makes it more likely for Beijing to ease monetary policy, which would weaken the yuan. The offshore yuan has already tested the 7.40 level against the dollar multiple times in 2025, indicating market expectations for economic stimulus. We believe that shorting the yuan against the US dollar remains a strong strategy in the coming weeks. It’s essential to understand that these numbers are part of a larger picture of economic difficulty. The ongoing issues in the property sector, which began with major defaults in 2021 and 2022, continue to shake confidence. Additionally, the overall GDP deflator has been falling for nine quarters, marking the longest decline in decades. Create your live VT Markets account and start trading now.Bowman calls for multiple rate cuts by the Federal Reserve due to labor market weaknesses and an economic slowdown.
Michelle Bowman, the vice chair of supervision at the Federal Reserve, has recommended three interest rate cuts by the end of 2025. This comes after a decline in the U.S. labor market, highlighted by significant downward revisions in the July nonfarm payrolls report.
The report showed a notable decline in job growth, with May’s figures revised from 144,000 to 19,000 and June’s from 147,000 to 14,000. Bowman shared these observations at a bankers’ conference in Colorado Springs, stating that the weakening labor market poses a bigger concern than inflation risks.
Continued Economic Slowdown
Bowman expects to support three rate cuts in the remaining Federal Reserve meetings this year. She believes it’s necessary to shift towards a neutral policy stance because of the economic slowdown and declining labor market activity. Only three Federal Reserve meetings are left for this year, scheduled for September 16-17, October 28-29, and December 9-10. Bowman proposes a rate cut at each of these meetings. With significant changes upcoming from a top Federal Reserve official, market expectations for interest rates are shifting quickly. The large downward revisions to May and June job numbers indicate the labor market is weaker than we previously thought. For derivative traders, this means we need to adjust for a series of rate cuts starting as early as September. Recent inflation data supports this outlook, making rate cuts more probable. The latest Consumer Price Index (CPI) report showed that year-over-year inflation dropped to 2.8% in July, giving the Federal Reserve more reason to ease its policy. This marks a significant decrease from the higher inflation levels seen in much of 2024.Financial Market Implications
In the bond market, we should expect yields to keep falling. The 2-year Treasury yield, sensitive to Fed policy, has already dropped below 3.5% this week following this news. Traders might consider buying futures on 10-year or 30-year Treasury bonds to profit from falling rates. For equity derivatives, this scenario is generally good for stocks, as lower borrowing costs can enhance corporate earnings. We recall how sharply markets rallied in late 2023 based on expected future rate cuts. Purchasing call options on major market indices, like the S&P 500, before the September meeting could be an effective way to capitalize on this anticipated rally. The U.S. dollar may also weaken as the Fed cuts rates while other central banks hold steady. The U.S. Dollar Index (DXY) recently fell below 101 for the first time this year due to this news. There are opportunities to use currency futures or options to bet against the dollar, particularly against currencies like the euro or the Japanese yen. While the prospect of rate cuts is soothing markets for the moment, the root cause is a quickly deteriorating labor market. The CBOE Volatility Index, or VIX, has dropped to 15, but this may not last if new data points to an impending recession. Buying some inexpensive, out-of-the-money VIX calls might serve as a useful hedge against a sharper economic downturn. Create your live VT Markets account and start trading now.In July, China’s year-on-year Producer Price Index was recorded at -3.6%.
In July, China’s Producer Price Index (PPI) dropped to -3.6% year-on-year, falling short of the expected -3.3%. This information is important for understanding China’s economic situation, as it shows the changes in prices that domestic producers receive for their goods.
In financial markets, the EUR/USD pair rose above 1.1650, recovering slightly alongside a mild increase in the US Dollar. Meanwhile, the GBP/USD pair approached the 1.3450 mark, buoyed by recent decisions from the Bank of England and a general decline in US Dollar strength.
