President Donald Trump's apparent reversal on beef tariffs stood out in the North American session, as the administration searches for ways to bring down sharply higher beef prices. The announcement anchored a busy session that also delivered stronger-than-expected Canadian retail sales, robust U.S. flash PMIs, a surprise expansion of Treasury bond buybacks, and a weekly close that left the dollar mostly lower, gold surging, and Bitcoin posting its best week since March 2023.

Session headlines:

• Nasdaq and S&P indices are settling between risk/bias defining MAs as the week comes to a close
• Baker Hughes rig count -5 at 588
• European stocks rebound Friday, but weekly losses dominate
• Brazil's Lula and US Pres. Trump held phone call on Friday
• Gold surges and breaks away from its 200 day MA
• SNB Tschudin: Swiss inflation is low because of low inflation expectations
• Trump: Gets rid of 26.4% tariffs on imported beef and prices will come down by 25%
• EU consumer confidence -15.5 versus -16.3 expected
• Canada Retail sales for June 0.6% vs 0.4% estimate
• Kickstart the North American session: The USD is lower vs the 3 major currency pairs
• investingLive European markets wrap: Gold runs higher, dollar stays under pressure
• How have interest rate expectations changed after this week's events?

Trump folds on beef tariffs

One of the more interesting stories in the North American session was President Trump's apparent reversal on beef tariffs as the administration looks for ways to bring down sharply higher beef prices.

Go to a grocery store in the U.S. and a pound of ground beef can now cost around $10 for an 85/15 blend. Beef prices have risen much faster than overall food inflation, and like gasoline, beef is something American consumers buy in large quantities and notice immediately when prices rise.

That brings Brazil into the picture.

Brazil is the world's largest beef exporter. The Trump administration has used tariffs both to "generate revenue" and to "protect U.S. producers" from foreign competition. They have not protected the U.S. consumer, however, as at the same time the U.S. cattle herd has fallen. Drought, higher feed and energy costs, labor constraints (i.e. the stopping of immigrants, especially in farming), and the expense of rebuilding herds have restricted domestic beef supplies. Demand has remained relatively strong, increasing the need for imported beef.

For Brazilian beef, once the applicable low-tariff quota is exhausted, imports have generally faced a 26.4% out-of-quota tariff.

Now Trump appears ready to remove that obstacle.

Trump announced that the U.S. would allow as much as 300,000 metric tons of additional ground beef imports over the next 90 days without triggering the 26.4% out-of-quota tariff. Trump also said the imported beef would help bring prices down by around 25%.

The numbers are hard to ignore: Trump is talking about prices potentially falling by roughly 25% while removing a tariff of 26.4% on the marginal imported beef.

Adding another piece to the puzzle, Brazil acknowledged that President Luiz Inácio Lula da Silva spoke with Trump earlier in the day.

Connecting the dots, the U.S. needs additional beef supply. The domestic cattle herd is historically tight, rebuilding it takes years rather than months, and consumers are already dealing with elevated food and energy costs. Increasing imports offers the administration a quicker avenue for trying to bring ground-beef prices down.

That potentially puts Brazil, the world's largest beef exporter, in a strong position to supply some of that additional demand.

So, at least when it comes to beef, the tariff story may be coming full circle: tariffs were raised in part to protect domestic producers, but tight U.S. supplies and high consumer prices are now pushing the administration toward tariff relief to encourage more imports.

It also puts the inflation debate surrounding tariffs back into focus. Removing a 26.4% tariff specifically to facilitate cheaper imports and lower consumer prices illustrates the mechanism through which tariffs can raise the domestic cost of imported goods. That doesn't mean tariffs alone caused the surge in beef prices — the shrinking U.S. cattle herd and tight supply are major factors — but it does make the tariff itself part of the price equation, and all things being equal its removal will reduce tariff income but should lead to lower imported prices to importers who are satisfying demand.

If domestic demand cannot be met by domestic supply and tariffs are imposed on imported goods, imported inflation will make its way into prices.

The practical questions from here are mostly operational: how quickly the additional imports can move through U.S. supply chains to store shelves, and whether the tariff exemption is extended beyond its initial 90-day window.

Canada retail sales beat expectations

Canada's June retail sales came in stronger than expected, rising 0.6% versus the 0.4% forecast, while May was revised higher to +1.1%. Sales excluding autos increased 0.5%, also slightly above expectations, while sales volumes rose a solid 1.5%.

The underlying details were generally positive, with core retail sales rising 1.2% for a second consecutive month, led by general merchandise and clothing-related retailers. Motor vehicle and parts sales rose 1.0%, while gasoline station sales fell sharply.

Regionally, sales increased in seven provinces, led by Ontario, while Alberta posted the largest decline. Looking ahead, Statistics Canada's advance estimate points to another 0.8% increase in July, suggesting consumer spending maintained momentum into the third quarter.

That momentum matters beyond the data release itself: consumer spending is one of the main inputs the Bank of Canada weighs, alongside inflation, in setting its policy rate.

U.S. flash PMIs: services strength lifts composite

The S&P Global flash PMI data for August pointed to stronger overall U.S. economic activity, despite manufacturing coming in below expectations. Manufacturing PMI slipped to 53.2 versus 53.9 expected, but remained comfortably above the 50 expansion threshold.

The strength came from services, where the PMI jumped to 56.8 versus 54.0 expected, lifting the composite PMI to 56.0 from 54.5. All three measures remain in expansion territory.

S&P Global characterized U.S. business activity as the strongest in more than four years, with the surveys pointing to annualized Q3 growth approaching 3% versus 1.5% in Q2. Employment also improved, although supply disruptions and elevated price pressures remain risks.

Overall, the report suggests growth momentum has shifted from manufacturing toward the much larger services sector. As one of the earliest reads on the economy each month, the flash surveys are also a timely input for markets as they recalibrate expectations for Fed policy.

Treasury doubles long-term bond buybacks

The better economic data, the increasing budget deficits, and the insatiable demand for capital by private companies to fund AI expansion are contributing factors despite the U.S. Treasury's actions this week. On Wednesday, Treasury Secretary Scott Bessent surprised markets by doubling the size of Treasury's long-term bond buybacks, increasing the maximum purchase from $2 billion to at least $4 billion per operation.

Treasury has conducted regular buyback operations since 2024 as a liquidity-management tool for older securities, but until this week the operations were modest in scale.

The key points:

• Treasury will increase purchases of 10-year and longer-dated securities.
• The larger buybacks are scheduled to begin in September.
• Bessent indicated that the $4 billion amount could be increased further if needed.
• The purchases primarily target older, less-liquid Treasury securities.
• Buying those bonds provides support to prices and can put downward pressure on longer-term yields.

The amounts themselves are relatively small compared with the overall Treasury market. However, the announcement caught markets by surprise because it signaled that Treasury may be willing to become more active at the long end of the yield curve.

Importantly, this is not Fed quantitative easing (QE). Treasury is managing its existing debt rather than creating money to purchase securities. Still, the prospect of larger Treasury purchases helped push long-term yields lower at least temporarily, and contributed to the sharp selling pressure on the U.S. dollar. Yields today, however, did move back to the upside and yields are also higher on the week.

A snapshot of the market shows:

• 2-year: 4.240%, +5.5 bps
• 5-year: 4.426%, +3.9 bps
• 10-year: 4.736%, +3.8 bps
• 30-year: 5.276%, +3.9 bps

For the trading week:

• 2-year yield rose 6.9 basis points
• 5-year yield rose 6.6 basis points
• 10-year yield rose 4.4 basis points
• 30-year yield rose 1.5 basis points

Dollar ends a difficult week mostly lower

The U.S. dollar is ending the week mostly lower against the major currencies, with the Swiss franc the only currency against which the greenback gained on the day.

The biggest USD declines came against the commodity currencies, so called because their economies are closely tied to raw-material exports. The Australian dollar rose 0.82%, while the New Zealand dollar gained 0.52%. The Canadian dollar also strengthened, with the USD falling 0.18% against the loonie.

Elsewhere, the moves were more modest. The Japanese yen gained 0.08%, while the euro and British pound were little changed, rising 0.01% and 0.03%, respectively. The dollar's only advance was a 0.10% rise against the Swiss franc.

The mostly weaker finish caps a difficult week for the dollar, highlighted by the sharp midweek decline following the Treasury's decision to expand its long-dated bond buyback program.

Stocks rise on the day, fall for the week

U.S. stocks rose to end the week, but for the week the major indices fell.

For the trading day:

• Dow Industrial Average closed up 518.05 points, or 0.98%, at 53,282.32
• S&P closed up 33.17 points, or 0.43%, at 7,674.32
• Nasdaq index closed up 113.29 points, or 0.43%, at 26,180.45
• Russell 2000 rose 25.43 points, or 0.85%, to 3,017.87
• NASDAQ 100 rose 95.69 points, or 0.33%, to 29,308.86

For the trading week:

• Dow industrial average: -0.85%
• S&P: -1.43%
• Nasdaq index: -2.05%
• Russell 2000: -1.64%
• Nasdaq 100: -2.45%

Gold surges, Bitcoin has best week since March 2023

Gold benefited from the lower dollar this week and today, surging away from its 200-day moving average. The precious metal rose $84.21, or 1.86%, to $4,602.66. Silver was also higher, with a gain of $0.88, or 1.30%, at $68.95.

Bitcoin had its best week since March of 2023 with a gain of 25% to $78,640. The price surged by an additional 7.76% today.

Source: investingLive