The U.S. trade deficit increased 24.4% month over month in July, to $88.6 billion, its highest level since early 2025. Although the figure was slightly below the $90.2 billion expected by the market, it confirmed a significant deterioration in the trade balance, driven by a 2.8% increase in imports and a 2.1% decline in exports.

Our Take

The widening trade deficit could weigh on U.S. growth during the third quarter. The rebound in imports suggests that domestic demand remains firm, but the decline in exports reflects a less favorable external environment and limits the expected effect of tariff policy on the trade balance. (image)

S&P Global’s composite PMI for total Eurozone activity stood at 52 points in August. This kept the pace of growth unchanged from the eight-month high recorded in July. Industrial momentum strengthened, while services managed to overcome the initial weakness caused by higher energy costs following the outbreak of the conflict in the Middle East.

Our Take The region continues to expand moderately, with improved industrial activity offsetting weaker momentum in services. The PMI’s stability reduces the risk of an immediate slowdown, but weak external demand and the increase in energy costs could limit the continuation of the recovery.

Brent crude surpassed $87 per barrel, while West Texas approached $93, amid intensifying attacks between the United States and Iran and the risk of disruptions to crude oil supplies from the Middle East. Preliminary maritime transport data showed that only four commodity vessels crossed the Strait of Hormuz, compared with an average of nearly 13 during the previous ten days.

Our Take The United States and Iran intensified their retaliatory attacks in recent days, in a scenario oscillating between a possible ceasefire and military escalation. Higher energy prices are also deepening bond sell-offs in global markets amid fears of renewed inflationary pressures.

The Bank of Japan (BOJ) will consider raising its interest rate from the current 1% at its September 18 meeting, amid persistent inflation risks and yen weakness. Although a 25-basis-point adjustment is gaining support, officials do not consider a larger increase necessary. The decision will also be closely watched in Washington, after Scott Bessent expressed his preference for higher rates in Japan during the G20 and in his meeting with Kazuo Ueda.

Our Take The BOJ’s caution contrasts with increasingly explicit pressure from Washington. This tension, together with uncertainty over the pace of monetary normalization, will keep yen volatility elevated even after the September decision.

Later, at 8:00 a.m., the U.S. services ISM for August will be released. The market consensus expects the indicator to come in at 54.4 points, slightly above the 54.1 recorded in July. If confirmed, the result would point to an economy that continues to show resilience during the second half of the year.

Our Take We expect the indicator to confirm moderate growth in the services sector, although without significant acceleration. Attention will focus on the activity, new orders and prices components, particularly the latter, given its relevance for assessing inflationary pressures.

Corporate News

Broadcom disappointed investors, despite presenting an ambitious outlook for its artificial intelligence business. The company projected that AI chip revenue will double to $115 billion in fiscal 2027 and double again to $230 billion in 2028. The negative market reaction suggests that these forecasts were already partially priced in and that investors were looking for stronger signals on profitability, new customers and execution capacity.

Snowflake shares rose as much as 24% after the software company raised its sales forecast, supported by rapid adoption of its AI-assisted coding tool. The result confirms that AI tools applied to developer productivity continue to find strong demand.

Elliott Investment Management accumulated a substantial stake in Deutsche Telekom and called on the German company to abandon a potential merger with its U.S. subsidiary, T-Mobile US. The activist fund’s stance increases pressure on management and raises the question of whether the deal would truly create value for shareholders or add greater complexity to the group’s structure.

The “to-do list”

  • Review the August services ISM at 8 a.m., ahead of tomorrow’s nonfarm payrolls report.

  • Track the yen’s performance following today’s jump, as well as any additional signals regarding the Bank of Japan’s September 18 decision.

  • Monitor Brent’s reaction to the back-and-forth rhetoric between Trump and Iran, as well as the impact of record gasoline and diesel prices in the U.S.

  • Dedicate 30 minutes to a climbing session at an indoor climbing gym or to pull-ups and lat pulldowns at home, exercises that work the entire upper body.

  • Remember that today marks another anniversary of the 1934 founding of the Fondo de Cultura Económica by Mexican intellectual Daniel Cosío Villegas.

Quote of the day…

"Imagination is more important than knowledge."

— Albert Einstein