Core Viewpoint - The G7 has reached an agreement that allows U.S. companies to be exempt from certain provisions of the 2021 "global minimum tax" framework, in exchange for the U.S. government repealing a retaliatory tax provision from the "Big and Beautiful" Act [1] Group 1 - The G7 has established a "parallel system" in response to the U.S. government's agreement to eliminate the retaliatory tax proposal under Section 899 of the Trump tax and spending law [1] - U.S. Treasury Secretary Janet Yellen announced the agreement with the G7, indicating a significant shift in tax policy for American corporations [1] - The agreement reflects a collaborative effort among G7 nations to address global tax standards while accommodating U.S. corporate interests [1]

Core Viewpoint - The Trump administration is pushing for trade agreements with partner countries to eliminate the need for the "retaliatory tax" included in the tax reform bill [1] Group 1: Trade Agreements - The White House's National Economic Council Director, Hassett, stated that if countries make announcements soon, Congress could remove Section 899 of the tax reform bill this week [1] - The "retaliatory tax" increases taxes on foreign companies and investors from countries deemed to impose unfair taxes on U.S. companies, including Canada, the UK, France, and Australia [1] Group 2: Digital Services Tax - The Trump administration and Republican lawmakers have criticized the digital services tax as discriminatory [1] - It is politically popular in European countries, making it unlikely for multiple nations to suddenly eliminate or even promise to eliminate the digital services tax before Congress votes on the tax reform bill this weekend [1]

Group 1 - Goldman Sachs indicates a shift in investor preference towards euro financing, suggesting that the premium for dollar borrowing may turn into a discount due to European Central Bank policies and savings-investment dynamics across the Atlantic [1] - The report highlights that the premium for euro against dollar is driven by the slower reduction of the ECB's balance sheet compared to the Fed, and the persistent U.S. budget deficit relative to Europe's solid net international investment position [1] - Goldman Sachs also notes that the "retribution tax" clause in Trump's tax reform may weaken foreign investors' interest in U.S. assets, potentially redirecting attention back to European markets, with European investors' confidence in the continent's prospects increasing [1] Group 2 - The CEO of ING Group warns that the collapse of the Dutch government may slow down decision-making related to proposed investment initiatives in Europe, emphasizing the need for significant decisions in digital and defense infrastructure investments [2] - Danske Bank's senior analyst predicts that the yield on 30-year U.S. Treasury bonds is likely to exceed 5% due to better-than-expected employment data and anticipated Senate approval of Trump's budget proposal [3] Group 3 - Mitsubishi UFJ Morgan Stanley Securities forecasts that the yield on 10-year Japanese government bonds will fluctuate between 1.4% and 1.5%, influenced by market concerns over long-term bond demand and potential government bond issuance reductions [4] - CITIC Securities reports a continuous rise in prices of strategic metals like molybdenum and tungsten, driven by resource scarcity and increasing demand from sectors such as new energy and military, suggesting investment opportunities in these metals [5] - CITIC Securities also predicts that gold priced in U.S. dollars will continue to strengthen, reflecting broader market trends [5] Group 4 - Galaxy Securities notes that infrastructure investment growth remains high, with a broad infrastructure investment growth rate of 10.86% in the first four months of the year, and recommends focusing on growth-stabilizing sectors [6] - Huatai Securities highlights the recovery in the real estate market, recommending "three good" real estate stocks and stable property management companies, as well as monitoring policies aimed at stabilizing the market [7] - Huatai Securities anticipates a reduction in preset interest rates, which could lower costs for the insurance industry and improve sales momentum, as insurance stocks are currently undervalued [8]

Core Viewpoint - The "Beautiful Act" proposed by President Trump may undermine the recent positive investment trends in the U.S. due to its "retaliatory tax" provisions, which could deter foreign investors from U.S. assets and make European assets more attractive [1]. Group 1: Impact of the "Beautiful Act" - The "Beautiful Act" includes a provision (Clause 899) that allows the U.S. Treasury to impose a maximum tax rate of 20% on foreign investors earning income from U.S. investments [1][5]. - The proportion of European investors in U.S. investments has increased from 15% in 2009 to 45% by the end of Q4 2024, but signs indicate a potential reversal of this trend [1]. - The implementation of Clause 899 could lead to significant tax burdens on foreign entities, potentially reaching a combined tax rate of 50% for withholding and branch profits taxes [5][7]. Group 2: European Market Performance - European investor confidence is rising, with the STOXX 50 index increasing over 10% since early 2025 and the DAX index up more than 21% year-to-date [1]. - The euro has appreciated nearly 10% against the U.S. dollar since the beginning of the year, reflecting a strengthening European market [1]. Group 3: Legislative Status - The "Beautiful Act" was narrowly passed by the House of Representatives with a vote of 215 to 214 and is currently under Senate review, with expectations for completion of the legislative process between June and July [9]. - If passed, the act is projected to generate an additional $116 billion in tax revenue for the U.S. government over the next decade [7].

Group 1 - Danske Bank reports an improvement in the US dollar's performance following better-than-expected hiring data, with the 30-year US Treasury yield approaching 5% [1] - The US job market data, including ADP employment figures and initial jobless claims, will be closely monitored for further insights [1] - The 10-year Japanese government bond yield is expected to fluctuate between 1.4% and 1.5%, influenced by market concerns over long-term bond demand and upcoming significant events [2] Group 2 - Goldman Sachs indicates that Trump's "retaliatory tax" clause may weaken foreign investors' interest in US assets, potentially redirecting attention to European markets [2] - European investors' confidence is rising, with the proportion of investments in the US expected to reverse from 45% back to lower levels, as the European Stoxx 600 index has increased by 8% since early 2025 [2] - South Korea's inflation rate has slowed to 1.9% in May, below the central bank's target, providing a basis for potential monetary easing to support economic growth [3] Group 3 - HSBC economists predict that the Reserve Bank of India will lower interest rates by 25 basis points in an upcoming meeting, with another cut expected in August, bringing rates down to 5.5% [4] - The Indian central bank has room for further policy easing, focusing on interest rate tools rather than liquidity injections, with inflation projected to remain below target levels [4] - The final interest rate cut of the year may occur in December, contingent on the economic growth situation at that time [4]

Group 1: Core Insights - The "mysterious 899 clause" in U.S. tax law may escalate trade tensions into a capital war, imposing punitive tax burdens of up to 20% on foreign investors, particularly targeting countries like the EU that do not comply with U.S. trade demands [1][3] - Major Wall Street institutions warn that this clause could fundamentally alter the tax treatment of foreign capital in the U.S., being described as a "nuclear option" by the Trump administration [1][3] Group 2: Details of the 899 Clause - The 899 clause, officially known as "Enforcement Measures Against Unfair Foreign Taxes," is part of the recently passed "One Big Beautiful Bill Act" [2] - It aims to impose retaliatory taxes on non-U.S. individuals, companies, and governments from countries deemed to impose "unfair/discriminatory" taxes on U.S. entities [3] Group 3: Definition of "Discriminatory" Taxes - "Discriminatory" taxes include Digital Services Taxes (DST), Digital Profit Taxes (DPT), and low-tax profit rules under the OECD's global minimum tax framework [4] - The U.S. opposes the OECD framework, arguing it disproportionately affects American companies with significant global influence [4] Group 4: Tax Implications - The 899 clause could raise the statutory tax rate on U.S.-sourced income from interest, dividends, rents, and royalties by up to 20 percentage points for countries considered "discriminatory," increasing by 5 percentage points annually [5] - Investment portfolio interest may be exempt, but non-U.S. financial institutions relying on treaty-based exemptions could still be affected [6] Group 5: Revenue Projections - The 899 clause is expected to generate approximately $120 billion in tax revenue over ten years, equating to an annual increase of $12 billion, which is relatively minor compared to the overall U.S. tax landscape [7] Group 6: Impact on U.S. Deficit - The clause may influence foreign demand for U.S. assets, potentially helping to reduce the current account deficit, although rising yields could offset some revenue gains [8] Group 7: Legislative Uncertainty - There is uncertainty regarding the passage of the 899 clause in the Senate due to potential jurisdictional issues and the delegation of tax powers to the executive branch [9] Group 8: Affected Companies - Goldman Sachs has begun assessing the risk exposure of EU companies to the 899 clause, creating a "GS EU 899 Clause Basket" that includes firms with significant U.S. sales [10] - The basket consists of companies with an average U.S. sales exposure of about 48%, while excluding those with high U.S. ownership [10] Group 9: Market Performance and Valuation - Despite better earnings expectations for the GS EU 899 Clause Basket compared to the GS Domestic Quality Basket, its performance has weakened since early May, with current valuations still above historical ranges [12] - High trading congestion and negative earnings momentum for the GS EU 899 Basket suggest continued pressure on performance [14]