Geopolitical Developments & Market Impact - A 20-point proposal for a Gaza ceasefire, agreed upon by U S President Trump and Israeli Prime Minister Netanyahu, awaits Hamas approval, potentially impacting regional stability and oil markets [1][5][38] - Qatar's role as a key mediator between Israel and Hamas is crucial for the ceasefire, requiring a face-saving gesture, such as Israel expressing regret for a past attack [8][9][10] - The Israeli Shekel has strengthened against the USD by approximately 10% this year, reflecting the impact of geopolitical developments on local markets [46] - RBA (澳大利亚储备银行) holds cash rate at 36%, notes uncertainties in global environment and upside risks to inflation [40][41][42][43] Economic & Financial Market Trends - Looming U S government shutdown raises market risk, potentially delaying crucial jobs data release and impacting monetary policy assessment [2][3][23][25][44] - Gold hits record highs, massively outperforming Bitcoin, driven by uncertainty and a pullback in USD, with potential for further gains amid Fed rate cuts [3][4][23][32][33][44] - The market has aggressively priced in 3-4 rate cuts by June 2026, making upcoming jobs market data pivotal for determining monetary policy [27] - Potential tariffs on imports of timber and lumber, particularly impacting Canada, add to market uncertainty [23][39] - MSCI China is logging five-month gains, the longest streak since 2018, driven by better-than-expected PMI data and geopolitical signals [48] Energy Sector - Brent crude oil is slipping down by 08% ahead of the OPEC Plus meeting, where increased supply is expected [4] - The oil market is bearish due to well-supplied conditions, with focus on Iran snapback and Russia-Ukraine conflict, leading to investment in gold over oil [52][53] - Afentra is cautious about oil price volatility, focusing on a strong balance sheet and strategic acquisitions [64][65][66] - Nigeria's government intervenes to resolve a clash between the petroleum and natural gas association and oil labor group, potentially impacting crude production of 650 thousand barrels a day [76][77][78]

Market Trends & Capital Flows - A significant asset allocation shift away from the US dollar in international portfolios was observed, particularly into European equities, leading to their outperformance [2] - This asset allocation shift was most aggressive from March to June, with Asia following later, peaking in June [3][6] - The US dollar has stabilized in the last six weeks [7] Monetary Policy & Economic Factors - The Federal Reserve's actions will define the next move for the US dollar [3] - The Fed faces a tricky balancing act between unemployment and inflation [4] - The market is closely watching the labor market to determine if the Fed will cut rates [7] - A hawkish rate cut is expected in September, but the Fed is unlikely to commit to a multi-cut path due to inflation concerns [9] - Tariffs are expected to increase again by October, potentially impacting inflation [8] US Dollar & Government Influence - The US Treasury Secretary has expressed a desire for a weaker US dollar [10] - The US influence on the dollar is primarily through verbal interventions rather than direct control like China [11][12] - The cyclical state of the US relative to the rest of the world will ultimately determine the dollar's value [12] - The tariff push is expected to be paid for mostly by consumers, potentially leading to a decrease in consumption towards the end of the year [13]

Investment Rating - The report indicates a negative impact on European equities due to Section 899, with an estimated decline of 1-2% in the first year and up to 5% over a four-year horizon [10] Core Insights - Section 899 introduces retaliatory tax measures against non-US individuals and entities from countries imposing "unfair foreign taxes" on US persons, which could discourage foreign investment in US assets [2][8] - The withholding tax for listed companies will start at 5% and increase by 5 percentage points annually to a maximum of 20%, affecting both active business income and passive income [3] - European equities, particularly those with significant US operations, are notably exposed, with the STOXX 600 deriving approximately 25% of its revenues from the US [10] - The report suggests that Section 899 may catalyze renewed interest in European equities as international investors may reduce their appetite for US assets [19] Summary by Sections Tax Mechanics - The withholding tax will apply to both active business income and passive income, starting at 5% and increasing annually [3] Affected Entities - Non-US individuals and entities in countries with UTPRs, DSTs, or DPTs will be affected, including foreign governments, sovereign wealth funds, and foreign corporations [4] Impact on European Equities - Earnings for the STOXX 600 could be revised down by 1-2% in the first year and by as much as 5% over four years, translating to a potential decline in European equities [10] - Companies with high US exposure have begun to reflect growing investor concerns, with a specific subset (GSXES899) particularly vulnerable to Section 899 [13] Investment Strategy - The report recommends focusing on quality domestic exposures in Europe, highlighting sectors such as Banks, Retail, and Telecoms for overweight positions [14]