Market stress signals are flashing bright
"It's quite clear that the market is in a panic," said Van Luu, global head of FX and fixed income strategy, Russell Investments.
here.
The asset manager's gauge of investor risk aversion, which incorporates pricing trends and sentiment indicators, was approaching levels last seen in September-October 2022, when global central banks started an unprecedented run of interest rate hikes.
Here's a look at just some of the indicators on investors' watchlist.
VIX JUMPS
Wall Street's closely watched fear gauge, the VIX volatility index (.VIX), opens new tab, jumped to 60 on Monday - its highest level since a global market selloff in August. It closed above 45 on Friday for the first time since the 2020 COVID-19 crisis, and jumped the most on a single day since then.
In Europe, a similar indicator -- the Euro STOXX Volatility Index (.V2TX), opens new tab -- was set for its biggest one-day surge in absolute terms since October 2008, the depths of the global financial crisis.
DOLLAR DEMAND
Demand from non-U.S. investors for dollars has surged, a typical sign that market participants need cash. The rate on three-month cross-currency basis swaps for the euro , a derivative that reflects this demand, traded around -7% from above 12.5% a week ago, its most negative since late 2023. A more negative number indicates higher demand for dollars.
JUNK IT
Junk bond spreads, which reflect the premium investors get for owning riskier corporate debt, compared to government bonds, have blown out to multi-month highs.
On Monday, the iTRAXX Crossover Index an index of five-year European junk bonds, leapt above 420 basis points in its largest one-day rise since March 2023 and to its highest since November that year and nearly 80 basis points higher than it was a week ago.
In the United States, the ICE BofA U.S. High Yield Index (.MERH0A0), opens new tab ended last week at its lowest since September, having posted its largest weekly drop since September 2022.
BANKS SLIDE
Global banks, key to the functioning of the global economy and a barometer for growth, continue to suffer steep share price falls.
European and Japanese bank stocks have shed roughly 20% of their value each in the last three trading sessions alone (.SX7P), opens new tab. Japanese banks closed 10% lower on Monday (.IBNKS.T), opens new tab, while U.S. banks slid some 15% last week in their biggest weekly drop since 2020 (.SPXBK), opens new tab.
SWAP SPREADS
The pressure building in the U.S. bond market, the world's biggest with some $28 trillion in outstanding government debt, is starting to become apparent and one sign of strain is in swap spreads. They capture the premium on the fixed side of an interest-rate swap, which investors use to hedge against rates risk relative to bond yields.
U.S. two-year swap spreads - the difference between two-year swap rates and the two-year Treasury yield - briefly dropped to almost -46 basis points on Monday before pulling back to around -24 bps -- near its tightest levels since November.
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The Independent
3 minutes ago
- The Independent
US-EU trade deal wards off further escalation but will raise costs for companies, consumers
President Donald Trump and European Commission President Ursula von der Leyen have announced a sweeping trade deal that imposes 15% tariffs on most European goods, warding off Trump's threat of a 30% rate if no deal had been reached by Aug. 1. The tariffs, or import taxes, paid when Americans buy European products could raise prices for U.S. consumers and dent profits for European companies and their partners who bring goods into the country. Here are some things to know about the trade deal between the United States and the European Union: What's in the agreement? Trump and von der Leyen's announcement, made during Trump's visit to one of his golf courses in Scotland, leaves many details to be filled in. The headline figure is a 15% tariff rate on 'the vast majority' of European goods brought into the U.S., including cars, computer chips and pharmaceuticals. It's lower than the 20% Trump initially proposed, and lower than his threats of 50% and then 30%. Von der Leyen said the two sides agreed on zero tariffs on both sides for a range of 'strategic' goods: Aircraft and aircraft parts, certain chemicals, semiconductor equipment, certain agricultural products, and some natural resources and critical raw materials. Specifics were lacking. She said the two sides 'would keep working' to add more products to the list. Additionally, the EU side would purchase what Trump said was $750 billion (638 billion euros) worth of natural gas, oil and nuclear fuel to replace Russian energy supplies, and Europeans would invest an additional $600 billion (511 billion euros) in the U.S. What's not in the deal? Trump said the 50% U.S. tariff on imported steel would remain; von der Leyen said the two sides agreed to further negotiations to fight a global steel glut, reduce tariffs and establish import quotas — that is, set amounts that can be imported, often at a lower rate. Trump said pharmaceuticals were not included in the deal. Von der Leyen said the pharmaceuticals issue was 'on a separate sheet of paper' from Sunday's deal. Where the $600 billion for additional investment would come from was not specified. And von der Leyen said that when it came to farm products, the EU side made clear that 'there were tariffs that could not be lowered,' without specifying which products. What's the impact? The 15% rate removes Trump's threat of a 30% tariff. It's still much higher than the average tariff before Trump came into office of around 1%, and higher than Trump's minimum 10% baseline tariff. Higher tariffs, or import taxes, on European goods mean sellers in the U.S. would have to either increase prices for consumers — risking loss of market share — or swallow the added cost in terms of lower profits. The higher tariffs are expected to hurt export earnings for European firms and slow the economy. The 10% baseline applied while the deal was negotiated was already sufficiently high to make the European Union's executive commission cut its growth forecast for this year from 1.3% to 0.9%. Von der Leyen said the 15% rate was 'the best we could do' and credited the deal with maintaining access to the U.S. market and providing 'stability and predictability for companies on both sides.' What is some of the reaction to the deal? German Chancellor Friedrich Merz welcomed the deal which avoided 'an unnecessary escalation in transatlantic trade relations" and said that 'we were able to preserve our core interests,' while adding that 'I would have very much wished for further relief in transatlantic trade.' The Federation of German Industries was blunter. "Even a 15% tariff rate will have immense negative effects on export-oriented German industry," said Wolfgang Niedermark, a member of the federation's leadership. While the rate is lower than threatened, "the big caveat to today's deal is that there is nothing on paper, yet," said Carsten Brzeski, global chief of macro at ING bank. 'With this disclaimer in mind and at face value, today's agreement would clearly bring an end to the uncertainty of recent months. An escalation of the US-EU trade tensions would have been a severe risk for the global economy," Brzeski said. 'This risk seems to have been avoided.' What about car companies? Asked if European carmakers could still sell cars at 15%, von der Leyen said the rate was much lower than the current 27.5%. That has been the rate under Trump's 25% tariff on cars from all countries, plus the preexisting U.S. car tariff of 2.5%. The impact is likely to be substantial on some companies, given that automaker Volkswagen said it suffered a 1.3 billion euro ($1.5 billion) hit to profit in the first half of the year from the higher tariffs. Mercedes-Benz dealers in the U.S. have said they are holding the line on 2025 model year prices 'until further notice.' The German automaker has a partial tariff shield because it makes 35% of the Mercedes-Benz vehicles sold in the U.S. in Tuscaloosa, Alabama, but the company said it expects prices to undergo 'significant increases' in coming years. What were the issues dividing the two sides? Before Trump returned to office, the U.S. and the EU maintained generally low tariff levels in what is the largest bilateral trading relationship in the world, with some 1.7 trillion euros ($2 trillion) in annual trade. Together the U.S. and the EU have 44% of the global economy. The U.S. rate averaged 1.47% for European goods, while the EU's averaged 1.35% for American products, according to the Bruegel think tank in Brussels. Trump has complained about the EU's 198 billion-euro trade surplus in goods, which shows Americans buy more from European businesses than the other way around, and has said the European market is not open enough for U.S.-made cars. However, American companies fill some of the trade gap by outselling the EU when it comes to services such as cloud computing, travel bookings, and legal and financial services. And some 30% of European imports are from American-owned companies, according to the European Central Bank.
Powys County Times
2 hours ago
- Powys County Times
US-EU deal sets 15% tariff on most goods and averts threat of trade war
The United States and the European Union have agreed to a trade deal setting a 15% tariff on most goods, US President Donald Trump announced, staving off higher import taxes on both sides that might have sent shockwaves through economies around the world. The announcement came after Mr Trump and European Commission chief Ursula von der Leyen met briefly at Mr Trump's Turnberry golf course in Scotland. Their private meeting was a culmination of months of bargaining, with the White House deadline of August 1 approaching for imposing punishing tariffs on the 27-member EU. 'It was a very interesting negotiation. I think it's going to be great for both parties,' Mr Trump said. The agreement, he said, was 'a good deal for everybody' and 'a giant deal with lots of countries'. Ms von der Leyen said the deal 'will bring stability, it will bring predictability that's very important for our businesses on both sides of the Atlantic'. Mr Trump said the EU had agreed to buy some 750 billion dollars' (£558 billion) worth of US energy and to invest 600 billion dollars (£446 billion) more in America, as well as making a major purchase of military equipment. The US leader said: 'We are agreeing that the tariff straight across for automobiles and everything else will be a straight across tariff of 15%. 'We have a tariff of 15%. We have the opening up of all of the European countries.' Ms von der Leyen said the 15% tariffs were 'across the board, all inclusive' and that 'indeed, basically the European market is open'. Before the meeting began, Mr Trump pledged to change what he characterised as 'a very one-sided transaction, very unfair to the United States'. 'I think both sides want to see fairness,' the Republican President told reporters. His EU Commission counterpart spoke of rebalancing. Ms von der Leyen said the US and EU combined have the world's largest trade volume, encompassing hundreds of millions of people and trillions of dollars. She added that Mr Trump was 'known as a tough negotiator and dealmaker'. 'But fair,' Mr Trump added. Together, the EU and the US are a market of 800 million people. And nearly 44 percent of global GDP. It's the biggest trade deal ever ↓ — Ursula von der Leyen (@vonderleyen) July 27, 2025 For months, Mr Trump has threatened most of the world with large tariffs in hopes of shrinking major US trade deficits with many key trading partners. More recently, he had hinted that any deal with the EU would have to 'buy down' the currently scheduled tariff rate of 30%. During his comments before the deal was announced, he pointed to a recent US agreement with Japan that set tariff rates for many goods at 15% and suggested the EU could agree to something similar. Asked then if he would be willing to accept tariff rates lower than that, Mr Trump said 'no'. Joining Ms von der Leyen were Maros Sefcovic, the EU's chief trade negotiator; Bjorn Seibert, the head of von der Leyen's Cabinet; Sabine Weyand, the commission's directorate-general for trade, and Tomas Baert, head of trade and agriculture at the EU's delegation to the US. The US and EU seemed close to a deal earlier this month, but Mr Trump instead threatened the 30% tariff rate. The deadline for the Trump administration to begin imposing tariffs has shifted in recent weeks but is now firm, the administration insists. 'No extensions, no more grace periods. August 1, the tariffs are set, they'll go into place, Customs will start collecting the money and off we go,' US commerce secretary Howard Lutnick told Fox News on Sunday. He added, however, that even after that 'people can still talk to President Trump. I mean, he's always willing to listen'. Without an agreement, the EU said it was prepared to retaliate with tariffs on hundreds of American products, ranging from beef and car parts to beer and Boeing planes. If Mr Trump eventually followed through on his threat of tariffs against Europe, it could have made everything from French cheese and Italian leather goods to German electronics and Spanish pharmaceuticals more expensive in the United States.
North Wales Chronicle
2 hours ago
- North Wales Chronicle
US-EU deal sets 15% tariff on most goods and averts threat of trade war
The announcement came after Mr Trump and European Commission chief Ursula von der Leyen met briefly at Mr Trump's Turnberry golf course in Scotland. Their private meeting was a culmination of months of bargaining, with the White House deadline of August 1 approaching for imposing punishing tariffs on the 27-member EU. 'It was a very interesting negotiation. I think it's going to be great for both parties,' Mr Trump said. The agreement, he said, was 'a good deal for everybody' and 'a giant deal with lots of countries'. Ms von der Leyen said the deal 'will bring stability, it will bring predictability that's very important for our businesses on both sides of the Atlantic'. Mr Trump said the EU had agreed to buy some 750 billion dollars' (£558 billion) worth of US energy and to invest 600 billion dollars (£446 billion) more in America, as well as making a major purchase of military equipment. The US leader said: 'We are agreeing that the tariff straight across for automobiles and everything else will be a straight across tariff of 15%. 'We have a tariff of 15%. We have the opening up of all of the European countries.' Ms von der Leyen said the 15% tariffs were 'across the board, all inclusive' and that 'indeed, basically the European market is open'. Before the meeting began, Mr Trump pledged to change what he characterised as 'a very one-sided transaction, very unfair to the United States'. 'I think both sides want to see fairness,' the Republican President told reporters. His EU Commission counterpart spoke of rebalancing. Ms von der Leyen said the US and EU combined have the world's largest trade volume, encompassing hundreds of millions of people and trillions of dollars. She added that Mr Trump was 'known as a tough negotiator and dealmaker'. 'But fair,' Mr Trump added. Together, the EU and the US are a market of 800 million people. And nearly 44 percent of global GDP. It's the biggest trade deal ever ↓ — Ursula von der Leyen (@vonderleyen) July 27, 2025 For months, Mr Trump has threatened most of the world with large tariffs in hopes of shrinking major US trade deficits with many key trading partners. More recently, he had hinted that any deal with the EU would have to 'buy down' the currently scheduled tariff rate of 30%. During his comments before the deal was announced, he pointed to a recent US agreement with Japan that set tariff rates for many goods at 15% and suggested the EU could agree to something similar. Asked then if he would be willing to accept tariff rates lower than that, Mr Trump said 'no'. Joining Ms von der Leyen were Maros Sefcovic, the EU's chief trade negotiator; Bjorn Seibert, the head of von der Leyen's Cabinet; Sabine Weyand, the commission's directorate-general for trade, and Tomas Baert, head of trade and agriculture at the EU's delegation to the US. The US and EU seemed close to a deal earlier this month, but Mr Trump instead threatened the 30% tariff rate. The deadline for the Trump administration to begin imposing tariffs has shifted in recent weeks but is now firm, the administration insists. 'No extensions, no more grace periods. August 1, the tariffs are set, they'll go into place, Customs will start collecting the money and off we go,' US commerce secretary Howard Lutnick told Fox News on Sunday. He added, however, that even after that 'people can still talk to President Trump. I mean, he's always willing to listen'. Without an agreement, the EU said it was prepared to retaliate with tariffs on hundreds of American products, ranging from beef and car parts to beer and Boeing planes. If Mr Trump eventually followed through on his threat of tariffs against Europe, it could have made everything from French cheese and Italian leather goods to German electronics and Spanish pharmaceuticals more expensive in the United States.
