Dollar rises on EU-US trade deal but European stocks turn sour

The Australian

a day ago

The dollar jumped Monday on the back of the US-EU trade deal struck on the weekend, but European stock markets dipped, reflecting unease at terms viewed as lopsided.
New York's main indices were mixed, with the Dow opening lower, while the broader S&P 500 rose, and the tech-heavy Nasdaq extended its bullish run.
In Europe, Paris and Frankfurt dipped, wiping out early gains.
London -- which is outside the EU -- also slid.
The European Commission defended the deal it negotiated on behalf of the bloc as "better than a trade war with the United States" -- and better than the 30 percent tariffs President Donald Trump had been threatening.
But several EU countries expressed unhappiness with the agreement's 15 percent tariffs on most EU exports to the United States -- but with no extra ones on US goods entering the EU.
French Prime Minister Francois Bayrou slammed the deal as a "dark day" for Europe. Spanish Prime Minister Pedro Sanchez said he backed it, but "without any enthusiasm".
"While the deal has avoided a much worse outcome for now, it remains to be seen whether it will last," cautioned Jack Allen-Reynolds, a eurozone economist at Capital Economics.
He said average US tariffs on EU imports would now rise to around 17 percent, up from 1.2 percent last year. "We think this will reduce EU GDP by about 0.2 percent."
Oil prices rose strongly on relief that Washington's tariffs on the EU -- the world's second-biggest economy, whose bilateral trade with the United States amounts to $1.9 trillion a year -- were contained.
"Investors expect reduced tariffs will support global growth and, in turn, lift energy demand," said David Morrison, senior market analyst at Trade Nation.
Trump will likely point to the money raised from the tariffs, Morrison said, "but the big question is who pays the extra tax, and how will that affect future trade and consumer spending?"
While there was relief that uncertainty had been reduced by the deal, Allen-Reynolds said Trump's volatility meant it had not been removed.
"President Trump could still change his mind even after the deal has been finalised and signed," he said. "So uncertainty is likely to remain high for the foreseeable future."
- US-China talks -
Trump has set a baseline 10-percent tariff on imports for most other US trading partners, and higher ones on others, including China.
Monday saw the start of a fresh round of trade negotiations between China and the United States ahead of the end of a 90-day truce between the economic superpowers.
An April agreement brought down triple-digit tariffs each country had imposed on the other, to a level of 30 percent for China's exports to the United States, and 10 percent for US ones to China.
But that accord runs out on August 12.
Shares in European companies tracked the unease at the EU-US deal.
Volkswagen, BMW and Porsche all lost more than three percent, and Germany's main auto industry group, the VDA, warned the 15 percent tariff "burdens" EU carmakers.
As part of the deal, Trump said the 27-nation bloc had agreed its companies will purchase "$750 billion worth of energy" from the United States, as well as make $600 billion in additional investments.
In Paris, shares in Pernod Ricard, which exports wine and spirits to the United States, fell more than three percent.
"There remains a prevailing sense that the agreement does not constitute a significant win," said Jochen Stanzl, Chief Market Analyst at CMC Markets.
Traders were prepared for a busy week in the United States, with a slew of corporate earnings reports -- including from Apple, Microsoft, Meta and Amazon -- and macro data readings coming their way giving indications about US jobs and growth.
The Federal Reserve is expected to keep interest rates unchanged at its meeting this week, with investors focused on its outlook for the rest of the year given Trump's tariffs and recent trade deals.
- Key figures at around 1545 GMT -
New York - Dow: DOWN 0.1 percent at 44,878.84 points
New York - S&P 500: UP 0.1 percent at 6,397.02
New York - Nasdaq Composite: UP 0.3 percent at 21,178.79
London - FTSE 100: DOWN 0.4 percent at 9,082.95
Paris - CAC 40: DOWN 0.1 percent at 7,828.43
Frankfurt - DAX: DOWN 0.6 percent at 24,080.06
Tokyo - Nikkei 225: DOWN 1.1 percent at 40,998.27 (close)
Hong Kong - Hang Seng Index: UP 0.7 percent at 25,562.13 (close)
Shanghai - Composite: UP 0.1 percent at 3,597.94 (close)
Euro/dollar: DOWN at $1.1638 from $1.1738 on Friday
Pound/dollar: DOWN at $1.3418 from $1.3431
Dollar/yen: UP at 148.19 yen from 147.68 yen
Euro/pound: DOWN at 86.72 pence from 87.40 pence
Brent North Sea Crude: UP 2.7 percent at $69.44 per barrel
West Texas Intermediate: UP 2.8 percent at $66.94 per barrel
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