European stocks gain, euro dips after US-EU strike trade deal
The STOXX 600 opened 0.7% higher and the euro was down 0.3% against the dollar at the start of what looks set to be a pivotal week in U.S. President Donald Trump's global trade war.
The framework deal, which European Commission President Ursula von der Leyen described as the best the bloc could get, will impose a 15% import tariff on most EU goods and see the EU spend $600 billion on U.S. investments while opening up some important parts of its market.
"The deal is better than the 30%-50% tariff rates threatened over the last couple of months, although it is probably as bad as the universal tariff rates being discussed late last year," ING analyst Chris Turner said.
While the U.S.-EU deal averts a more damaging standoff between the two blocs, which account for almost a third of global trade, a number of European capitals complained it was lopsided in favour of Washington.
Other major economies are still scrambling to finalise deals ahead of Trump's August 1 deadline. Talks between the U.S. and China taking place in Stockholm on Monday are expected to extend their trade truce for another 90 days, while Europe's deal comes hot the heels of one struck with Japan last week.
MUFG FX strategist Derek Halpenny said the EU deal was ultimately, "good news from a financial markets perspective as it reduces uncertainty further still ahead of 1st August, which is now looking like an insignificant date."
Prashant Newnaha at TD Securities meanwhile called it "a big win for the U.S." given the forced purchases of U.S. energy and military equipment and "zero tariff retaliation by Europe".
Germany's exporter-heavy DAX, France's CAC 40 , Italy's FTSE MIB and Spain's IBEX were all up between 0.4% and 0.8% after the first hour of trading, while S&P 500 and Nasdaq futures pointed to fresh record highs on Wall Street when it resumes.
The euro had initially strengthened when Asian markets reopened, but it steadily dropped into the red as the dollar nudged higher across the board.
Euro area government bond yields, which are a proxy for borrowing costs, also edged down.
Germany's 10-year yield, the euro area's benchmark, was 0.5 basis points lower at 2.71%, after rising more than 10 basis points at the end of last week when the European Central Bank curbed talk of imminent rate cuts.
FED, BOJ AWAIT
Overnight in Asia, MSCI's broadest index of regional shares ended 0.3% weaker with Japan's Nikkei falling back more 1% after it hit a one-year high last week.
The Australian dollar, often seen as a proxy for global risk appetite, was at $0.657, hovering around the near eight-month peak it had scaled.
In an action-packed week, traders are also waiting for interest rate decisions from both the U.S. Federal Reserve and Bank of Japan, monthly U.S. non-farm payrolls and earnings from megacap companies Apple, Microsoft and Amazon .
While the Fed and the BOJ are expected to maintain rates, comments from the officials will be crucial for investors to gauge the interest rate path. The trade deal with Japan has opened the door for the BOJ to raise rates again this year.
Meanwhile, the Fed is likely to be cautious on any rate cuts as officials seek more data to determine the impact of tariffs on inflation before they ease rates further.
But tensions between the White House and the central bank over monetary policy have increased, with Trump repeatedly lashing out at Fed Chair Jerome Powell for not cutting rates. Two of the Fed Board's Trump appointees have articulated reasons for supporting a rate cut this month.
In commodities, oil prices rose after the U.S.-EU trade agreement. Brent crude futures and U.S. West Texas Intermediate crude both rose 0.5%.
Gold prices dribbled down 0.1% to $3,334 an ounce - their lowest in nearly two weeks on reduced appetite for traditional safe havens. - Reuters
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
22 minutes ago
- The Star
4 European flagship airlines resume flights to Israel
JERUSALEM, Aug. 1 (Xinhua) -- Three European national airlines resumed flights to Israel on Friday, joining Bulgaria Air, which restarted operations a day earlier. Flights operated by Germany's Lufthansa from Frankfurt and Munich, Austrian Airlines from Vienna, and LOT Polish Airlines from Warsaw landed at Israel's Ben Gurion Airport outside Tel Aviv. The airlines suspended their services after the fighting between Israel and Iran in June, when the Israeli airspace was temporarily closed. This month, Air Seychelles, the national airline of the Republic of Seychelles, Hungarian low-cost carrier Wizz Air, as well as Belgium's flag carrier Brussels Airlines are also expected to resume flights to Israel. On June 13, Israel launched major airstrikes on several areas in Iran, including nuclear and military sites, killing senior commanders, nuclear scientists, and civilians. Iran responded with multiple waves of missile and drone attacks on Israel. Following 12 days of war, a ceasefire between Iran and Israel was achieved on June 24.
The Star
2 hours ago
- The Star
US, NATO developing novel funding mechanism for Ukraine weapons transfers
WASHINGTON (Reuters) -The United States and NATO are working on a novel approach to supply Ukraine with weapons using funds from NATO countries to pay for the purchase or transfer of U.S. arms, according to three sources familiar with the matter. The renewed transatlantic cooperation on Ukraine comes as U.S. President Donald Trump has expressed frustration with Moscow's ongoing attacks on its neighbor. Trump, who initially took a more conciliatory tone toward Russia as he tried to end the more than three-year war in Ukraine, has threatened to start imposing tariffs and other measures if Moscow shows no progress toward ending the conflict by August 8. The president said last month the U.S. would supply weapons to Ukraine, paid for by European allies, but did not indicate how this would be done. NATO countries, Ukraine, and the United States are developing a new mechanism that will focus on getting U.S. weapons to Ukraine from the Priority Ukraine Requirements List, known under the acronym PURL, the sources said. Ukraine would prioritize the weapons it needs intranches of roughly $500 million, and NATO allies - coordinated by NATO Secretary General Mark Rutte - would then negotiate among themselves who would donate or pay for items on the list. Through this approach, NATOallies hope to provide $10 billion in arms for Ukraine, said a European official, speaking on condition of anonymity. It was unclear over what timeframe they hope to supply the arms. "That is the starting point, and it's an ambitious target that we're working towards. We're currently on that trajectory. We support the ambition. We need that sort of volume," the European official said. NATO declined to comment. The White House, Pentagon, and Ukrainian embassy in Washington did not respond to requests for comment. Russian forces are gradually advancing against Ukraine, and control one-fifth of Ukraine's territory. FASTER ARMS RESTOCKING If a NATO country decides to donate weapons to Ukraine, the mechanism would allow that country to effectively bypass lengthy U.S. arms sales procedures to replenish its own stocks, said one U.S. official, speaking on condition of anonymity. But the NATO country would have to pay the U.S. up front for the speedier replenishment. The money would be paid into a U.S.-held account, possibly at the U.S. Treasury Department, or to an escrow fund, although the exact structure remains unclear, the official said. NATO countries also have the option of simply paying the United States to send weapons directly to Ukraine. In that case, the payment could be made via NATO or directly to the U.S. Department of Defense, said a second source, speaking on condition of anonymity. This would be in addition to the United States' own effort to identify arms from U.S. stockpiles to send to Ukraine under the Presidential Drawdown Authority, which allows the U.S. president to draw from current weapons stocks to help allies in an emergency. At least one tranche of weapons for Ukraine is currently being negotiatedunder the new mechanism, two sources said, though it was unclear if any money has yet been transferred. Trump's fellow Republicans in Congress have introduced legislation, known as the PEACE Act, that aims to create a fund at the U.S. Treasury in which allies can deposit money that would pay to replenish U.S. military equipment donated to Ukraine. Ukraine's needs remain consistent with previous months - air defenses, interceptors, systems, rockets, and artillery. The last statement of need from Ukraine came at the July 21 Ramstein conference led by EU allies, including Britain. (Reporting by Gram Slattery, Mike Stone, Phil Stewart in Washington; additional reporting by Patricia Zengerle in Washington and Andrew Gray in Brussels; editing by Michelle Nichols and Rod Nickel)
The Star
3 hours ago
- The Star
South Africa continues tariff negotiation with U.S.
JOHANNESBURG, Aug. 1 (Xinhua) -- With a 30-percent tariff imposed by the United States set to take effect, South African President Cyril Ramaphosa on Friday pledged to pursue all diplomatic efforts to safeguard the national interests. According to a statement released by the presidency, South Africa will continue to negotiate with the United States regarding the 30 percent tariff, which is now expected to take effect at 12:01 a.m. EDT (0401 GMT) on Aug. 7. The South African government has presented the U.S. side with a framework deal aimed at enhancing mutually beneficial trade and investment relations. "All channels of communication remain open to engage with the United States, and our negotiators are ready, pending an invitation from the United States," the presidency said in the statement. The presidency noted that the South African government is finalizing a package to support companies vulnerable to reciprocal tariffs, which includes several measures to assist firms, producers, and workers. "South Africa will continue to pursue all diplomatic efforts to safeguard its national interests," said the presidency. On Tuesday, the South African government acknowledged that "the intersection of geopolitical, domestic and trade issues" defines the current impasse between the two sides. Relations between South Africa and the United States have taken a downturn since U.S. President Donald Trump took office in January. Trump indicated that he may skip the Group of 20 Summit, which will be held in November in Johannesburg, the largest city and economic hub of South Africa.
