Stocks rise, euro firms after US-EU trade agreement
The U.S. struck a framework trade agreement with the European Union, imposing a 15% import tariff on most EU goods - half the threatened rate, a week after agreeing to a trade deal with Japan that lowered proposed tariffs on auto imports.
Countries are scrambling to finalise trade deals ahead of an August 1 deadline set by U.S. President Donald Trump, with talks between the U.S. and China set for Monday in Stockholm amid expectations of another 90-day extension to the truce between the world's top two economies.
"A 15% tariff on European goods, forced purchases of U.S. energy and military equipment and zero tariff retaliation by Europe, that's not negotiation, that's the art of the deal," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities. "A big win for the U.S."
S&P 500 futures rose 0.4% and the Nasdaq futures gained 0.5% while the euro firmed across the board, rising against the dollar, sterling and yen. European futures surged nearly 1%.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab was up 0.27%, just shy of the almost four-year high it touched last week. Japan's Nikkei fell 0.8% after hitting a one-year high last week.
While the baseline 15% tariff will still be seen by many in Europe as too high, compared with Europe's initial hopes to secure a zero-for-zero tariff deal, it is better than the threatened 30% rate.
The U.S.-EU deal provides clarity to companies and averts a bigger trade war between the two allies that account for almost a third of global trade.
"A major tail-risk has now been defused," said Marc Velan, head of investments at Lucerne Asset Management in Singapore.
"Markets are interpreting this as a sign of stability and predictability returning to trade policy," he added. "The China delay fits the same pattern: the administration is opting for controlled diplomacy over confrontation."
China's blue-chip stocks (.CSI300), opens new tab rose 0.3% while the Hong Kong's Hang Seng index (.HSI), opens new tab advanced 0.75%.
The Australian dollar , often seen as a proxy for risk appetite, was at $0.657, hovering around the near eight-month peak scaled last week.
In an action-packed week, investors will watch out for the monetary policy meetings from the Fed and the BOJ as well as the monthly U.S. employment report and earnings from megacap companies Apple (AAPL.O), opens new tab, Microsoft (MSFT.O), opens new tab and Amazon (AMZN.O), opens new tab.
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 tariffs' impact 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.
"Inflation readings, particularly the PCE index, and the upcoming July jobs report will shape expectations beyond this meeting, with the next likely policy pivot now pushed out to September if inflation continues to ease," said Kieran Williams, head of Asia FX at InTouch Capital Markets.
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 fell on Monday to their lowest in nearly two weeks on reduced appetite for safe havens.
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The last minute addition to his schedule has Trump going toe-to-toe with a top European leader days after he said there was a 'fifty-fifty' chance of reaching a trade deal. If Trump wanted to send a message about what kind of contender she was dealing with, he posted a short video of himself swinging a driver at one of the tees on his Turnberry course. Trump also put in plug by golf legend Gary Player, quoting him as saying 'Turnberry is, without a question, in the Top Five Greatest Golf Courses I've ever played in my 73 years as a pro.' 'Thank you, Gary!' Trump added. Not all of his musings were upbeat – on a trip that Trump began by railing against wind turbines and illegal immigration. Trump used his site to fire at Democrats about the 2024 election, after spending part of the week accusing President Barack Obama of 'treason' after his administration released declassified documents about Russian election interference intelligence assessments. 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