Stocks slide as trade euphoria fades, focus shifts to Fed, earnings
While Donald Trump's agreement with the European Union on Sunday was seen as better than a tariff standoff, observers pointed out that the US president's 15 per cent levies — with none on American goods — were still much higher than before.
The pact, which followed a similar one with Japan last week, still left many worried about the economic consequences, with auto companies particularly worried.
'The 15 per cent blanket levy on EU and Japanese imports may have helped markets sidestep a cliff, but it's no free pass,' said Stephen Innes at SPI Asset Management.
'With the average effective US tariff rate now sitting at 18.2 per cent… the barrier to global trade remains significant. The higher tail risk didn't detonate, but its potential impact on the global economy hasn't disappeared either.'
And National Australia Bank's Ray Attrill added: 'It hasn't taken long for markets to conclude that this relatively good news is still, in absolute terms, bad news as far as the near term (through 2025) implications for eurozone growth are concerned.'
Traders are also keeping an eye on US talks with other major economies, including India and South Korea.
After a tepid day on Wall Street — which still saw the S&P and Nasdaq hit records — Asia turned negative.
Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Wellington, Taipei, Manila and Jakarta were all in the red.
The euro held its losses from Monday, having taken a hit from worries about the effects of the trade deal on the eurozone.
The first of two days of negotiations between top US and Chinese officials in Stockholm concluded Monday with no details released, though there are hopes they will agree to extend a 90-day truce that ends on August 12.
The two imposed triple-digit tariffs on each other earlier this year in a tit-for-tat escalation, but then walked them back under the temporary agreement reached in May.
Investors are also looking ahead to a busy few days that includes earnings from tech titans Apple, Microsoft, Meta and Amazon, as well as data on US economic growth and jobs creation.
That all comes as the Fed concludes its policy meeting amid increasing pressure from Trump to slash rates, even with inflation staying stubbornly high.
While it is expected to stand pat on borrowing costs, its post-meeting statement and comments from boss Jerome Powell will be pored over for clues about its plans for the second half of the year in light of the tariffs.
Oil prices extended Monday's rally after Trump shortened a deadline for Russia to end its war in Ukraine to August 7 or 9, following which he vowed to sanction countries buying its crude. — AFP
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