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European stocks up, dollar steady, even as tariff deal deadline looms

The dollar was largely unchanged on Wednesday as market sentiment was dominated by uncertainty over U.S. president Donald Trump's plans for tariffs and his negotiations with China.

Trump has set a deadline of Wednesday for trading partners to submit proposals for trade agreements in order to avoid the "Liberation Day Tariffs" from coming into effect within five weeks.

The U.S. also increased its tariffs on aluminium and steel on Wednesday. These higher tariffs apply to all trading partners except for Britain, the only country that has reached a preliminary agreement.

The dollar-denominated MSCI All-Country Index climbed to a new record high. This was largely due to the recent weakness of the U.S. dollar. However, trading remained low as investors awaited news on a potential phone call between Trump, and Chinese leader Xi Jinping.

Trump's social media post before the opening of European markets hurt sentiment.

Trump wrote in a Truth Social post that he liked President Xi, "but he's VERY TOUGH and EXTREMELY DIFFICULT TO DEAL WITH."

At 0956 GMT the pan-European STOXX 600 rose 0.5%, while Germany's DAX rose 0.8%.

The dollar index was unchanged at 99.171, while the euro rose 0.1% to $1.1383.

Amelie Derambure is a Senior Multi-Asset portfolio manager at Amundi, based in Paris. She was surprised by the relative calm on the markets regarding the threat of tariffs.

She said, "To me, there is a very clear willingness on the part of the markets to believe that the Trump administration won't be able to stop U.S. economic growth at the end."

Derambure stated that there may be more changes in the behaviour of traders as tariffs near their implementation.

She said, "I believe we can expect a higher level of volatility in the days to come up until the end of the tariff pause."

Investors have fled U.S. assets this year in search of safe-havens such as gold and other currencies. They expect that trade uncertainty will have a negative impact on the global economic climate.

The traders are waiting to see what data the U.S. releases later in the day will reveal about how tariffs affect companies, before Friday's monthly payroll data.

Derambure, from Amundi, said: "The market believes that the constant back and forth, the uncertainty hasn't had a major impact on the behaviour of firms at the moment."

This can change relatively quickly if this assumption changes for any reason. It could be because the data is weaker or that some companies change their advice or are more concerned.

The benchmark German Bund yield increased by 3 basis points to 2.533%.

The European Central Bank begins its two-day meeting on Wednesday. After data showed that inflation fell below ECB target of 2% in May, the central bank will likely cut rates and continue to ease monetary policy on Thursday.

PMI data shows that the growth of euro zone businesses slowed in May.

Brent crude futures rose 0.3% to $65.85 as supply pressure from wildfires in Canada offset concerns over output increases.

The weaker dollar and trade tensions helped gold to rise 0.3% in the last day, reaching $3,361.65.

(source: Reuters)