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European stocks gain, euro dips after US-EU strike trade deal
The euro dropped in the early hours of trading on Monday, as investors welcomed a trade deal between the United States an the European Union. The STOXX 600 index opened 0.7% higher, and the euro was 0.3% lower against the dollar. This is the beginning of what appears to be an important week for President Donald Trump's trade war with the rest of the world. The EU will spend $600 billion in U.S. investment and impose a 15 percent import tariff on the majority of EU goods. It will also open up important parts to its market. Chris Turner, an ING analyst, said: "The deal is much better than the 30%-50% tariff rate that was threatened in the last few months. However, it is likely to be as bad as universal tariff rates discussed late last year." The U.S./EU agreement averts a potentially damaging standoff between two blocs that account for almost a quarter of global trade. However, a number European capitals have complained about its lopsidedness in favor of Washington. There are still major deals to be finalised before Trump's deadline of August 1. The U.S.-China talks in Stockholm, Sweden on Monday will likely extend the 90-day trade truce. Meanwhile, the deal struck by Europe and Japan last week is expected to be followed closely by the one reached between Europe and the U.S. MUFG FX Strategist Derek Halpenny stated that the EU deal is ultimately "good news for financial markets as it further reduces uncertainty ahead of the 1st August which now looks like an insignificant day." Prashant Nnewnaha, TD Securities, called it "a huge win for the U.S." due to the forced purchase of U.S. military and energy equipment as well as "zero tariff retaliation" by Europe. After the first hour, Germany's exporter heavy DAX, France’s CAC40, Italy’s FTSE MIB, and Spain's IBEX all rose between 0.4% to 0.8%. Meanwhile, S&P500 and Nasdaq Futures point towards new Wall Street record highs when trading resumes. As the dollar grew across the board, the euro began to fall. The yields on government bonds in the Eurozone, which is a proxy for borrowing cost, have also been pushed down. The benchmark yield for the euro zone, Germany's 10-year bond, fell 0.5 basis points to 2.71%. It had risen more than 10 basis point at the end last week, when the European Central Bank tempered talk of impending rate cuts. FED, BOJ AWAIT Overnight, MSCI’s broadest regional share index ended 0.3% lower. Japan’s Nikkei fell more than 1% from its one-year high set last week. The Australian dollar was trading at $0.657 and hovered around its near eight-month high. The week ahead is packed with action as traders await the interest rate decisions of both the U.S. Federal Reserve Bank and Bank of Japan. They also wait for monthly U.S. Non-Farm Payrolls, and earnings from megacap companies Apple and Microsoft. Investors will need to pay attention to the comments of officials to determine the future interest rate path. The BOJ can now raise rates this year because of the trade agreement with Japan. The Fed will likely be cautious about any further rate cuts, as they are awaiting more data on the impact of tariffs and inflation to make a decision. Trump has repeatedly criticized Fed Chairman Jerome Powell's refusal to cut rates. Two Trump-appointed members of the Fed Board have outlined reasons to support a rate reduction this month. Oil prices have risen in commodities after the U.S. EU trade agreement. Brent crude futures as well as U.S. West Texas Intermediate crude rose both by 0.5%. Gold prices fell 0.1% to $3334 per ounce, their lowest level in two weeks due to a reduced appetite for safe-havens.
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Gold prices are impacted by the risk-on sentiment following the US-EU tariff agreement, with Fed in focus
The gold price was stable on Monday. Gains were curtailed by an improved risk outlook following a trade agreement between the United States of America and the European Union. Investors looked forward to upcoming U.S. Federal Reserve meeting this week. As of 0736 GMT spot gold was unchanged at $3,336.75 an ounce, after reaching its lowest level since 17th July earlier in the day. U.S. Gold Futures remained unchanged at $3.336.20 per ounce. On Sunday in Scotland, the U.S. and the European Union reached a framework agreement that imposed a 15% tariff on the majority of EU goods. This is half the rate threatened. It also averted a larger trade war. The risk appetite on the financial markets has increased, with European shares rising to a record high of four months. This was led by auto and pharmaceutical stocks. The United States and China will meet in Stockholm on Monday amid hopes of a 90-day extension of the truce to the trade war between the two world's largest economies. Gold is in equilibrium because of two factors. "The (U.S. EU) trade deal weighs down on demand for safe haven assets," said UBS commodities analyst Giovanni Staunovo. The deal also removes uncertainty about inflation for the Fed and allows the Fed to reduce rates later in the year. This is normally gold-supportive. After its two-day meeting, the U.S. Central Bank is expected to keep its benchmark rate at 4.25%-4.50% after Wednesday's conclusion. The markets continue to price-in a possible rate cut in September. Donald Trump, the U.S. president, said on Friday that he met with Fed chair Jerome Powell and had a good meeting. He suggested Powell might be inclined towards lowering interest rates. In an environment of low interest rates, gold tends to perform well. Silver spot gained 0.3%, to $38.23 an ounce. Platinum was unchanged at $1,402.48. Palladium grew 2%, to $1,244.73.
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World Bank to focus on climate and gender in Pacific Islands that rely on aid
Anna Bjerde, the managing director of operations at the World Bank, said this on a recent visit to Australia. This is despite the fact that the United States, its largest shareholder, has reduced its aid in these areas. Bjerde, who met with Pacific Islands' economic ministers in Fiji said that countries in the area continue to be concerned about the effects of climate changes and have grave concerns over food security and increasing debt levels. The bank warns that six Pacific Island nations are at risk of high debt distress. She said that the World Bank will be moving a regional Vice President from Washington to Singapore and directors from Australia to Fiji, Papua New Guinea and Papua New Guinea in order to be closer a $3.4 billion Pacific Aid Programme, which has grown seven times in 10 years. We are committed to developing projects that take into consideration the vulnerability of countries in which we work. She said that countries in this region of the world are particularly vulnerable to climate change. She added, "We haven't changed our language in relation to that." Bjerde stated that Pacific road projects designed for flood resilience provide better infrastructure to withstand climate change and can also be included in climate finance programs. She said that the World Bank is focused on increasing women's participation in the workforce to boost the economic growth of the region. This was after she met with women leaders from Fiji, who stressed the importance of childcare for women so they can work. Bjerde met with officials of the Australian government on Monday. Australia is the largest bilateral donor in the region. The World Bank, under the reforms implemented last year by Ajay Bana as its president, has begun to implement regional programmes in order to make a greater impact on Pacific countries with smaller populations. Eight countries are part of an agreement that prevents small island states from being cut off by the international financial system. A health programme aimed at non-communicable diseases will reach up to 2 million people in the Pacific Ocean, and 16,000 health professionals. She said a trade program is being developed to provide goods more quickly and at a lower cost. Reporting by Kirsty Mayberry in Sydney, editing by Kate Mayberry
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Coking coal withdraws from profit-taking activities
The prices of coking coal futures declined in China on Monday as investors liquidated their long positions in order to take advantage of the dramatic rise in the price. Coking coal, the most traded commodity on China's Dalian Commodity Exchange(DCE), closed daytime trading 11% lower. It hit a limit of 1,100.5 Yuan ($153.47 per metric ton). The price of coking coal reached the daily limit in five consecutive trading sessions. Last week, it gained 33%. The Dalian exchange announced a drop in price, ending a seven-day rally fueled by expectations of a reduction in supply after the National Energy Administration had ordered inspections at major coal production hubs for the purpose of checking excess production. After the Dalian Exchange imposed restrictions on holding positions, some investors liquidated their long positions in order to avoid risks, resulting in an abrupt price drop, said Zhou Tao. An analyst with broker Galaxy Futures. Coke has also fallen 7.98%. Markets bet Beijing was finally serious in addressing overcapacity, and prices of commodities such as coking coal, coke, and other raw materials have soared in the last month. Iron ore, a key ingredient in steelmaking, also weakened on Monday as investors waited for clear signals from the upcoming Politburo high-level meeting that is expected to take place by the end of July and the new trade talks between two of the world's largest economies. As of 0723 GMT, the most traded September iron ore contract was 1.75% less than the previous day's closing price at 786 yuan per ton. The benchmark September iron on the Singapore Exchange fell 2.31%, to $100.9 per ton. The Shanghai Futures Exchange's steel benchmarks have fallen due to lower raw material costs. Rebar fell 2.05%, while hot-rolled coils dropped 2.3%. Wire rods also declined 2.92%, and stainless steel fell 0.73%. $1 = 7.1707 Chinese Yuan (Reporting and editing by Janane Soreng and Eileen Soreng; Amy Lv, Lewis Jackson)
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Iberdrola, Spain's Iberdrola, and Echelon, Ireland's Echelon create a joint venture to build data centres
Iberdrola, Europe's biggest utility and Echelon, an Irish data centre operator will create a joint venture in order to build and operate data centers in Spain. This was announced by the Spanish company on Monday. Iberdrola believes that the demand for data centers will continue to grow in future, both for its grids as well as renewable energy businesses. Companies like Iberdrola, which sells energy to data centres and connects them to the grid, can both benefit from this development. The Spanish company will hold a 20% share in the joint-venture, and provide energy as well as land that is connected to the grid. Echelon will handle the remaining 80% and be responsible for permitting, design, advertising, and day-today management of data centers. A joint venture has already started a project: a complex of 160,000 square metres with a processing capacity for data of 144 Megawatts. The joint venture has already secured a connection of 230 MW. The 1 terawatt-hour demand is expected to be met by 2030 by Iberdrola and a planned solar power plant. Iberdrola has already supplied 11 TWh to data centres located in Spain, Britain, America and Germany. It created a CPD4Green data centre unit last year and was looking for a partner. The alliance with Echelon allows us to value the portfolio of sites that have access to electricity and to provide these infrastructures with secure, competitive and clean energy 24 hours a days, 365 day a year, said David Mesonero Molina. David Smith, Chief Investment Office at Echelon Data Centres, said that the deal achieved the company's strategic goal of entering the Spanish market. (Reporting and editing by Mark Potter.)
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US and China to start new talks on tariff truce, easing the path for Trump-Xi Meeting
The top U.S. economic officials and Chinese representatives will resume their talks on Monday in Stockholm to address long-standing economic disputes that are at the heart of a trade conflict between the two largest economies. They hope to extend the truce for three months while preventing tariff increases. China faces an August 12 deadline for a lasting tariff agreement with the Trump administration. Beijing and Washington had reached preliminary agreements in May and early June to end weeks' worth of escalating tariffs, and to stop the cutoff of rare-earth minerals. If there is no agreement, the global supply chain could be thrown into turmoil by U.S. tariffs returning to triple-digit rates that would amount to an embargo on bilateral trade. The Stockholm talks follow Trump's largest trade deal to date with the European Union, which was announced on Sunday. It included a 15% tariff for most EU exports into the U.S. including autos. The EU will also invest $600 billion in U.S. energy and buy $750 billion of American energy over the next few years. The U.S. and China talks are not expected to produce a similar breakthrough, but trade analysts believe that a 90-day extension is likely of the tariff and export control ceasefire struck in mid May. A further extension would help prevent further escalation, and allow for planning a possible meeting between Trump and Chinese president Xi Jinping at the end of October or beginning of November. A U.S. Treasury spokeswoman declined to comment on South China Morning Post's report, which cited unnamed sources who said that the two sides will refrain from introducing any new tariffs for 90 more days. Trump's administration will soon impose new tariffs on China, including those on semiconductors. Pharmacies, ship to shore cranes and more. "We are very close to making a deal with China." "We're very close to a deal with China. We'll see what happens," Trump told reporters Sunday, before European Commission President Ursula von der Leyen signed the tariff agreement. Financial Times reported Monday that the U.S. had paused curbs of tech exports to China in order to avoid disrupting talks with Beijing, and to support Trump's attempts to secure a meet-up with Xi. The newspaper reported that the Commerce Department's industry and security bureau, which is responsible for export controls, was told not to take any tough measures against China. This information came from current and former officials. The report could not be verified immediately. Outside of business hours, neither the White House nor the Department responded to requests for comments. DEEPER ISSUES The previous U.S.-China talks held in Geneva and London, in May and in June, focused on reducing the U.S. and Chinese tariffs from triple-digit rates and restoring the flow for rare earth minerals that China had stopped and Nvidia H20 AI chips as well as other goods that the United States had stopped. The talks so far have not covered broader economic topics. The U.S. has complained that China's export-driven, state-led model floods the world's markets with cheap products, while Beijing complains that U.S. export controls on technology goods are meant to stunt Chinese economic growth. "Geneva and London really were just trying to get their relationship back on track, so that at some point they could actually negotiate about the questions which are the source of the initial disagreement between the two countries," said Scott Kennedy. He is an expert in China economics at the Center for Strategic and International Studies, Washington. Kennedy stated that "I would be surprised if some of these things were harvested early, but an extension of ceasefire for 90 more days seems the most likely result." U.S. Treasury secretary Scott Bessent already announced a deadline extension. He also said that he wanted China to rebalance their economy from exports towards more domestic consumption, a goal of U.S. policymakers for decades. Analysts claim that the U.S. and China negotiations will take more time than other Asian nations because they are more complex. China's hold on the world market for rare earth magnets and minerals, which are used in everything from car windshield wiper motors to military hardware, has proven to be a powerful leverage point against U.S. industry. TRUMP-XI MEETING? There is speculation in the background about a meeting between Trump & Xi that could take place at the end of October. Trump has stated that he would decide on a historic trip to China soon, and any new tariffs or export controls could derail the planning. Sun Chenghao is a fellow with the Center for International Security and Strategy at Tsinghua's Center for International Security and Strategy, Beijing. He said the Trump-Xi Summit would give the U.S. an opportunity to lower its 20% tariffs against Chinese products related to fentanyl. He said that in exchange for the Chinese commitment to purchase more U.S. farm goods and other goods by 2020, they could fulfill their 2020 pledge. Sun stated that the future summit of heads of state is very helpful to negotiations, as everyone wants to achieve an agreement or pave a way for the negotiations in advance. Analysts said that China would likely ask for a further easing of U.S. export controls on high-tech products and a reduction in the multi-layered U.S. duties totaling 55 percent. Beijing argues that these purchases will help reduce the U.S.-China trade deficit, which is expected to reach $295.5 billion by 2024. (Reporting and editing by Diane Craft, Stephen Coates, and Shivani Tanna; Additional reporting in Bengaluru by Shivani.
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Stocks rise, but euro stays steady following US-EU trade deal
The euro rose on Monday, after a US-EU trade deal lifted the mood and provided clarity ahead of a week of important policy meetings at the Federal Reserve and Bank of Japan. A week after signing a similar deal with Japan, the U.S. has reached a framework agreement with the European Union. The U.S. will impose a 15% tariff on the import of most EU goods. The U.S. president Donald Trump has set a deadline of August 1, and countries are scrambling for trade deals to be finalised before that date. Talks between the U.S., China will take place in Stockholm on Monday amid hopes of extending the 90-day truce between two of the world's largest economies by another 90 days. Prashant N. Newnaha, senior Asia-Pacific rate strategist at TD Securities, said: "A 15% tariff against European goods, the forced purchase of U.S. military and energy equipment, and zero tariff retaliation from Europe is not negotiation. That's art of deal." "A huge win for the U.S." European futures soared by more than 1%. S&P 500 Futures gained 0.5%, and Nasdaq Futures advanced by 0.6%. The euro gained against the dollar and sterling, as well as the yen. "We need to be cautious," said Sim MOH SIONG, currency strategist, Bank of Singapore. "A lot good news is already reflected in the price." MSCI's broadest Asia-Pacific share index outside Japan rose 0.32%. This was just a fraction shy of its almost four-year-high it reached last week. Japan's Nikkei index fell 1%, after reaching a record high one year ago. The baseline tariff of 15% is still considered by many to be too high in Europe, but it's better than the 30% rate that was threatened. The U.S. and EU deal gives clarity to businesses, and averts a larger trade war between these two allies who account for almost a quarter of global trade. Marc Velan is the head of investments for Lucerne Asset Management, a Singapore-based asset management firm. He added that "markets interpret this as a return to predictability and stability in trade policy." "The China delaying fits the same pattern - the administration has chosen controlled diplomacy to avoid confrontation." The gains for China's blue chip stocks slowed down towards midday, but the Hang Seng index in Hong Kong gained 0.5%. The Australian dollar was trading at $0.657 and hovering near the peak reached last week, which is a close eight-month high. FED, BOJ AWAIT Investors will be watching closely for the Fed's and BOJ's monetary policy meetings, the U.S. monthly employment report, and the earnings of megacap companies Apple and Microsoft. Investors will need to pay attention to the comments of officials to determine the future interest rate path. The BOJ can now raise rates this year because of the trade agreement with Japan. The Fed will likely be cautious about any further rate cuts, as they are waiting for more data on the impact of tariffs on inflation to see if they can ease them. Trump has repeatedly criticized Fed Chairman Jerome Powell's refusal to cut rates. Two Trump-appointed members of the Fed Board have stated their support for a rate reduction this month. Oil prices have risen in commodities after the U.S. EU trade agreement. Brent crude futures as well as U.S. West Texas Intermediate crude rose both by 0.5%. Gold prices dropped on Monday, to their lowest level in almost two weeks due to a reduced demand for safe-havens. Reporting by Ankur Baerjee in Singapore and Gregor Stuart Hunter; Editing by Sam Holmes and Kate Mayberry.
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Oil prices rise as US-EU trade deal increases optimism
The oil prices increased on Monday, after the United States reached a trade agreement with the European Union. It is also possible that the tariff pause will be extended with China. This alleviates concerns about higher tariffs having a negative impact on economic activity and fuel demand. Brent crude futures rose 20 cents or 0.29% to $68.64 a barrel by 0336 GMT. U.S. West Texas Intermediate crude was at $65.31 a barrel, up 15 cents or 0.23%. Tony Sycamore, IG's markets analyst, said that the US-European Union Trade Deal and a potential extension of the US-China Tariff Pause are supporting oil prices and global financial markets. The markets responded positively to the gradual deflation of the threat of a long-term trade war, and the significance of the August deadlines for tariffs. The US-EU Framework Trade Agreement, signed on Sunday, sets a 15% import tariff for most EU products. This is half of the rate that was threatened. The agreement avoided a larger trade war between the two allies, who account for nearly one-third of world trade and could reduce fuel demand. A meeting of US and Chinese negotiators is also scheduled for Monday in Stockholm. The goal is to extend the truce that has held back sharply increased tariffs until August 12. The oil price fell to its lowest level in three weeks on Friday, weighed down both by concerns about global trade and the expectation of increased Venezuelan oil supplies. Sources at the company said that once Donald Trump, U.S. president, reinstates authorizations for partners to export oil and operate under swaps in the United States, PDVSA will resume work on its joint ventures with terms similar to those of Biden's era. Prices rose slightly on Monday but gains were restricted by the possibility that OPEC+ would further ease supply restrictions. On Monday, 1200 GMT, the Organization of the Petroleum Exporting Countries (OPEC) and its allies will meet to monitor the market. Four OPEC+ delegates stated last week that it is unlikely they will recommend changing existing plans to increase oil production by 548,000 barrels a day in August. However, another source said the time was not yet right to make a decision. ING believes that OPEC+ should be able to return a minimum of 2.2 millions barrels of additional voluntary supply per day by the end September. This would translate to an increase in supply of at least 280.000 barrels per day by September. There is room to increase the supply more aggressively. Summer demand helps absorb the extra barrels. JP Morgan analysts reported that global oil demand increased by 600,000 barrels per day (bpd) in July compared to the previous year. Global oil stocks also rose 1.6 millions bpd. Yemen's Houthis announced on Sunday that they will target all ships belonging to companies doing business in Israeli ports, irrespective of their nationality. This is part of a new phase of military action against Israel for the Gaza conflict. (Reporting and editing by Christian Schmollinger, Clarence Fernandez).
REACTION TO US-EU TRADE DEAL INSTANTLY
Donald Trump, the U.S. president, said that the United States had reached an agreement with the European Union on a deal which includes a 15% duty on EU goods entering the U.S. as well as significant EU purchases of U.S. military and energy equipment.
He told reporters that the deal calls for the EU to invest $600 billion into the U.S.
The deal follows the U.S. agreement with Japan signed on July 23, which reduced tariffs on imports of autos and other goods, in exchange for $550 billion worth of loans and investments destined for the United States.
U.S. Stock Futures rose on Monday. Nasdaq futures were up 0.5%, while S&P futures were up 0.37%.
The euro rose 0.16% to $1.1757 and hovered near a three-year high reached earlier in the month.
Here are some comments made by the markets on the announcement.
COMMENTS:
JARROD KERR CHIEF ECONOMIST KIWIBANK AUCKLAND
"It's great, I think so. I expected a higher tariff for the EU...I am surprised by this deal. We're usually surprised in the opposite direction, but I believe this deal is positive. The markets also agree.
"What we are seeing is quite clearly an administration that wants to grab revenue, grab money, instead of diverting trade."
TONY SYCAMORE MARKET ANALYST IG SYDNEY
It's a win for Trump. The fact that he was able to reach agreements with Japan and the EU in a matter of a week is a positive step.
"Putting all of this together, we have seen what has happened with Japan, the EU and with the talks that will be held between the U.S.A. and China in Stockholm. It really negates the risk of a long-term trade war and the importance the August deadline for tariffs has been significantly diffused."
HOLGER SCHMIEDING CHIEF ECONOMIST, BERENBERG BANK LONDON
"First, the good news. The crippling uncertainty has largely passed. The deal is manageable for the EU. The equity markets have probably already priced in the majority of this news. The deal appears to be in line with reports that were made last Thursday about a possible deal."
"Trump could claim that this asymmetrical deal is a win for him. The outcome is bad, but it's still better than the previous situation before Trump began his trade wars.
BRIAN JACOBSEN CHIEF ECONOMIST ANNEX WELL BEING MANAGEMENT BROOKFIELD WISCONSIN
"President Trump claimed that the EU trade deal was the largest of all deals. Mexico, China and Canada have bigger trade deals, whether it is imports or exports. This is the biggest deal up until the next."
"Settle into an average tariff rate of 20% is better than Liberation Day's tariff rate of 25 percent, but still higher than 2024 tariffs at 2.5%."
Tariffs are a tool to make production outside of the U.S. more expensive. One Big Beautiful Bill contains a number carrots to encourage production in the U.S. "It's a risk to see if investing in the U.S. with a stick-and-carrot strategy will work. Sticks tend to hurt immediately, while carrots can take some time to show benefits."
HASNAIN MALIK, STRATEGY HEAD, EQUITY RESEARCH TELLIMER DUBAI
The headline 15% is a relief to all investors. This includes those who own manufacturing assets in Europe. The devil is in the details, as with any other "deal", such as the one with Japan. Metals are already a confusing area, but this is something that will worry you later.
MICHAEL BROWN SENIOR RESEARCHER, PEPPERSTONE LONDON.
"The EU will be hit with 15% tariffs which is pretty punitive but it is half of the 30% that they were threatened with. It is also well below the 50% that Trump was throwing around at the beginning of the month, so that is good news."
The two obvious reactions you'd expect are an increase in the euro, and an increase in equity futures. "I don't believe that equities, in particular, needed much of an explanation to rally. Now they have one."
ERIC WINOGRAD, CHIEF ECONOMIST, ALLIANCEBERNSTEIN, NEW YORK:
This is very similar to a deal we made with Japan.
We will have to see how long both sides are willing to stick with the agreement. It is comforting from a market standpoint to know that a deal is always better than no deal.
RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY:
"It is in line with Japan's deal and I expect investors to view it positively, just as they did the Japan agreement." There will be higher tariffs. This may result in more inflation depending on the amount of them that are absorbed by manufacturers and passed on to consumers. (Reporting from Matt Tracy and Caroline Valetkevitch, in New York; Lucy Raitano, Karin Strohecker and Rae Wee, in Singapore; Compilation by Amanda Cooper; Editing and compilation by Alexandra Hudson; Marguerita Choy; Jacqueline Wong.
(source: Reuters)