European Stocks Climb as US-EU Trade Deal Calms Markets, but Euro Slips
European markets opened the week on a positive note after a long-awaited trade deal between the United States and the European Union was struck, lifting major stock indexes. The pan-European STOXX 600 rose 0.7% in early trading, with Germany’s DAX, France’s CAC 40, and other regional indexes posting similar gains. However, the euro slipped 0.3% against the U.S. dollar, reflecting concerns that the agreement may be more favorable to Washington than Brussels. Analysts described the deal as a relief, especially when compared to the steeper tariffs that had been threatened in recent months.
The new trade framework, while preventing more severe economic fallout, includes a 15% import tariff on most EU goods and mandates $600 billion in EU investments into the U.S. economy. Additionally, the EU agreed to open parts of its market and increase purchases of American energy and military equipment. Though the deal averted a crisis, some European capitals criticized it as unbalanced. ING and TD Securities analysts highlighted that while it reduces short-term uncertainty, it still gives the U.S. a significant upper hand.
Elsewhere, global attention is turning to key developments this week, including interest rate decisions from the U.S. Federal Reserve and the Bank of Japan, along with corporate earnings from Apple, Microsoft, and Amazon. While no major policy shifts are expected, investor focus will be on the central banks’ commentary regarding inflation and rate cut timelines. The trade deal with Japan may give the BOJ room to raise rates again this year, whereas the Fed is treading cautiously amid political pressure and unresolved inflation data.
Commodities also reacted to the trade news, with oil prices ticking up 0.5%, driven by improved global trade sentiment. However, gold prices slipped 0.1% to a two-week low as risk appetite grew. Meanwhile, eurozone government bond yields dipped slightly, signaling eased borrowing concerns. Germany’s 10-year yield dropped to 2.71% after a recent spike. As global markets digest the geopolitical and monetary policy developments, this week could be a turning point in shaping economic direction for the remainder of the year.
Source: Reuters