U.S. stock futures rose late Sunday, as a busy week for markets kicked off with the U.S. and the European Union agreeing to the framework of a trade deal, avoiding the risk of an all-out transatlantic trade war.
President Donald Trump announced the agreement Sunday after talks with European Commission President Ursula von der Leyen, saying it will result in 15% tariffs on most European imports to the U.S.
Dow Jones Industrial Average futures (YM00) rose around 160 points, or 0.4%, Sunday evening. S&P 500 futures (ES00) rose 0.4% and Nasdaq-100 futures (NQ00) advanced 0.5%. Bitcoin (BTCUSD) gained slightly, above the $119,000 level, while West Texas crude (CL.1) inched higher and gold (GC00) was about flat. The U.S. Dollar Index DXY, which measures the buck against a basket of foreign currencies, was little changed.
U.S. stocks closed higher Friday, with the S&P 500 ending the week by notching a fifth straight record high. The S&P 500 SPX climbed 1.5% on the week, while the Nasdaq COMP rose 1% and the Dow Jones Industrial Average DJIA advanced 1.3%.
Trump has set an Aug. 1 deadline for his administration’s global tariffs to take effect unless new deals are reached, and had originally threatened the E.U. with tariffs of 50%, though that was later lowered to 30%. Japan, the U.K. and other countries have already made deals, but the clock is still ticking for some of America’s largest trading partners, including Mexico, Canada and China, which faces an Aug. 12 deadline.
As the trade-deal deadline looms, the U.S. and China are expected to resume talks Monday, amid a report by the South China Daily News that the two sides may extend their tariff pause for another 90 days.
Experts see the puzzle pieces beginning to fall into place. “When Japan broke down and made a deal, the E.U. had little choice,” Jamie Cox, managing partner for Harris Financial Group, said in a note Sunday. “The biggest piece in the trade deal puzzle still remains, and the Chinese are unlikely to be as willing to fold. The next big durable theme in markets is security, and the E.U. deal only accelerates it.”
For markets, Sunday’s deal “not only removes a key left tail risk that the market had been concerned about, but also yet again reiterates that the direction of travel remains away from punchy rhetoric and towards trade deals done,” Michael Brown, senior research strategist at Pepperstone, wrote in a note Sunday. “Rumors that the U.S.-China trade truce will be extended for a further 90 days will also help on this front.”
Brown added that the big winners from the deal include the European auto industry – as the 15% tariffs puts them on equal footing Japanese automakers – and U.S. defense and energy companies, after the E.U. committed to billions in additional spending.
Investors will also be eagerly awaiting the results from this week’s meeting of the U.S. Federal Reserve’s interest-rate-setting committee. Fed Chair Jerome Powell will speak Wednesday, after the two-day meeting’s conclusion. The Fed has stayed pat on interest rates for their past five meetings, and though Trump has turned up the pressure for the Fed to cut rates soon, it’s seen as more likely that a rate cut won’t come until their September meeting.
Read more: Investors face a week rife with risks, as worries about stock-market euphoria mount. Here’s what to watch.
This week will also see the release of key inflation and jobs data, and it’s the busiest week of earnings season, with 163 S&P 500 companies set to report this week, including Microsoft Corp. (MSFT), Meta Platforms Inc. (META), Apple Inc. (AAPL) and Amazon.com Inc. (AMZN).
-Mike Murphy
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