No relief from US-China trade truce
Details on how the new tariffs will be implemented are yet to be ironed out. (NurPhoto pic)
FRANKFURT : European investors are set to wake up to a souring mood as rapidly rising tensions in the Middle East and yet another tariff salvo from US President Donald Trump triggered a new wave of dollar-selling and risk-off moves.
The much-hyped US-China talks culminated in a fragile truce that may have put a lid on simmering trade tensions between the world's top two economies for now, but the lack of details has left investors unnerved.
For starters, China's President Xi Jinping has yet to give his approval on the 'deal'.
Details on how the new tariffs will be implemented are yet to be ironed out, and US export restrictions on high-end artificial intelligence chips are still in place.
With the July 8 deadline on worldwide tariffs fast approaching, Trump is back to his unilateral style of policymaking as he said he would send out letters in one to two weeks outlining terms of trade to dozens of other countries, which they could embrace or reject.
Markets will be hoping for another TACO moment.
While backward looking inflation reports are yet to reflect the price pressures, companies are starting to sound the alarm.
Zara-owner Inditex was the latest to issue a disappointing quarterly report and flag headwinds from trade uncertainty.
As if investors did not have enough to juggle with already, geopolitical tensions in the Middle East are flaring, adding to the risks of rising crude prices fuelling inflation pressures.
Supply concerns out of the oil-rich region pushed Bren and West Texas Intermediate futures to two-month highs of nearly US$70 a barrel each.
In all of this, as my colleague Jamie McGeever points out, valuations in equities and stocks are beginning to appear stretched, compounding the risks to investors in the event of a market selloff.
European futures were down 0.7%, while futures in the US are pointing to a lower open today, but the benchmark indexes in the regions are just about 2% away from their respective record highs.
Further, investors continue to question the dollar's safe-haven status.
Today, the euro hit a seven-week high and is up 11% this year, poised for its biggest yearly advance since 2017.
The central bank bonanza next week could perhaps throw more light on the global economy's outlook.
The US Federal Reserve along with the Bank of Japan and the Bank of England (BoE) are due to announce their policy decisions.
Meanwhile, investors will look for a string of UK economic data including reports on gross domestic product (GDP) and manufacturing output later in the day.
Both are expected to reflect a decline in activity on a monthly basis, reigned in by the BoE's cautious approach to monetary policy easing.
Key developments that could provide more direction to markets today include: in the UK – GDP, industrial output, manufacturing output and trade data; and in the US – producer inflation data, initial weekly jobless claims report and an auction of 30-year bonds worth US$22 billion.
In addition, policymakers expected to speak include the ECB's Jose Luis Escriva and the Reserve Bank of Australia's David Jacobs.
Other notable developments include: UniCredit sees slim hopes for a BPM deal and says Commerzbank is too costly; Oracle raises annual forecast on strong cloud demand; and Warner Bros' credit rating is downgraded to junk by Fitch after its split-up.
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Malay Mail
3 hours ago
- Malay Mail
Trump signs off on Nippon Steel's US$14.9b takeover of US Steel after security review, but details on ‘golden share' remain unclear
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The Sun
4 hours ago
- The Sun
Trump approves Nippon Steel's $14.9n takeover of US Steel
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The Sun
4 hours ago
- The Sun
Trump approves Nippon Steel's $14.9 billion purchase of US Steel
U.S. President Donald Trump approved Nippon Steel's $14.9 billion bid for U.S. Steel on Friday, capping a tumultuous 18-month effort by the companies that survived union opposition and two national security reviews. Trump signed an executive order saying the tie-up could move forward if the companies sign an agreement with the Treasury Department resolving national security concerns posed by the deal. The companies then announced they had signed the agreement, fulfilling the conditions of Trump's directive and effectively garnering approval for the merger. 'We look forward to putting our commitments into action to make American steelmaking and manufacturing great again,' the companies said in the statement, thanking Trump. They added the agreement includes $11 billion in new investments to be made by 2028 as well as governance, production and trade commitments. Nippon Steel will buy a 100% stake in U.S. Steel, a spokesperson for the Japanese company in Tokyo said on Saturday. The steelmakers provided no detail on the 'golden share' they pledged to issue to the U.S. government, raising questions about the extent of U.S. control. U.S. Senator David McCormick of Pennsylvania, where U.S. Steel is headquartered, said last month the golden share would give the government veto power over key decisions relating to the American steel icon. Reuters has reported that Nippon Steel would invest an additional $3 billion for a new mill after 2028. The takeover will set up the ailing U.S. firm to receive the critical investment, allowing Nippon Steel to capitalize on a host of American infrastructure projects while its foreign competitors face steel tariffs of 50%. The Japanese firm also avoids the $565 million in breakup fees it would have had to pay if the companies had failed to secure approvals. For Nippon Steel, the world's fourth-biggest steelmaker, securing a foothold in the U.S. is key to its global growth strategy. The U.S. steel market, including high-grade steel, Nippon Steel's specialty, is growing amid rising global trade tensions. 'GREAT PARTNER' Still, some Nippon Steel investors are concerned about short-term financial pressure due to the scale of the additional investment commitment. The Japanese government, rushing to try to secure a trade deal with the U.S. by the time Trump and Prime Minister Shigeru Ishiba meet at the Group of Seven summit starting on Sunday, applauded the Nippon-U.S. Steel agreement. 'The government of Japan welcomes the U.S. government's decision, as we believe this investment will enhance innovation capabilities in the U.S. and Japanese steel industries and further strengthen the close partnership between our two countries,' Economy, Trade and Industry Minister Yoji Muto said in a statement on Saturday. Friday's announcement was hardly guaranteed, even if many investors had seen approval as likely after Trump headlined a rally on May 30 giving his vague blessing to an 'investment' by Nippon Steel, which he described as a 'great partner.' Shares of U.S. Steel had dipped earlier on Friday after a Nippon Steel executive told Japan's Nikkei newspaper that the takeover required 'a degree of management freedom' to go ahead after Trump said the U.S. would be in control with the golden share. The bid has faced opposition since Nippon Steel launched it in December 2023. After the United Steelworkers union came out against the deal last year, both then-President Joe Biden, a Democrat, and Trump, a Republican, expressed their opposition as they sought to woo voters in the presidential campaign in the swing state of Pennsylvania. Shortly before leaving office in January, Biden blocked the deal on national security grounds, prompting lawsuits by the companies, which argued the national security review they received was biased. The Biden White House disputed the charge. The steel companies saw a new opportunity in the Trump administration, which opened a fresh 45-day national security review into the proposed merger in April. But Trump's public comments, ranging from welcoming a simple 'investment' in U.S. Steel by the Japanese firm to floating a minority stake for Nippon Steel, spurred confusion.
