European, Japan stocks surge after US-Japan trade deal
ADVERTISEMENT President Donald Trump on Tuesday said a trade deal with Tokyo will include Japan paying a lower-than-threatened 15% tariff on shipments to the U.S. It followed an agreement with the Philippines that will see the U.S. collect a 19% tariff rate on imports from there.
Trump also said EU representatives were coming for trade negotiations on Wednesday. That stirred hopes for a deal with Europe, even as the EU was reportedly refining countermeasures in case of a deadlock before the August 1 deadline.
Euro STOXX 600 jumped 1%, with auto shares surging 3.6%. UK shares hit a record high, climbing 0.5%. The trade deal news has "raised hopes that the U.S. might be about to reach deals with other countries that avoid the higher tariffs on August 1," Deutsche Bank analysts wrote in a note. On Wall Street, S&P 500 futures were up 0.2%, while Nasdaq futures added 0.1%.
ADVERTISEMENT Japan's Nikkei climbed 3.7% as automaker shares surged on news the deal would cut the U.S. auto tariff to 15%, from a proposed 25%. Mazda Motor rose 18%, while Toyota Motor jumped 14%. South Korean automakers also rose as the Japan deal fuelled optimism over potential progress in tariff negotiations between South Korea and the United States.
ADVERTISEMENT The dollar remained weak, having lost ground overnight. It traded flat at 146.71 yen after sliding 0.5% on Tuesday. The dollar index, which tracks the currency against major peers, was little changed at 97.48.
ADVERTISEMENT Analysts noted the trade deal reduced a major risk to the fragile Japanese economy, providing more scope for the Bank of Japan to raise interest rates to fight inflation. That hit the bond market, with yields for 10-year JGBs rising 8.5 basis points to 1.585%.
ADVERTISEMENT Japan's Prime Minister Shigeru Ishiba denied reports he planned to step down following a bruising upper house election defeat. Ishiba said media reports that he had already decided to resign were "completely unfounded." In another positive development, U.S. and Chinese officials will meet in Stockholm next week to discuss an extension to the August 12 deadline for negotiating a trade deal, Treasury Secretary Scott Bessent said. Chinese blue-chips rose 0.7% before losing steam, and MSCI's broadest index of Asia-Pacific shares outside Japan added 1.2%. U.S. corporate earnings reports were showing signs that Trump's trade war was hitting profit margins. General Motors tumbled 8.1% after the automaker reported a $1 billion hit from tariffs to its quarterly results. Investors are awaiting results from Tesla and Google's parent Alphabet - two of the Magnificent 7 stocks that have driven much of the market rally fuelled by AI optimism. Elsewhere, the euro dipped 0.1% to $1.1737, after rising 0.5% the previous day. The European Central Bank is expected to hold rates steady on Thursday after eight consecutive rate cuts. Oil prices nudged higher, helped by rising prices for diesel in the U.S., where stockpiles are at their lowest levels for this time of the year since 1996.
U.S. crude rose 0.3% to $65.48 per barrel, while Brent was at $68.77 per barrel, up 0.2%.
(You can now subscribe to our ETMarkets WhatsApp channel)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
&w=3840&q=100)
Business Standard
8 minutes ago
- Business Standard
Asia shares sideswiped by US economic jitters, retreat in oil prices
Some early resilience in US stock futures and a continued retreat in oil prices did help limit the losses, but the bleak message from the July payrolls report was hard to ignore Reuters SYDNEY Asian share markets followed Wall Street lower on Monday as fears for the US economy returned with a vengeance, spurring investors to price in an almost certain rate cut for September and undermining the dollar. Some early resilience in US stock futures and a continued retreat in oil prices did help limit the losses, but the bleak message from the July payrolls report was hard to ignore. Not only had revisions meant payrolls were 290,000 below where investors had thought they would be, but the three-month average slowed to just 35,000 from 231,000 at the start of the year. "The report brings payroll growth closer in line with big data indicators of job gains and the broader growth dataset, both of which have slowed significantly in recent months," noted analysts at Goldman Sachs. "Taken together, the economic data confirm our view that the US economy is growing at a below-potential pace." Neither did the reaction of President Donald Trump instil confidence, as the firing of the head of Labor Statistics threatened to undermine confidence in US economic data. Likewise, news that Trump would get to fill a governorship position at the Federal Reserve early added to worries about the politicisation of interest rate policy. Analysts assume the appointee will be loyal to Trump alone, though the president did grudgingly concede that Fed Chair Jerome Powell would likely see out his term. "It opens the prospect of broader support on the Fed Board for lower rates sooner rather than later," said Ray Attrill, head of FX research at NAB. "Fed credibility, and the veracity of the statistics on which they base their policy decisions, are both now under the spotlight." Markets moved quickly to price in a lot more easing with the probability of a September rate cut swinging to 90%, from 40% before the jobs report. Futures extended the rally on Monday to imply 65 basis points of easing by year-end, compared to 33 basis points pre-data. Markets have essentially already eased for the Fed with two-year Treasury yields down another 4 basis points at 3.661%. They tumbled almost 25 basis points on Friday in the biggest one-day drop since August last year. DOLLAR DENTED The prospect of lower borrowing costs offered some support for equities and S&P 500 futures inched up 0.1%, while Nasdaq futures rose 0.2%. Asian share markets, however, were still catching up with Friday's retreat and the Nikkei fell 2.1%, while South Korea dipped 0.2%. MSCI's broadest index of Asia-Pacific shares outside Japan broke the mould and firmed 0.3%. Wall Street has also taken comfort in an upbeat results season. Around two-thirds of the S&P 500 have reported and 63% have beaten forecasts. Earnings growth is estimated at 9.8%, up from 5.8% at the start of July. Companies reporting this week include Disney, McDonald's, Caterpillar and some of the large pharmaceutical groups. The dismal US jobs data did put a dent in the dollar's crown of exceptionalism, snuffing out what had been a promising rally for the currency. The dollar dipped 0.1% to 147.24 yen, having shed an eye-watering 2.3% on Friday, while the euro stood at $1.1585 after bouncing 1.5% on Friday. The dollar index was pinned at 98.659, having been toppled from last week's top of 100.250. Sterling was more restrained at $1.3287 as markets are 87% priced for the Bank of England to cut rates by a quarter point at a meeting on Thursday. The BoE board itself is expected to remain split on easing, while markets still favour two further cuts by the middle of next year. In commodity markets, gold was flat at $3,361 an ounce, having climbed more than 2% on Friday. [GOL/] Oil prices extended their latest slide as OPEC+ agreed to another large rise in output for September, which completely reverses last year's cuts of 2.2 million barrels per day. [O/R] Brent dropped 0.6% to $69.24 a barrel, while US crude also fell 0.6% to $66.93 per barrel. (Reporting by Wayne Cole; Editing by Jacqueline Wong)
Mint
8 minutes ago
- Mint
Who is Adriana Kugler and what her exit mean for Trump's pick for next Fed Chair
Governor Adriana Kugler has stepped down from the US Federal Reserve board, providing US President Donald Trump with an important chance to shape monetary policy before the 2026 transition of the central bank's chair. Kugler is the first Hispanic to serve on the Fed's Board of Governors. She submitted her resignation letter on Friday, effective August 8. With her term ending in January 2026, her early exit comes amid Trump's latest attack on Fed Chair Jerome Powell. Dr. Adriana D. Kugler was appointed on the Board of Governors of the Federal Reserve System since September 13, 2023, for a term until January 31, 2026. Before her appointment to the Board, she was the US Executive Director at the World Bank Group. She is currently on leave from Georgetown University, where she serves as a professor of Public Policy and Economics. She previously held the position of chief economist at the US Department of Labour between 2011 and 2013. Additionally, Dr. Kugler was a research associate at the National Bureau of Economic Research and the Centre for the Study of Poverty and Inequality at Stanford University. Kugler also served as the elected chair of the Business and Economics Statistics Section of the American Statistical Association, a member of the Board on Science, Technology, and Economic Policy of the National Academies of Sciences, and a member of the Technical Advisory Committee of the Bureau of Labour Statistics. In terms of education, she pursued a BA in economics and political science from McGill University and a PhD in economics from the University of California, Berkeley. Under Fed regulations, the chair must be selected from the present members of the Fed's board. Trump, who has been repeatedly urging Powell to resign, Kugler's departure may impact his timeline to choose the next central bank chair. If the US President opts to select an outsider for the board, like National Economic Council Director Kevin Hassett or former Fed Governor Kevin Warsh, he might not have the opportunity to do so again soon, Bloomberg reported. Powell's term as chair concludes in May, but his role as a governor continues until 2028. Although outgoing chairs usually resign from the board, Powell has not disclosed his future plans. If he stays, Trump won't have another chance to fill a board vacancy until 2028. In that scenario, the president might be obliged to appoint the person he plans to promote next May to fill the Kugler vacancy. If he is keen to quickly add a new loyalist to the board, he will need to decide promptly who that chair will be. There is no indication that Trump has decided on a candidate yet. However, the contenders include Hassett, Warsh, Treasury Secretary Scott Bessent, and current Fed Governor Christopher Waller, the report added.
&w=3840&q=100)
Business Standard
8 minutes ago
- Business Standard
China pushes back at US demands to stop buying Russian, Iranian oil
US and Chinese officials may be able to settle many of their differences to reach a trade deal and avert punishing tariffs, but they remain far apart on one issue: the US demand that China stop purchasing oil from Iran and Russia. "China will always ensure its energy supply in ways that serve our national interests," China's Foreign Ministry posted on X on Wednesday, following two days of trade negotiations in Stockholm, responding to the US threat of a 100 per cent tariff. "Coercion and pressuring will not achieve anything. China will firmly defend its sovereignty, security and development interests," the ministry said. The response is notable at a time when both Beijing and Washington are signalling optimism and goodwill about reaching a deal to keep commercial ties between the world's two largest economies stable -- after climbing down from sky-high tariffs and harsh trade restrictions. It underscores China's confidence in playing hardball when dealing with the Trump administration, especially when trade is linked to its energy and foreign policies. US Treasury Secretary Scott Bessent, emerging from the talks, told reporters that when it comes to Russian oil purchases, the "Chinese take their sovereignty very seriously". "We do not want to impede on their sovereignty, so they would like to pay a 100 per cent tariff," Bessent said. On Thursday, he called the Chinese tough negotiators, but said China's pushback has not stalled the negotiations. "I believe that we have the makings of a deal," Bessent told CNBC. Gabriel Wildau, managing director of the consultancy Teneo, said he doubts President Donald Trump would actually deploy the 100 per cent tariff. "Realising those threats would derail all the recent progress and probably kill any chance" for Trump and Chinese President Xi Jinping to announce a trade deal if they should meet this fall, Wildau said. In seeking to restrict oil sales by Russia and Iran, a major source of revenue for both countries, the US wants to reduce the funding available for their militaries, as Moscow pursues its war against Ukraine and Tehran funds militant groups across the Middle East. China plays hardball When Trump unveiled a sweeping plan for tariffs on dozens of countries in April, China was the only country that retaliated. It refused to give in to US pressure. "If the US is bent on imposing tariffs, China will fight to the end, and this is China's consistent official stance," said Tu Xinquan, director of the China Institute for WTO Studies at the University of International Business and Economics in Beijing. WTO is the acronym for the World Trade Organization. Negotiating tactics aside, China may also suspect that the US will not follow through on its threat, questioning the importance Trump places on countering Russia, Tu said. Scott Kennedy, senior adviser and trustee chair in Chinese Business and Economics at the Centre for Strategic and International Studies in Washington, said Beijing is unlikely to change its posture when it sees inconsistencies in US foreign policy goals toward Russia and Iran, whereas Beijing's policy support for Moscow is consistent and clear. It is also possible that Beijing may want to use it as another negotiating tool to extract more concessions from Trump, Kennedy said. Danny Russel, a distinguished fellow at the Asia Society Policy Institute, said Beijing now sees itself as "the one holding the cards in its struggle with Washington". He said Trump has made it clear he wants a "headline-grabbing deal" with Xi, "so rejecting a US demand to stop buying oil from Iran or Russia is probably not seen as a deal-breaker, even if it generates friction and a delay". Continuing to buy oil from Russia preserves Xi's "strategic solidarity" with Russian President Vladimir Putin and significantly reduces the economic costs for China, Russel said. "Beijing simply cannot afford to walk away from the oil from Russia and Iran," he said. "It is too important a strategic energy supply, and Beijing is buying it at fire-sale prices." China depends on oil from Russia and Iran A 2024 report by the US Energy Information Administration estimates that roughly 80 per cent to 90 per cent of the oil exported by Iran went to China. The Chinese economy benefits from the more than one million (10 lakh) barrels of Iranian oil it imports per day. After the Iranian parliament floated a plan to shut down the Strait of Hormuz in June following US strikes on Iran's nuclear facilities, China spoke out against closing the critical oil transit route. China also is an important customer for Russia, but is second to India in buying Russian seaborne crude oil exports. In April, Chinese imports of Russian oil rose 20 per cent over the previous month to more than 1.3 million (13 lakh) barrels per day, according to the KSE Institute, an analytical centre at the Kyiv School of Economics. This past week, Trump said the US will impose a 25 per cent tariff on goods from India, plus an additional import tax because of India's purchasing of Russian oil. India's Foreign Ministry said on Friday its relationship with Russia was "steady and time-tested". Stephen Miller, White House deputy chief of staff and a top policy adviser, said Trump has been clear that it is "not acceptable" for India to continue financing the Ukraine war by purchasing oil from Russia. "People will be shocked to learn that India is basically tied with China in purchasing Russian oil," Miller said on Fox News Channel's "Sunday Morning Futures". He said the US needs "to get real about dealing with the financing of this war". (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
