Asia shares slip as investors remember the drag of tariffs
The initial relief over Europe's 15% levy quickly soured when set against the 1% to 2% that stood before President Donald Trump took office. Leaders in France and Germany lamented the outcome as a drag on growth, pulling down stocks and bond yields across the continent while slugging the single currency.
Trump also flagged a "world tariff" rate of 15% to 20% on all trading partners that were not negotiating a deal, among the highest rates since the Great Depression of the 1930s.
"While the worst case scenario was averted, the implied EU tariff increase from 1% in January is a significant tax increase on EU exports," wrote economists from JPMorgan in a note.
"This is a very big shock that unwinds a century of U.S. leadership in global free trade," they warned. "While we no longer see a U.S. recession as our baseline from this shock, the risk is still elevated at 40%."
A further risk to world growth came from a sudden spike in oil prices after Trump threatened a new deadline of 10 or 12 days for Russia to make progress toward ending the war in Ukraine or face tougher sanctions on oil exports.
Brent edged up 0.1% to $70.10 a barrel, having climbed 2.3% on Monday, while U.S. crude held at $66.73.
The air of caution saw MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab slip 0.7%. Japan's Nikkei eased 0.8% (.N225), opens new tab, while Chinese blue chips (.CSI300), opens new tab fell 0.1%.
European shares steadied after Monday's sell-off. EUROSTOXX 50 futures edged up 0.2%, while FTSE futures and DAX futures both added 0.1%.
The euro was flat at $1.1592 , after falling 1.3% overnight in the largest drop since mid-May. It now has chart support at $1.1556.
The dollar index was up at 98.674 , after the rush out of short dollar positions lifted it 1% overnight, while it touched a one-week high on the yen at 148.63 .
Wall Street held firm on hopes for upbeat results from mega caps this week that include Apple (AAPL.O), opens new tab, Microsoft (MSFT.O), opens new tab and Amazon (AMZN.O), opens new tab.
S&P 500 futures nudged up 0.1%, while Nasdaq futures added 0.2%.
Yields on 10-year Treasuries held at 4.408% having crept higher on Monday as markets braced for another steady decision on interest rates from the Federal Reserve.
Futures imply a 97% chance the Fed will keep rates at 4.25%-4.5% at its meeting on Wednesday and reiterate concerns that tariffs will push inflation higher in the short term.
Analysts also assume one, or maybe two, Fed officials will dissent in favour of a cut and supporting wagers for a move in September.
The odds could change depending on a slew of U.S. data this week including gross domestic product for the second quarter where growth is seen rebounding to an annualised 2.4%, after a 0.5% contraction in the first quarter.
Figures on job openings are due later on Tuesday that will help refine forecasts for the crucial payrolls report on Friday.
Canada's central bank also meets on Wednesday and again is widely expected to hold rates at 2.75% as it waits to see how trade talks with the U.S. wash out.
In commodity markets, prices for copper and iron ore were under pressure while gold idled at $3,316 an ounce .
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
36 minutes ago
- Reuters
European second-quarter corporate profits expected to rise after EU-US tariff deal
July 29 (Reuters) - The outlook for European corporate health has improved, the latest earnings forecasts showed on Tuesday, after the European Union struck a framework trade deal with the U.S. on Sunday after weeks of negotiations. European companies are expected to report growth of 1.8% in second-quarter earnings, on average, according to LSEG I/B/E/S data, a large improvement from the 0.3% fall analysts had expected a week ago. The framework trade agreement sets out a 15% import tariff on most EU goods from next month, lower than the 30% U.S. President Donald Trump had threatened to apply earlier in July, but likely higher than businesses had hoped. Before the agreement, Trump's tariff policies had changed frequently since April, the most common start of the second fiscal quarter. Some were imposed while others were proposed and then delayed. This earnings season is the first to expose the impact of Trump's tariff-fuelled trade war on corporate health. Revenue meanwhile is expected to be slightly worse than last week's estimate, the LSEG report showed, with analysts expecting a 3.3% fall versus a 3.1% drop previously. That would be the worst quarterly performance in more than a year. It compares to a 3.0% increase in earnings and a 0.8% drop in revenues a year ago. Milan-listed Stellantis ( opens new tab said on Tuesday as it reported its half-year results that it expected a 1.5 billion euro ($1.7 billion) impact from U.S. tariffs this year, at the higher end of a forecast range provided last week. Volkswagen ( opens new tab last Friday cut its full-year sales and margin forecasts when it reported a 1.3 billion euro hit from tariffs for the first half, in the German carmaker's first assessment of the damage from Trump's trade war. Companies still to report this week include Adidas ( opens new tab, Anheuser-Busch InBev ( opens new tab and Santander ( opens new tab. As of Monday's close, Europe's benchmark STOXX 600 (.STOXX), opens new tab index was up about 8% since the start of 2025. ($1 = 0.8674 euros)
Reuters
36 minutes ago
- Reuters
Candy giant Mars to invest $2 billion more in US manufacturing through 2026
July 29 (Reuters) - Candy and snacks giant Mars on Tuesday announced plans to invest $2 billion more in its U.S. operations through next year to bolster the company's ongoing efforts to expand manufacturing in the country. The Twix and MilkyWay chocolate maker has already invested more than $6 billion in U.S. manufacturing in the last five years and the new funding will support a $240 million facility for Nature's Bakery in Salt Lake City, Utah. The new facility, opening on Wednesday, will create over 230 new jobs in the region and have the capacity to produce about one billion candy bars every year, Mars said. "The U.S. is our biggest and most important market, and a key engine of growth for the long term – not only through our legacy manufacturing footprint but also through the expansion of strategic acquisitions like Nature's Bakery, which is already scaling quickly," said Mars CFO Claus Aagaard. Many companies are doubling down on their U.S. production capabilities after the Trump administration imposed sweeping import tariffs aimed at narrowing the trade deficit and prompting multinational firms to bring manufacturing back to America. About 94% of Mars products sold in the U.S. are produced locally. The company announced a $36 billion deal to buy Pringles maker Kellanova (K.N), opens new tab in August, and has received approval from U.S. antitrust regulators while EU counterparts opened a full-scale investigation last month.
The Independent
38 minutes ago
- The Independent
Surging US imports and lower tariffs to lift global growth, IMF predicts
Global economic growth will be stronger than previously thought, as US imports surged and some of President Donald Trump's tariff rates have been softened since April, new projections show. Global growth is forecast to be 3% in 2025 and 3.1% in 2026, according to the International Monetary Fund's (IMF) latest World Economic Outlook. This is higher than the respective 2.8% and 3% forecast in the previous report in April. UK gross domestic product (GDP) is predicted to be 1.2% this year, and 1.4% in 2026, unchanged from revised forecasts set out in May. The upgrade to the world outlook reflects factors including a strong degree of trade 'front-loading' in recent months – referring to a rush of imports into the US. This has happened as businesses and households tried to get ahead of planned increases to US tariff rates, following Mr Trump's 'liberation day' announcements in April, according to the report. The IMF said front-loading had 'shaped economic activity in the first half of the year', adding that it was 'creating exposures that could amplify the impact of any potential negative shocks'. For example, firms could end up having too much stock, therefore pushing down future imports, or it could lead to additional holding costs or the risk of items becoming obsolete. Meanwhile, the growth upgrade since April was also driven by US tariffs being lowered since higher rates were first announced by Mr Trump, alongside improved conditions in the financial markets. This came after the US struck new trade deals, including with the UK and, most recently, the EU. The introduction of some higher tariff rates have also been paused until August, notably between China and the US, helping diffuse escalating trade tensions and open the door to negotiations. However, the IMF warned that a 'rebound in effective tariff rates could lead to weaker growth' and weigh on wider sentiment. 'Elevated uncertainty could start weighing more heavily on activity, also as deadlines for additional tariffs expire without progress on substantial, permanent agreements,' the report said. Furthermore, the IMF flagged conflict in the Middle East creating potential risks to global shipping and trade, which could further raise commodity prices like oil. On the other hand, the report found that global growth could be lifted if trade negotiations lead to lower tariffs, ease tensions, and create more certainty and predictability. The IMF also highlighted technological advancements, including the use of artificial intelligence (AI), as a way to further boost growth around the world. Chancellor Rachel Reeves said: 'The IMF's forecasts show that the UK remains the fastest growing European economy in the G7 despite the global economic challenges we are facing. 'However, I am determined to unlock Britain's full potential, which is why we are investing billions of pounds through our plan for change – in jobs through better city region transport, record funding for affordable homes, as well as backing major projects like Sizewell C to drive economic growth and put more money into people's pockets.'
