European shares softer as EU mulls US countermeasures; Big Tech in focus
The European Union is exploring a broader set of possible counter-measures against the United States as prospects for an acceptable trade agreement with Washington fade, according to EU diplomats.
Investors had been hoping for some progress in trade talks ahead of U.S. President Donald Trump's August 1 tariff deadline, with U.S. Commerce Secretary Howard Lutnick still confident a deal could be reached with the EU.
The pan-European benchmark STOXX 600 index was down 0.2 per cent as was the UK's blue-chip FTSE 100. The euro was 0.2 per cent higher at $1.1652.
S&P 500 futures edged 0.2 per cent higher, while Nasdaq futures were up 0.3 per cent. U.S. indexes are already around record highs in anticipation of more solid quarterly earnings reports.
But tariff uncertainty is also casting a shadow over markets, with Trump's August 1 deadline fast approaching.
"Let's say that tariffs are pushed off again from August 1, which I think is the rosiest outcome at this point, then I don't think markets will spike another 10 per cent higher. I'm thinking more that we get a grind higher for the rest of the year," said Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson.
Markets, meanwhile, are gearing up for a host of big tech company results this week, including Google owner Alphabet, Tesla and IBM.
"They are going to be key for sentiment because frankly there's not a lot else to drive things," said Michael Brown, senior research strategist at Pepperstone.
"We saw the banks deliver decent results last week, so you'd certainly be looking for the big tech names to keep up with that to reinforce the bull case (for equities)," he said.
Investors also expect upbeat news for defence groups RTX, Lockheed Martin and General Dynamics. Higher government spending around the globe has seen the S&P 500 aerospace and defence sector rise 30 per cent this year, while defence stocks in Europe have also hit record highs.
MARKETS UNFAZED BY JAPANESE POLITICS
The yen firmed on Monday as markets shrugged off the Japanese ruling coalition's defeat in upper house weekend elections.
Japan's ruling coalition lost control of the upper house in an election on Sunday, further weakening Prime Minister Shigeru Ishiba's grip on power ahead of the tariff deadline.
Ishiba vowed to stay on, which along with a market holiday, limited the reaction. The yen was 0.77 per cent firmer at 147.655 to the dollar and up 0.5 per cent against the euro.
"The loss was within the range of expectations, and actually the outlook was even more pessimistic," said Nissay Research Institute chief economist Tsuyoshi Ueno.
"In terms of negotiations with the U.S., it is easy to doubt whether a government with such a weak foundation is reliable as a negotiating partner," he added. "For the Bank of Japan, if there is political instability, it will be difficult to raise interest rates, and pressure on the yen will continue."
The BOJ still has a bias to raise rates further, but markets imply little chance of a move until late October.
Elsewhere, euro zone government bond yields eased ahead of euro zone PMI data and the ECB meeting later this week, at which it is expected to leave rates at 2 per cent following a string of cuts.
The euro dipped 0.5 per cent last week, moving off a recent near-four-year top of $1.1830. The dollar index was 0.3 per cent lower at 98.11.
U.S. Treasury yields fell, leaving the yield on the benchmark 10-year note down 5.5 basis points at 4.3757 per cent.
Most Federal Reserve policymakers, including Chair Jerome Powell, have indicated leaving U.S. rates unchanged right now is warranted in order to gauge the inflationary impact of tariffs.
Markets imply almost no chance of a move in July and place a chance of 61 per cent on a September cut and an 80 per cent chance for October.
Powell's reticence on rates has drawn the ire of Trump who threatened to fire the Fed chief, before backing down. The spectre of a potential political appointee who would seek to ease policy sharply has investors on edge.
In commodity markets, gold firmed 0.6 per cent to $3,368 an ounce, with all the recent action in platinum, which last week hit its highest since August 2014.
Oil prices were caught between the prospect of increased supply from OPEC+ and the risk European Union sanctions against Russia over its war in Ukraine could curb its exports.
Brent eased 0.27 per cent to $69.09 a barrel.
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CNA
24 minutes ago
- CNA
As the US cuts trade deals across Asia, how is China feeling the heat?
BEIJING/SHENZHEN: First, Vietnam and Indonesia. Now, the Philippines and Japan. As the United States strikes a wave of trade deals across Asia, offering lower tariffs to key partners, analysts say Beijing may be pushed to respond, whether by deepening engagement with non-Western partners or showing greater flexibility in talks with traditional ones. This includes the European Union (EU), which is set to hold a high-level summit with China in Beijing on Thursday (Jul 24). While some Chinese businesses in Europe are hoping for meaningful outcomes, observers caution that longstanding sticking points, such as industrial overcapacity and unequal market access, could limit progress. 'There may be some low-lying branches that the EU and China may reach for. Those would be a bonus for the bilateral relationship,' Lim Tai Wei, an East Asian affairs observer and professor at Soka University's business faculty, told CNA. Still, analysts say China is under growing pressure from Washington's economic manoeuvres in Asia. 'Pressure on the PRC (People's Republic of China) will come in the form of exports from other economies being more competitive,' Chong Ja Ian, associate professor of political science at the National University of Singapore (NUS), told CNA. Observers say Beijing is likely to be especially wary of clauses in the US trade deals that could directly or indirectly undermine its export interests. One example is the US-Vietnam agreement, which imposes far steeper tariffs on goods identified as being transshipped. The Trump administration's transshipment clause is aimed at Chinese firms that use countries in Southeast Asia as conduits for their products to avoid higher US tariffs. ART OF THE DEAL The US under President Donald Trump has been securing bilateral trade agreements across Asia, part of its wider 'reciprocal tariff' strategy that rewards compliance with lower duties while penalising countries that do not play ball. As of Wednesday, Japan, the Philippines, Vietnam, and Indonesia have all reached deals that reduce the tariff threats they initially faced, while deepening trade and investment ties with the US. Trump announced the latest deals with Tokyo and Manila on Tuesday, just over a week ahead of his Aug 1 deadline. Japan will face 15 per cent duties, down from 25 per cent, alongside a sweeping investment commitment into the US worth more than US$550 billion. In a post on his Truth Social media platform, Trump hailed the deal with Japan as 'massive', claiming the US would receive '90 per cent of the profits'. "This deal will create hundreds of thousands of jobs - There has never been anything like it," he wrote. Meanwhile, the Philippines secured a 19 per cent tariff rate, a touch below the 20 per cent levy floated earlier this month. The announcement followed a meeting between Trump and Philippine President Ferdinand Marcos Jr at the Oval Office. Analysts say the US trade deals across Asia underscore how countries in the region continue to view the US as an integral economic partner. 'The eagerness for deals with the Trump administration suggests that most economies see the United States as indispensable, at least for now,' said NUS' Chong. At the same time, American dealmaking across Asia is turning up the heat on China by giving its regional export rivals a potential edge in accessing the world's largest consumer market, say observers. China is the largest trading partner for Indonesia and Vietnam. Bilateral trade between China and Indonesia reached US$147.8 billion in 2024, a 6.1 per cent year-on-year increase, while China-Vietnam trade surged 14.6 per cent year-on-year to 1.85 trillion yuan (US$257.8 billion) that same year, according to China's customs data. China has also long been Japan's largest trading partner, and one of the largest investment destinations for Japanese companies. Meanwhile, trade with the Philippines remains robust, although rising tensions in the South China Sea have cast a shadow over broader relations. Experts say China will be scrutinising the fine print of the US trade deals across Asia, wary of any provisions that could directly or indirectly undermine its economic interests. Particular attention is likely to focus on clauses targeting transshipments, the practice of rerouting Chinese goods through third countries to bypass tariffs. For example, in the case of the US-Vietnam agreement, goods identified as transshipped face a 40 per cent tariff, double the 20 per cent baseline rate, signalling Washington's intent to clamp down on workaround routes that have long benefited Chinese exporters. Such provisions threaten to shut off a critical pressure valve in China's trade strategy, raising costs for exporters and potentially diverting orders to rival manufacturing hubs that now enjoy more favourable terms. This would also pile further economic stress on the Chinese economy, which is already contending with sluggish domestic demand, weak private investment and mounting demographic headwinds, including an ageing population and a shrinking workforce. 'Chinese pressure and displeasure can be expected if actual implementation of the deals damages Chinese economic interests such as reducing demand for their exports,' Hoo Tiang Boon, an associate professor at Nanyang Technological University's (NTU) school of social sciences, told CNA. China has consistently voiced strong opposition to any deal between the US and its trading partners that come at the expense of Chinese interests. 'If proven to damage Chinese interests … China may impose targeted sanctions such as curtailing exports which those countries need; or impose additional tariffs commensurate with those imposed by the Americans on Chinese goods,' he said. Beijing and Washington are now nearing the end of an uneasy 90-day trade truce agreed in May, which put a pause on escalating tit-for-tat tariffs. With the Aug 12 deadline looming, officials from both sides are set to meet in Stockholm next week to discuss a possible extension and narrow the gaps toward a broader trade agreement. Given its sputtering economy, it would be unwise for Chinese policymakers to adopt an aggressive diplomatic stance against the US, said Benjamin Ho, assistant professor at the S Rajaratnam School of International Studies' (RSIS) China Programme. 'It would attempt to buy time in order to diversify its economic exports. But the West still remains very much the main consumer market,' he said. AS US DEALS, CHINA REVIEWS ITS HAND Indeed, as Washington deepens its economic dealmaking across Asia, analysts say China will likely keep up its diversification strategy - strengthening ties with partners such as the EU, BRICS and ASEAN, in a bid to balance the scales. 'The current deals with the United States could encourage the PRC to work more with others, including the European Union,' said NUS' Chong. While Beijing will increasingly seek new partners for technological collaboration, potentially creating new business opportunities, Chong also warned of potential ripple effects. 'The diversion of PRC exports away from the United States could further flood other markets with cheap PRC goods, creating pressures on their enterprises,' he said, adding that thorny issues like overcapacity and intellectual property protection also remain. CNA previously reported on how China's export engines are increasingly aimed at Southeast Asia as Chinese products lose their lustre in the West, and how this would bring more benefits for consumers but also challenges for businesses in the region. Against this backdrop, the upcoming EU-China summit on Thursday is set to be closely watched for signs of whether Beijing is prepared to offer trade concessions or recalibrate its approach to longstanding issues. European Council President Antonio Costa and European Commission President Ursula von der Leyen will be attending the summit in Beijing, and are set to meet with Chinese President Xi Jinping and Chinese Premier Li Qiang. Analysts have signalled low expectations for any breakthrough as trade frictions persist, and Europe remains wary of Beijing's support for Russia's war in Ukraine, as well as its broader challenges to international law and global institutions. While the expectation of any immediate deal is low, China may be more flexible in addressing a wider range of issues and positioning itself as a 'free trade enabler', Gary Ng, senior economist at Natixis and research fellow at the Central European Institute of Asian Studies, told CNA. 'It can be the removal of certain sanctions or commitment to market access, or easing some anti-dumping duties,' he said. European Commission spokesperson Olaf Gill has said that the upcoming summit provides an opportunity to address these concerns. 'That relationship … must be based on fair competition and on a level playing field,' he said at a regular press briefing on Jul 10. 'There are a number of trade-distorting measures, unfair competition and an unlevel playing field - challenges that the EU wants China to meaningfully address.' Chinese businesses have urged EU and Chinese leaders to come together and reach a deal to reduce trade barriers. 'We the business community hold high expectations, hoping that China and Europe can seize this historic opportunity to achieve substantive results (at the summit)', said Fang Dongkui, secretary general of the China Chamber of Commerce to the EU. The chamber hopes the two sides can broker a deal to remove trade barriers in several areas, including the EU's tariffs targeting Chinese electric vehicles, Fang told the South China Morning Post. Soka University's Lim said there is a possibility both sides could come to an agreement on 'low-lying branches' such as brandy and on other secondary issues that could help ease pressure in the broader bilateral relationship. In the lead-up to the summit, Chinese Foreign Minister Wang Yi met Estonian Prime Minister Kaja Kallas in Brussels on Jul 3. In a statement released by China's Foreign Ministry, Wang said China does not see the EU as an adversary and called for managing differences through dialogue. 'China and the European Union should not be regarded as opponents because of differences, nor should they seek confrontation because of disagreements,' he said. A day later, China excluded major cognac producers Pernod Ricard, LVMH and Remy Cointreau from planned anti-dumping duties on European brandy. The move stood out as a rare positive signal amid persistent trade tensions with Brussels, as both sides continue to clash over EU tariffs on Chinese-made electric vehicles, with Beijing signalling possible retaliation. While gestures such as those on European brandy offer a potential path forward, NUS' Chong said they remain largely symbolic without concrete follow-up. 'The manufacture and sales of these luxury items do not replace the effect from automobiles, for example,' he said.
CNA
24 minutes ago
- CNA
Explainer-What is tokenization and is it crypto's next big thing?
NEW YORK :Tokenization has long been a buzzword for crypto enthusiasts, who have been arguing for years that blockchain-based assets will change the underlying infrastructure of financial markets. The technology is seen as rapidly increasing in coming years, especially in the U.S., helped by the passage of three new bills. President Donald Trump's administration has eased regulation of the broader crypto industry, paving the way for a boom in the valuation of companies in the sector and the rapid growth of crypto-related securities. However, the growth of the market for tokenized assets has been far slower than expected in recent years, with many projects still in their infancy or not yet live. The term "tokenization" is used in a variety of ways. But it generally refers to the process of turning financial assets - such as bank deposits, stocks, bonds, funds and even real estate - into crypto assets. This means creating a record on digital ledger blockchain that represents the original asset. These blockchain-based assets, or "tokens", can be held in crypto wallets and traded on blockchain, just like cryptocurrencies. WHERE DO STABLECOINS COME IN? Stablecoins can be seen as an example of tokenization. They are a type of cryptocurrency designed to maintain a constant value by being pegged to a real-world currency, typically the U.S. dollar. The issuer holds one U.S. dollar in reserve for every dollar-pegged crypto token it creates. Stablecoins are blockchain-based tokens acting as a proxy for an asset that already exists outside the blockchain. They allow people to move money across borders without interacting with the banking system. While critics say that this makes them useful for criminals who want to avoid banks' anti-money laundering checks, stablecoin issuers say that they are a lifeline for people in countries without a developed payments system. ARE TOKENIZED ASSETS TAKING OFF? Yes and no. Stablecoins have grown in recent years, with the market estimated to be worth about $256 billion, according to crypto data provider CoinMarketCap, and expected to touch $2 trillion by 2028, according to Standard Chartered. But banks have talked for years about creating tokenized versions of other types of assets, which they say will make trading more efficient, faster and cheaper, and those "tokens" have struggled to gain traction. While there have been individual issuances, there is not a liquid secondary market for these kinds of assets. One impediment to trading traditional assets via blockchain is that banks are working on their own private networks, making it difficult to trade across platforms. WHAT ARE THE PROS OF TOKENIZATION? Some proponents of the crypto industry have said tokenization can improve liquidity in the financial system. Illiquid assets like real estate could be traded more easily if they are broken up into small digital tokens. It is also expected to improve access to asset classes that are typically out of reach of smaller investors by creating a cheaper entry point. WHICH COMPANIES ARE INTERESTED IN TOKENIZATION? Some major global banks, including Bank of America and Citi have said they could explore launching tokenized assets, including stablecoins. Asset manager BlackRock is also doubling down on the tokenization boom, and has highlighted its ambition of becoming the largest cryptocurrency manager in the world by 2030. Coinbase, the largest U.S. crypto exchange, is seeking permission from the SEC to offer "tokenized equities" to its customers. HOW DOES NEW REGULATION HELP TOKENIZATION? Since stablecoins themselves are tokens and seen as one of the biggest drivers of the growth of tokenization, the new stablecoin law will end up boosting the proliferation of tokenization, experts say. The new market structure bill, known as the Clarity Act, is expected to establish a clear framework that could enable stablecoins and other crypto tokens to become more widely used. WHAT ARE THE RISKS? Some analysts say the hype around tokenization might be premature and caution that the rapidly growing crypto ecosystem could experience near-term turbulence due to the potential risks of a big decline in prices. European Central Bank President Christine Lagarde has warned stablecoins pose risks for monetary policy and financial stability. Some critics of the industry warn the frenzy around the new technology could introduce new systemic risks, especially in the absence of stringent regulation. They also say there is no reason why blockchain should be any more efficient than the electronic ledgers and trading systems already used in financial markets. Buyers of third-party tokens, which are issued by unaffiliated third parties - such as crypto exchange Kraken - that have custody of securities, could be exposed to counterparty risks, and regulators are sounding notes of caution. Earlier in July, Hester Peirce, a commissioner at the U.S. Securities and Exchange Commission who has frequently spoken positively about cryptocurrency, said tokenized securities would not be able to circumvent existing securities laws. More than half of the world's U.S. dollar stablecoins are issued by a single company, Tether, which says it manages $160 billion in reserves, but has not undergone a financial audit.
CNA
24 minutes ago
- CNA
China seeks to 'strengthen cooperation' at trade talks with US
BEIJING: China said on Wednesday (Jul 23) it will seek to "strengthen cooperation" with the United States at next week's trade talks in Stockholm. Washington and Beijing slapped escalating, tit-for-tat levies on each other's exports earlier this year - reaching triple-digit levels - stalling trade between the world's two biggest economies as tensions surged. US Treasury Secretary Scott Bessent said on Tuesday he would meet his Chinese counterparts in Stockholm next week for tariff talks. The third round of high-level negotiations would see a likely postponement of a mid-August deadline for levies to snap back to steeper levels, Bessent told Fox Business. Chinese foreign ministry spokesman Guo Jiakun said Wednesday that Beijing hoped the two sides could work together "on the basis of equality, respect and mutual benefit". "We will enhance consensus, reduce misunderstandings, strengthen cooperation and promote the stable, healthy and sustainable development of Sino-US relations," he said. China's vice premier will attend the talks in the Swedish capital. "He Lifeng will go to Sweden from Jul 27 to 30" for the negotiations, a commerce ministry spokesperson said in a Wednesday statement. After top officials met in Geneva in May, both sides agreed to temporarily lower their tariff levels in a de-escalation set to expire next month. Officials from the two countries also met in London in June. DEADLINE APPROACHES Bessent noted that Washington also wanted to speak about a wider range of topics, potentially including Chinese purchases of Iranian and Russian oil. Trade talks between the United States and China had initially stalled after their Geneva meeting, although Bessent said trade is in a good place now with Beijing. Disagreements bubbled to the fore when US officials earlier accused Beijing of violating their pact and slow-walking export license approvals for rare earths - crucial materials for making electronics and other goods. Since then, the two countries have agreed on a framework to move forward with their Geneva consensus. The United States has been seen relaxing certain restrictions on semiconductor sales to China, while Beijing has been reviewing applications for export licenses of controlled items. Since returning to the White House in January, President Donald Trump has imposed a sweeping 10 per cent tariff on allies and competitors alike, alongside steeper levels on steel, aluminium and autos. The 10 per cent blanket rate is expected to increase for dozens of economies - although not China - come Aug 1, unless they reach an agreement with Washington to avert this outcome.
