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Bangkok Post
4 days ago
- Business
- Bangkok Post
EU could win trade war with US
The US-EU trade deal has been heavily criticised as a capitulation by the bloc. But if you dive into the agreement details, the European Union is likely not only to suffer less than the US but may even see its economy benefit from the new global tariff regime. The EU, on July 28, came to an agreement with the US that set base levies on EU goods at 15%, below the 30% rate US President Donald Trump had threatened, though still much higher than tariffs were before the trade war began. Many analysts and journalists alike are adamant that the trade deal the EU struck was a big win for the US and a major loss for the EU. Even French Prime Minister Francois Bayrou seems to think so. The main thrust of the argument is that the EU should have been strong enough to inflict measurable pain on the US, but instead made lots of promises without getting much in return. Plus, some European leaders are concerned that their exporters will suffer from lower US demand in the short term. Allow me to disagree and state that, as it stands today, the EU is winning the trade war. First, let us compare the EU trade deal with the agreement that one of Europe's major competitors, Japan, struck with the US just five days earlier. Both countries were hit with a baseline tariff rate of 15%, and both made much-derided promises to boost investment in the US. While Europe's total pledge is larger in nominal terms, it only represents around 7% of the EU's GDP compared to over 13% for Japan. The numbers clearly suggest the EU got a better deal than Japan, even without accounting for the fact that Japanese businesses depend more on exports to the US than their EU counterparts. Moreover, neither the EU's promised US$600 billion investments in the US nor the purchase of $750 billion in energy commodities is arguably a real concession. Over the last three years, EU businesses have invested some $605 billion in the US, so investing another $600 billion in the next three years would likely have happened regardless. And as Reuters Open Interest columnist Clyde Russell explained, it is delusional to think the US can deliver $750 billion in energy commodities to the EU in the next three years. On top of this, modelled projections of the impact of the tariffs on the US and other countries suggest that, based on the announced tariff levels, the US will suffer more than the EU both in terms of GDP and inflation. Over the next 12 months, my model -- which is a global trade model that considers the dynamic relationships between trade, growth, inflation, and foreign exchange rates -- forecasts a 1 percentage point (pp) increase in US inflation and a 0.4 pp decline in GDP growth. The Yale Budget model anticipates a similar hit to GDP, but it anticipates a larger 1.8 pp boost to inflation. Meanwhile, my model indicates that in the next 12 months, the impact on EU inflation and growth should both be in the order of 0.2 pp to 0.3 pp. In short, the EU appears set to suffer less from the new tariff regime than the US in the next year. And in the medium term, the EU could very well be a net winner from this new trade environment, as new supply chains are established in response to the higher global tariff environment. In fact, my model indicates that, based on the tariffs currently announced, the EU's GDP could actually increase by around 0.1 pp compared to a no-tariff scenario. Why? Because China and several other economies like India, Brazil and possibly Switzerland face much higher tariffs than the EU, which could allow EU exporters to gain market share from these international competitors. After all, US businesses and consumers who cannot replace imported goods with domestically produced ones will seek to find the cheapest possible imported good. And while Chinese imports tend to be cheaper than those from Europe, they will now come with much higher tariffs, eroding China's price advantage. Some recent economic data releases suggest these model forecasts could be onto something. Consider new manufacturing orders in recent PMI surveys. In the US, they crashed in April after rising in the first quarter due to businesses front-running tariffs, and they continue to hover well below the crucial 50-point mark denoting expansion and contraction. Meanwhile, in the EU, this indicator has accelerated and remains well above the levels seen in the US. Where does that leave us? Sentiment in the EU following the trade deal appears to have become too negative, while investors simultaneously appear too complacent about America's economic prospects. This sounds like where we were at the beginning of the year, right before Europe started outperforming. Reuters
Yahoo
18-06-2025
- Business
- Yahoo
Morning Bid: Oil ebbs again as Fed meets
By Mike Dolan LONDON (Reuters) -What matters in U.S. and global markets today I'm excited to announce that I'm now part of Reuters Open Interest (ROI), an essential new source for data-driven, expert commentary on market and economic trends. You can find ROI on the Reuters website, and you can follow us on LinkedIn and X. The alarming Israel-Iran war is keeping world oil prices volatile, but crude moves have not yet hit red-alert territory, and markets are now turning their attention to Wednesday's Federal Reserve policy decision. I'll discuss this and all of the market news below. Be sure to check out today's column, where I explain why the dollar's decline may persist despite signs that 'short dollar' is already a crowded trade. Today's Market Minute * Thousands of people were fleeing Tehran on Wednesday after U.S. President Donald Trump said they should leave the capital, while a source said Trump was considering options that include joining Israel in attacking Iranian nuclear sites. * Oil prices eased in Asian trade on Wednesday, after a gain of 4% in the previous session, as markets weighed the chance of supply disruptions from the Iran-Israel conflict against a U.S. Federal Reserve rates decision that could impact oil demand. * While global energy markets are not yet pricing in worst-case scenarios for the Israel-Iran war, oil tanker rates are providing a good real-time gauge of the escalating risks, writes ROI columnist Ron Bousso. * Energy equity investors are adjusting their positions in an attempt to pick winners and cut losers as President Donald Trump's tax-and-spending bill makes its way through the U.S. Congress. Read the analysis from ROI energy transition columnist Gavin Maguire. * As debate rages around 'de-dollarization' and the world's appetite for dollar-denominated assets, one major cohort of overseas investors appears to be quietly backing away from U.S. securities: central banks. Check out the latest from ROI markets columnist Jamie McGeever. Oil ebbs again as Fed meets The intensity of the Middle East conflict went up several more notches overnight amid speculation the U.S. military would join the attacks on Iran. The central question now is whether the U.S. air force would be involved in any attempt to take out Iran's underground nuclear enrichment facilities, particularly the Fordow plant. An Israeli military strike on Iran's nuclear complex at Natanz directly hit the underground uranium enrichment operation there, the U.N. nuclear watchdog said on Tuesday, after initially reporting only indirect damage. Markets have to calculate whether we're apt to see a long drawn-out war and related energy disruptions or a shorter and more decisive outcome that could limit any hit to Iranian crude supply. Back home in the U.S., any energy shock would be economically and politically sensitive. And it's unclear how much public support there would be for involvement in the sort of foreign wars Trump campaigned to keep America out of. So far, U.S. crude prices remain relatively contained despite the war, slipping back slightly again on Wednesday to just under $75 per barrel. Even though spot prices have risen about 14% since the start of last week, they have not breached intraday highs set last Friday nor the $80-plus peak hit in January, and they also remain down 7% year on year. What's more, crude prices remain below the average of the past two years since the latest wave of Middle East conflict was triggered by Hamas's Oct 7, 2023 attack on Israel. Gold price moves have also been moderate over the past week, as the prices of the safe haven have failed to hit new records set in April and slipped on Wednesday. The dollar and Swiss franc both edged lower again too today, the latter impacted by a likely interest rate cut to zero from the Swiss National Bank tomorrow. U.S. stock futures were higher ahead of the open after a near 1% drop in the S&P 500 index on Tuesday. The Fed decision, press conference and new economic projections later today will keep many markets in check, however, not least as they come before the U.S. 'Juneteenth' public holiday and market closures on Thursday. No change in the Fed policy rate is expected, especially now that the edgy energy outlook is adding to the already uncertain U.S. import tariff picture. But the Fed's nods and winks about its future course will be crucial as always, not least its 'dot plot' of policymakers' expectations on future rate moves. The most recent set of quarterly projections penciled in two more rate cuts by year-end, but there's some speculation that may be reduced to one in today's update. As of Wednesday, futures markets were pricing in 45 basis points of easing by December. Treasury yields fell back ahead of the meeting, following a series of soft U.S. economic readings for May on retail, industrial activity and housing. Treasuries got an additional lift as the Fed announced a board meeting for June 25 to consider plans to ease leverage requirements on larger banks, kicking off what is expected to be a broad effort to reconsider bank rules. Changes to the so-called "supplementary leverage ratio," which requires banks to set aside capital against assets regardless of their risk, could enable banks to hold more Treasuries. Elsewhere, stocks were mixed to higher around the world, with Hong Kong underperforming and European defense stocks a big gainer. Sweden's crown weakened after the Riksbank cut its key interest rate to 2.0% from 2.25% as expected on Wednesday, saying it may ease further before the end of the year. And Bitcoin remained relatively subdued even after the U.S. Senate on Tuesday passed a bill to create a regulatory framework for dollar-pegged cryptocurrency tokens known as stablecoins, seen by some as a watershed moment for digital assets. In today's deep dive, I look at whether the dollar's steep losses this year may already have run their course or whether this is longer-term exit from the currency. Chart of the day Much like world oil prices, freight rates out of the Persian Gulf have jumped sharply since the start of the Israel-Iran war on June 13. But also like crude prices, these shipping rates have so far failed to even hit their highest points for the year to date, never mind longer-term historical highs. Concerns about shipping disruption and energy supplies have clearly risen, but with too many contrasting scenarios for the conflict's outcome still in play, traders may be wary of betting one way or the other. Today's events to watch * U.S. May housing starts, weekly jobless claims (8:30 AM EDT), April TIC data on foreign holdings of Treasury securities (4:00 PM EDT) * Federal Reserve's Federal Open Market Committee policy decision (2:00 PM EDT), news conference from Fed Chair Jerome Powell and policymakers' new economic and rates projections * European Central Bank Vice President Luis de Guindos and heads of central banks of Italy, Spain, Netherlands, France and Germany meet students in Milan; ECB chief economist Philip Lane speaks in Amsterdam; Bank of Canada governor Tiff Macklem speaks * U.S. corporate earnings: Progressive Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Want to receive the Morning Bid in your inbox every weekday morning? Sign up for the newsletter here. (By Mike Dolan; Editing by Anna Szymanski) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
18-06-2025
- Business
- Yahoo
Morning Bid: Oil ebbs again as Fed meets
By Mike Dolan LONDON (Reuters) -What matters in U.S. and global markets today I'm excited to announce that I'm now part of Reuters Open Interest (ROI), an essential new source for data-driven, expert commentary on market and economic trends. You can find ROI on the Reuters website, and you can follow us on LinkedIn and X. The alarming Israel-Iran war is keeping world oil prices volatile, but crude moves have not yet hit red-alert territory, and markets are now turning their attention to Wednesday's Federal Reserve policy decision. I'll discuss this and all of the market news below. Be sure to check out today's column, where I explain why the dollar's decline may persist despite signs that 'short dollar' is already a crowded trade. Today's Market Minute * Thousands of people were fleeing Tehran on Wednesday after U.S. President Donald Trump said they should leave the capital, while a source said Trump was considering options that include joining Israel in attacking Iranian nuclear sites. * Oil prices eased in Asian trade on Wednesday, after a gain of 4% in the previous session, as markets weighed the chance of supply disruptions from the Iran-Israel conflict against a U.S. Federal Reserve rates decision that could impact oil demand. * While global energy markets are not yet pricing in worst-case scenarios for the Israel-Iran war, oil tanker rates are providing a good real-time gauge of the escalating risks, writes ROI columnist Ron Bousso. * Energy equity investors are adjusting their positions in an attempt to pick winners and cut losers as President Donald Trump's tax-and-spending bill makes its way through the U.S. Congress. Read the analysis from ROI energy transition columnist Gavin Maguire. * As debate rages around 'de-dollarization' and the world's appetite for dollar-denominated assets, one major cohort of overseas investors appears to be quietly backing away from U.S. securities: central banks. Check out the latest from ROI markets columnist Jamie McGeever. Oil ebbs again as Fed meets The intensity of the Middle East conflict went up several more notches overnight amid speculation the U.S. military would join the attacks on Iran. The central question now is whether the U.S. air force would be involved in any attempt to take out Iran's underground nuclear enrichment facilities, particularly the Fordow plant. An Israeli military strike on Iran's nuclear complex at Natanz directly hit the underground uranium enrichment operation there, the U.N. nuclear watchdog said on Tuesday, after initially reporting only indirect damage. Markets have to calculate whether we're apt to see a long drawn-out war and related energy disruptions or a shorter and more decisive outcome that could limit any hit to Iranian crude supply. Back home in the U.S., any energy shock would be economically and politically sensitive. And it's unclear how much public support there would be for involvement in the sort of foreign wars Trump campaigned to keep America out of. So far, U.S. crude prices remain relatively contained despite the war, slipping back slightly again on Wednesday to just under $75 per barrel. Even though spot prices have risen about 14% since the start of last week, they have not breached intraday highs set last Friday nor the $80-plus peak hit in January, and they also remain down 7% year on year. What's more, crude prices remain below the average of the past two years since the latest wave of Middle East conflict was triggered by Hamas's Oct 7, 2023 attack on Israel. Gold price moves have also been moderate over the past week, as the prices of the safe haven have failed to hit new records set in April and slipped on Wednesday. The dollar and Swiss franc both edged lower again too today, the latter impacted by a likely interest rate cut to zero from the Swiss National Bank tomorrow. U.S. stock futures were higher ahead of the open after a near 1% drop in the S&P 500 index on Tuesday. The Fed decision, press conference and new economic projections later today will keep many markets in check, however, not least as they come before the U.S. 'Juneteenth' public holiday and market closures on Thursday. No change in the Fed policy rate is expected, especially now that the edgy energy outlook is adding to the already uncertain U.S. import tariff picture. But the Fed's nods and winks about its future course will be crucial as always, not least its 'dot plot' of policymakers' expectations on future rate moves. The most recent set of quarterly projections penciled in two more rate cuts by year-end, but there's some speculation that may be reduced to one in today's update. As of Wednesday, futures markets were pricing in 45 basis points of easing by December. Treasury yields fell back ahead of the meeting, following a series of soft U.S. economic readings for May on retail, industrial activity and housing. Treasuries got an additional lift as the Fed announced a board meeting for June 25 to consider plans to ease leverage requirements on larger banks, kicking off what is expected to be a broad effort to reconsider bank rules. Changes to the so-called "supplementary leverage ratio," which requires banks to set aside capital against assets regardless of their risk, could enable banks to hold more Treasuries. Elsewhere, stocks were mixed to higher around the world, with Hong Kong underperforming and European defense stocks a big gainer. Sweden's crown weakened after the Riksbank cut its key interest rate to 2.0% from 2.25% as expected on Wednesday, saying it may ease further before the end of the year. And Bitcoin remained relatively subdued even after the U.S. Senate on Tuesday passed a bill to create a regulatory framework for dollar-pegged cryptocurrency tokens known as stablecoins, seen by some as a watershed moment for digital assets. In today's deep dive, I look at whether the dollar's steep losses this year may already have run their course or whether this is longer-term exit from the currency. Chart of the day Much like world oil prices, freight rates out of the Persian Gulf have jumped sharply since the start of the Israel-Iran war on June 13. But also like crude prices, these shipping rates have so far failed to even hit their highest points for the year to date, never mind longer-term historical highs. Concerns about shipping disruption and energy supplies have clearly risen, but with too many contrasting scenarios for the conflict's outcome still in play, traders may be wary of betting one way or the other. Today's events to watch * U.S. May housing starts, weekly jobless claims (8:30 AM EDT), April TIC data on foreign holdings of Treasury securities (4:00 PM EDT) * Federal Reserve's Federal Open Market Committee policy decision (2:00 PM EDT), news conference from Fed Chair Jerome Powell and policymakers' new economic and rates projections * European Central Bank Vice President Luis de Guindos and heads of central banks of Italy, Spain, Netherlands, France and Germany meet students in Milan; ECB chief economist Philip Lane speaks in Amsterdam; Bank of Canada governor Tiff Macklem speaks * U.S. corporate earnings: Progressive Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Want to receive the Morning Bid in your inbox every weekday morning? Sign up for the newsletter here. (By Mike Dolan; Editing by Anna Szymanski) Sign in to access your portfolio
Yahoo
16-06-2025
- Business
- Yahoo
Morning Bid: Markets calm as Israel-Iran war rages
By Mike Dolan LONDON (Reuters) -What matters in U.S. and global markets today I'm excited to announce that I'm now part of Reuters Open Interest (ROI), an essential new source for data-driven, expert commentary on market and economic trends. You can find ROI on the Reuters website, and you can follow us on LinkedIn and X. World markets were calm on Monday, even in the face of this weekend's escalation of the Israel-Iran conflict, as volatile oil prices fell slightly from Friday's 4-month peak. I'll discuss all of today's market-moving news below. Today's Market Minute * Iranian missiles struck Israel's Tel Aviv and the port city of Haifa before dawn on Monday, killing at least eight people and destroying homes, prompting Israel's defense minister to warn that Tehran residents would "pay the price and soon". * Iran has told mediators Qatar and Oman that it is not open to negotiating a ceasefire while it is under Israeli attack, an official briefed on the communications told Reuters on Sunday, as the two foes launched fresh attacks and raised fears of a wider conflict. * A two-day manhunt ended on Sunday with the arrest of a 57-year-old man for allegedly killing a Minnesota Democratic state lawmaker and her husband while posing as a police officer, Governor Tim Walz said. * U.S. President Donald Trump's administration is considering significantly expanding its travel restrictions by potentially banning citizens of 36 additional countries from entering the United States, according to an internal State Department cable seen by Reuters. Markets calm despite Israel and Iran exchanging fire Israel began its military strikes with a surprise attack on Friday that targeted the top echelon of Iran's military command and damaged its nuclear sites. The move occurred after the United Nations nuclear watchdog declared for the first time in 20 years that Iran was in breach of its non-proliferation obligations. Iran has vowed retaliation and reiterating Tehran's official stance against developing nuclear weapons. Iran has always said its nuclear program is peaceful, although the Board of Governors of the U.N. International Atomic Energy Agency declared last week that Tehran was in violation of its non-proliferation obligations. Iran's foreign ministry and atomic energy organization said the findings were politically motivated and lacked technical or legal foundation. The attacks from both sides were far more extensive than the more limited exchanges between the two in recent years, but oil production and export facilities have largely been unaffected so far. Oil prices fell back after jumping about 7% to 4-month peaks on Friday, with U.S. crude slipping to $72.40 per barrel from last week's high of $77.62. Gold also retreated, having failed to breach April's record last week. U.S. Treasury yields held Friday's gains, but remain largely stuck in recent ranges as the Federal Reserve meets this week and prepares to release its quarterly economic forecasts. A 20-year bond auction will occur later today. Wall Street stock futures recovered some of Friday's losses before today's bell, and stocks in Asia and Europe rallied. Middle East bourses, however, continue to fall. Even as oil analysts and brokers put forward $100-plus forecasts on "worst-case" scenarios, crude remains down 8% year-on-year and still subdued historically, a critical factor for investors focused on the inflationary impact of any new oil shock. The last time crude topped $100 per barrel was after Russia's full-scale invasion of Ukraine in 2022, but it sustained those heights for less than four months. Prior to that, you have to go back over a decade to see crude hit triple digits. A key question is whether the conflict will lead to disruptions in the Strait of Hormuz. About a fifth of the world's total oil consumption, or some 18 to 19 million barrels per day of oil, condensate and fuel, passes through the strait. The possibility of further escalation looms over a meeting of the Group of Seven leaders in Canada, with U.S. President Donald Trump expressing hope on Sunday that a deal could be done. But there is no sign of the fighting abating as we enter the fourth day of war. As an indication of how far the situation could spiral, two U.S. officials told Reuters that Trump had vetoed an Israeli plan to kill Iran's Supreme Leader Ayatollah Ali Khamenei. While the G7 talks will likely center on the Middle East conflict, leaders will also discuss lowering the Russian oil cap, with European nations and some others expected to go ahead with the move and further sanctions on Moscow even if Trump objects. Beyond geopolitics, it's a week jammed with central bank meetings. There is the Fed, of course, which is not expected to move rates lower until September. The Bank of Japan started its two-day policy meeting today. The trade and geopolitical uncertainties are widely expected to keep the BOJ on hold too. Likewise, the Bank of England is expected to stand pat until August. Perhaps the most notable central bank meeting of this week will involve the Swiss National Bank, which is widely expected to move policy rates back to zero. The likelihood of a cut into negative territory has also risen amid fresh franc strength and domestic price deflation. The franc flirted with its strongest level in more than 10 years against the dollar last week, but held steady on Monday. Chart of the day China's new home prices fell in May, extending two years of stagnation, official data showed on Monday, highlighting challenges in the sector despite several rounds of policy support measures. New home prices fell 0.2% month-on-month in May after showing no growth the previous month. From a year earlier, prices fell 3.5% in May. The market entered a prolonged slump in 2021, with debt-laden developers struggling to deliver homes that buyers had already paid for, further denting consumer confidence and hitting the wider economy. Monetary and fiscal supports have been extensive. But even though major cities had shown tentative signs of recovery in recent months, they saw a relapse as well in May, snapping a streak of five consecutive monthly gains. Today's events to watch * New York Federal Reserve June manufacturing survey * G7 summit in Kananaskis, Alberta * European Central Bank board member Piero Cipollone and Bundesbank President Joachim Nagel speak * U.S. Treasury sells $13 billion of 20-year bonds * U.S. corporate earnings: Lennar Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Want to receive the Morning Bid in your inbox every weekday morning? Sign up for the newsletter here. (By Mike Dolan; Editing by Anna Szymanski) Sign in to access your portfolio
Yahoo
12-06-2025
- Business
- Yahoo
Morning Bid: Oil pops, dollar drops
By Mike Dolan LONDON (Reuters) -What matters in U.S. and global markets today I'm excited to announce that I'm now part of Reuters Open Interest (ROI), an essential new source for data-driven, expert commentary on market and economic trends. You can find ROI on the Reuters website, and you can follow us on LinkedIn and X. Intro Not for the first time this year, markets are being hit by multiple crosscurrents. Today it's an oil price surge driven by Middle East tensions alongside surprisingly benign U.S. inflation readings. I discuss this and the rest of today's market news below. In today's column, I explore a surprising twist in the global dollar debate that could reshape how investors think about currency risk. I'll be off tomorrow so Morning Bid will take a day's holiday, but back to regular programming on Monday. Today's Market Minute * U.S. President Donald Trump said on Wednesday U.S. personnel were being moved out of the Middle East because "it could be a dangerous place", adding that the United States would not allow Iran to have a nuclear weapon. * U.S. consumer prices increased less than expected in May as cheaper gasoline partially offset higher rents, but inflation is expected to accelerate in the coming months on the back of the Trump administration's import tariffs. *An Air India plane bound for London with 242 people on board crashed minutes after taking off from India's western city of Ahmedabad on Thursday, the airline and police said, and India's federal health minister said that "many people" were killed. * U.S. trade negotiations have transitioned from their tumultuous opening act into a new chapter: the Slow Grind. It may be less turbulent than this past spring's drama, but no less worrying for investors. Oil pops, dollar drops With investors trying to read the runes of this week's 'framework' trade agreement between the U.S. and China on Wednesday, worries surfaced about the state of play in the Middle East after the U.S. announced that it was moving personnel out of the region ahead of talks with Iran over the latter's nuclear-related activity. Crude oil prices promptly jumped 4% and hit their highest in two months before giving up some of those gains earlier today. European travel stocks and auto makers fell more than 2% on Thursday on the jitters. Gold, however, was only marginally higher, and the dollar fell. While no specific reason was given for the U.S. personnel orders, the U.N. nuclear watchdog passed a resolution on Thursday formally declaring Iran in breach of its non-proliferation obligations for the first time in almost 20 years. Concern about Israeli threats to Iran's nuclear facilities inevitably ramped up. The prospect of higher energy prices at a time of tariff-related inflation concerns will certainly rankle. But so far at least, the Trump administration's import levies aren't putting much upward pressure on U.S. consumer prices, as May CPI came in below forecasts on Wednesday. Core annual producer price readings due out later today are expected to be steady. Despite this week's crude gains, year-on-year oil prices are still down more than 10%. And two-year U.S. 'breakeven' inflation rates in the inflation-protected Treasury market fell to their lowest of the year at 2.44%. Meanwhile, U.S. Treasury yields fell on a mix of soft inflation and robust demand at the 10-year auction on Wednesday. Some $22 billion of 30-year bonds are up for grabs later today, testing the recently shaky demand for long-duration debt. Federal Reserve expectations haven't shifted greatly, with two quarter-point interest rate cuts still priced by yearend. No move is expected before September, even though President Donald Trump once again called for an immediate full percentage point rate cut after the CPI report. The dollar remains under pressure however, raising more concern about the absence of its traditional 'safe haven' role at a time of rising geopolitical tensions. The dollar index fell to its lowest level since April, with the euro surging above $1.15 to within a whisker of its best levels since 2021. Sterling was a standout loser against the euro, falling to its weakest against the single currency in a month after a surprisingly sharp drop in April UK GDP. Stocks were slightly shaken by the whole picture, with the S&P500 ending in the red on the Middle East news on Wednesday and futures down almost half a percentage point ahead of Thursday's open. Chinese, Japanese and European bourses were all in the red on Thursday. Only South Korea's Kospi bucked the trend. The wider trade war picture remained uncertain despite the U.S.-China progress, with details still patchy as the negotiated deal in London awaited final approval. Trump on Wednesday said he was very happy with the trade deal, as it restored a fragile truce between the two biggest economies, claiming China agreed to free up rare earth supplies in exchange for the U.S. allowing Chinese students to attend U.S. colleges. But he also insisted: "We are getting a total of 55% tariffs, China is getting 10%." White House officials said the 55% represents the sum of a baseline 10% "reciprocal" tariff Trump has imposed on goods imported from nearly all U.S. trading partners, the 20% fentanyl-related tariffs, and pre-existing 25% levies on imports from China that were put in place during Trump's first term. Commerce Secretary Howard Lutnick said the 55% rate on Chinese imports is fixed and unalterable. Treasury Secretary Scott Bessent said the deal would not reduce U.S. export restrictions on high-end artificial intelligence chips. China on Thursday affirmed the trade deal, and a foreign ministry spokesperson said: "Now that a consensus has been reached, both sides should abide by it." But with less than four weeks to go before the expiration of the 90-day pause on U.S. tariffs worldwide, markets remain concerned about what will happen next month. Trump said on Wednesday he would be willing to extend a July 8 deadline for completing trade talks, but also said he did not believe that would be necessary, noting: "At a certain point, we're just going to send letters out ... saying, 'This is the deal. You can take it, or you can leave it.'" European Union talks, in particular, look unlikely to be concluded by then. Elsewhere, Boeing shares fell 6% pre-market after news that an Air India plane headed to London with 242 people on board crashed minutes after taking off from India's western city of Ahmedabad. Be sure to check out today's column, which looks at the weakening dollar and the debate about whether its decline is being driven by flight from U.S. assets at large or simply foreign investors hedging their dollar exposure. Chart of the day The UK may be seeing the downsides of publishing noisy monthly GDP readouts as opposed to quarterly updates. The April GDP report threw cold water on a relatively robust start to the year for the UK economy, showing a surprising 0.3% contraction during the month. However, it remains very unclear how much of the April loss will be durable through the second quarter. Either way, the data will put pressure on the Bank of England to step up monetary easing. Consequently, both sterling and UK government bond yields fell back after the GDP release. Today's events to watch * U.S. May producer price report (8:30 AM EDT), weekly jobless claims (8:30 AM EDT) * Federal Reserve issues Quarterly Financial Accounts of the United States (11:00 AM EDT) * U.S. Treasury auctions $22 billion of 30-year bonds * European Central Bank Vice President Luis de Guindos and ECB board member Isabel Schnabel both speak in Brussels * U.S. corporate earnings: Adobe Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Want to receive the Morning Bid in your inbox every weekday morning? Sign up for the newsletter here. (By Mike Dolan; Editing by Anna Szymanski and Gareth Jones) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
