Majority of world stocks climb due to optimism over potential trade agreement, contrasted by significant drop in Tesla's share value
The global markets closed mixed on Tuesday, with some major indices setting new records while others retreated.
On Wall Street, both the S&P 500 and tech-heavy Nasdaq edged higher to close at fresh records, despite the Dow Jones Industrial Average retreating. The S&P 500 closed at 6,363.35, up 0.1 percent, while the Nasdaq Composite closed at 21,057.96, up 0.2 percent. The Dow, however, closed at 44,693.91, down 0.7 percent.
Across the Atlantic, the DAX in Germany closed at 24,295.93, up 0.2 percent, and the FTSE 100 in London closed at 9,138.37, up 0.9 percent. In France, the CAC 40 closed at 7,818.28, down 0.4 percent.
In Asia, the Shanghai Composite closed at 3,605.73, up 0.7 percent, and the Hang Seng Index in Hong Kong closed at 25,667.18, up 0.5 percent. Stocks advanced in Asia, with Tokyo adding more than one percent, building on a more than three percent surge the previous day on the back of the Japan-US trade deal. The Nikkei 225 closed at 41,826.34, up 1.6 percent.
The European Central Bank left interest rates unchanged, but warned that the economic environment remains "exceptionally uncertain, especially because of trade disputes." The pound weakened against the dollar, at $1.3507, while the euro weakened against the dollar, at $1.1756, but strengthened against the pound, at 87.01 pence.
Investors have profited in recent weeks from wagers that governments will eventually hammer out pacts with Donald Trump ahead of the US president's August 1 deadline. The dollar strengthened against the yen, at 146.94 yen.
A significant development in the global trade landscape is the newly announced EU-US trade deal. The pact establishes a 15% tariff on EU goods like cars and other manufacturing products, but explicitly excludes pharmaceuticals and metals from these tariffs. The agreement commits the EU to significantly increase its purchase of American energy (valued at $750 billion) and military supplies, marking a major expansion of US exports to Europe. The EU will also invest an additional $600 billion into the United States, further deepening economic ties and investment flows.
The deal was framed as a move to resolve what former President Trump described as an unfair and one-sided trade relationship, where the US had a trade deficit of about $235 billion with the EU in the previous year. European leaders acknowledge that while a total zero-tariff agreement would have been ideal, this deal provides clear terms and enhances market stability, benefiting businesses and consumers in both markets.
According to multiple diplomats, the deal could waive tariffs on aircraft, lumber, pharmaceutical products, and agricultural goods. The details of these waivers are yet to be fully disclosed.
In corporate news, Tesla fell 8.2 percent as CEO Elon Musk warned investors of a rough patch for earnings. Google parent Alphabet climbed 0.9 percent after reporting a $28.2 billion profit in the second quarter.
Adam Sarhan of 50 Park Investments stated that buyers are in control and there is a lot of optimism about future trade deals. This optimism, combined with the ongoing recovery from the pandemic, seems to be driving the overall market sentiment.
- The European Central Bank's warning about the uncertain economic environment, particularly due to trade disputes, could potentially impact businesses and finance in the European market.
- The newly announced EU-US trade deal, which includes a 15% tariff on EU goods but excludes pharmaceuticals and metals, could benefit the technology sector as it marks a major expansion of US exports to Europe, responding to the former President Trump's description of an unfair trade relationship.
- Investments in the US by the EU, estimated at an additional $600 billion, could foster technology growth in the US, further deepening economic ties and investment flows between the two regions.
