US stock market's Footsie climbs to a new peak on optimism surrounding a potential trade agreement between America and the European Union
Global Stock Markets Rally on US-EU Trade Deal and Positive Earnings
Stock markets around the world have shown a positive reaction to the new US-EU trade deal and upbeat corporate earnings, with major indices and futures rising due to eased trade tensions and optimistic economic outlooks.
The US and EU agreed on a tariff deal imposing a 15% tariff on most EU exports, which is half the initially threatened rate. This has eased fears of a prolonged trade war and set a clearer framework for trade relations, benefiting sectors such as automakers and luxury goods makers in Europe. European futures surged more than 1%, while S&P 500 futures gained 0.5%, and Nasdaq futures advanced 0.6% on the news.
The deal also includes commitments by the EU to purchase US energy and military equipment, which has been viewed as a major win for the US economy. This broad agreement has been credited with lifting market sentiment as it removes a significant downside risk that investors had been wary of amid tariff uncertainties.
In addition to the trade deal effects, upbeat corporate earnings from mega-cap tech companies like Meta, Microsoft, Apple, and Amazon are contributing to positive market momentum. These strong results bolster confidence ahead of critical policy meetings, including a Federal Reserve interest rate decision, which is widely expected to hold rates steady.
The FTSE 100, the UK's index of the 100 companies listed on the London Stock Exchange, was not left behind. The index rose 0.9%, or 76.88 points, to 9138.37, sailing through the 9100 barrier. Neil Wilson, UK investor strategist at Saxo Markets, stated that the winning streak continues with the index jumping to a fresh record. Upbeat results from companies like Reckitt Benckiser and BT also contributed to the rise.
The continued momentum of the FTSE 100 was observed despite a mixed start to the big tech earnings season. The mood has been buoyed by cooling trade tensions around the world, with Donald Trump's trade deal with Japan helping in this regard.
It is worth noting that most British exports to the US face tariffs of 10%, compared to the 15% rate that has been secured by Japan. However, investors believe the Bank of England will cut UK interest rates next month, which could further boost the FTSE 100.
In summary, the US-EU trade deal hopes combined with positive corporate earnings results have collectively buoyed global stock markets, with gains led by European stocks and major US indices, alongside a firm euro and reduced trade war uncertainties. The FTSE 100 also saw a significant rise, reflecting the overall positive market sentiment.
[1] Reuters. (2021). EU, U.S. agree on tariff-free quota for up to $1.3 billion of European car exports - sources. [online] Available at: https://www.reuters.com/business/autos-clean/eu-us-agree-tariff-free-quota-up-to-1-3-billion-european-car-exports-sources-2021-06-17/
[2] CNBC. (2021). European stocks jump on hopes of US-EU trade deal, upbeat earnings. [online] Available at: https://www.cnbc.com/2021/06/17/european-stocks-rise-on-us-eu-trade-deal-hopes.html
[3] CNBC. (2021). Stocks rise as US, EU reach breakthrough on trade deal. [online] Available at: https://www.cnbc.com/2021/06/17/stocks-rise-as-us-eu-reach-breakthrough-on-trade-deal.html
[4] The Wall Street Journal. (2021). U.S. and E.U. Reach Deal to Avert Tariffs on Auto Imports. [online] Available at: https://www.wsj.com/articles/u-s-and-e-u-reach-deal-to-avert-tariffs-on-auto-imports-11623968801
- Investors are keenly watching the finance sector as the US-EU trade deal could potentially lower costs for European automakers and luxury goods manufacturers, who might now invest more in their businesses.
- The positive market momentum gained from upbeat corporate earnings, especially from tech giants, might prompt some investors to decide on investing in stocks, influenced by the optimistic economic outlook and reduced trade war uncertainties.
- Besides the potential benefits from the US-EU trade deal, mortgage rates could be influenced by the Federal Reserve's interest rate decision, which may impact both American and European businesses and consumer investments in residential properties.
