Brussels (Brussels Morning Newspaper) – Europe’s main stock indexes rose slightly, and the euro declined in early Monday trading as investors responded with cautious relief to the trade agreement between Washington and Brussels.
European stock markets rose sharply at the opening on Monday, following a handshake deal between US President Donald Trump and European Commission President Ursula von der Leyen in Turnberry, Scotland, on Sunday.
How did markets react to the EU-US deal?
The STOXX 600 rose by 0.7%, while the euro declined 0.3% against the dollar at the beginning of what appears to be a crucial week in U.S. President Donald Trump’s global trade conflict.
Although the U.S.-EU agreement prevents a more severe confrontation between the two blocs- representing nearly a third of global trade- several European capitals criticised it for being heavily tilted in Washington’s favour.
MUFG FX strategist Derek Halpenny stated that the EU deal was ultimately “good news for financial markets as it minimises uncertainty further before August 1st, which now seems like an insignificant date.”
Which European indexes gained after the trade agreement?
Germany’s export-driven DAX, France’s CAC 40, Italy’s FTSE MIB, and Spain’s IBEX all rose between 0.4% and 0.8% after the first hour of trading. Meanwhile, S&P 500 and Nasdaq futures indicated new record highs on Wall Street as trading resumed. The euro initially strengthened as Asian markets reopened, but gradually declined into negative territory as the dollar gained across the board.
What are the key terms of the new deal?
The deal negotiated by the European Union and the United States is a remarkable trade deal which imposes a 15% tariff on most European exports to the US, including cars. President Donald Trump and European Commission President Ursula von der Leyen both noted that the deal was hard-fought but mutually beneficial and is providing stability and predictability in trade between the world’s two largest economies.
The tariff rate is quite a reduction from the previously threatened rate of 30% or more and is higher than previous U.S. tariff levels of around 10%. Some strategic products are exempt from tariffs with a zero-for-zero tariff scheme, which includes aircraft parts, certain chemicals, generic prescription drugs and some agricultural products. The agreement also maintains a 50% tariff on European steel and aluminium with future adjustments in consideration, and a quota is planned.
