MNI US OPEN - US-EU Deal Avoids Escalating Trade War
EXECUTIVE SUMMARY
- EU REACHES TARIFF DEAL WITH US TO AVERT PAINFUL TRADE BLOW
- US, CHINA OFFICIALS TO MEET IN SWEDEN TO EXTEND TRADE TRUCE
- STARMER TO PRIORITISE GAZA IN TALKS WITH TRUMP IN SCOTLAND
- CHINA ROLLS OUT CHILDCARE SUBSIDY TO BOOST BIRTH RATE
Figure 1: E-Mini S&P rallies to fresh cycle high following US-EU trade deal
Source: MNI/Bloomberg Finance L.P.
NEWS
MNI FED PREVIEW - JULY 2025: Dividing Lines
With the Fed almost certain to hold the funds rate at 4.25-4.50% again at the July 29-30 meeting, focus will be on the degree to which the Committee signals openness to rate cuts resuming in the fall. The policy statement is unlikely to see meaningful changes, though Governor Waller and Vice Chair Bowman are widely expected to dissent in favor of a rate cut. The message from July is likely to look similar to that of June: a fairly divided Committee retains its overall easing bias but individual participants need varying degrees of certainty before supporting a resumption of the easing cycle.
US/EU (BBG): EU Reaches Tariff Deal With US to Avert Painful Trade Blow
The US and European Union agreed on a hard-fought deal that will see the bloc face 15% tariffs on most of its exports, including automobiles, staving off a trade war that could have delivered a hammer blow to the global economy. The pact was concluded less than a week before a Friday deadline for President Donald Trump’s higher tariffs to take effect and was quickly praised by several European leaders, including German Chancellor Friedrich Merz and Italian Prime Minister Giorgia Meloni, who called it “sustainable.”
US/CHINA (BBG): US, China Officials to Meet in Sweden to Extend Trade Truce
US and Chinese officials are meeting Monday to extend their tariff detente beyond a mid-August deadline, and haggle over other ways to further defuse trade tensions. Chinese Vice Premier He Lifeng and US Treasury Secretary Scott Bessent will lead the delegations through Tuesday in Stockholm — their third meeting in less than three months. The agenda includes discussions about how long the current tariff truce can be extended, as well as US levies tied to fentanyl trafficking and Chinese purchases of sanctioned Russian and Iranian oil.
US/UK (The Times): Starmer to Prioritise Gaza in Talks with Trump in Scotland
Sir Keir Starmer is expected to use a meeting with President Trump to increase diplomatic pressure on Israel over humanitarian aid to Gaza. Israel made concessions on aid delivery on Sunday amid a rising outcry over images of emaciated children. The UK will help airdrop aid into Gaza and evacuate children in need of medical assistance, but David Lammy, the foreign secretary, has called for “unhindered” overland food deliveries.
US/S.KOREA (BBG): S. Korea Mulls More US Rice Imports, Shipyard Acquisition: DongA
South Korean government is reviewing possible increase in US rice imports as well as extra investment in the US shipbuilding and semiconductor sectors amid the ongoing tariff negotiations, DongA Ilbo newspaper reports, citing unidentified government sources. South Korea is essentially accepting increasing US rice import as a “constant.”
ECB (BBG): Kazimir Sees ECB Holding Rates in September in Absence of Shock
The European Central Bank shouldn’t cut interest rates in September unless there’s evidence of a major deterioration in the economy, according to Governing Council member Peter Kazimir. With the deposit rate held at 2% last week, the ECB is in a “comfortable place” to monitor trade uncertainty, the Slovak official said Monday. A deal struck between the US and the European Union is “welcome news,” though doesn’t grant an all-clear for the euro-zone economy. “I don’t expect anything significant to happen that would force my hand to act as soon as September,” Kazimir said in an op-ed on the website of Slovakia’s central bank.
IRAN (BBG): Iran Says IAEA Official Likely to Visit Within Two Weeks
“One of the officials from the International Atomic Energy Agency is likely to visit Iran within the next two weeks,” during which technical discussions will take place, a spokesman from the Iranian Foreign Ministry says in a televised press conference. “A new framework is expected to be established with the IAEA, in line with legislation passed by parliament,” Esmaeil Baghaei says without providing details.
CHINA (BBG): China Rolls Out Childcare Subsidy to Boost Birth Rate
China announced that it will start handing out childcare subsidies across the nation, in its latest push to boost birthrates after a worrying drop in recent years. The government will spend 3,600 yuan ($502) a year per child under age three, according to the official Xinhua News Agency. The assistance, effective retrospectively from Jan. 1 this year and available regardless of the first-, second- or third-child, is meant as an incentive for young couples wary of rising costs of child-rearing.
CHINA (MNI): China to Continue Tax Cuts in H2
MNI (Beijing) China’s taxation authorities expect to implement CNY600 billion of tax breaks in H2, after reductions totalled CNY9.9 trillion between 2021 and end of H1 2025, according to Cai Zili, deputy director at the State Administration of Taxation, speaking at a press conference on Monday. "We will continue to implement preferential tax policies to support new quality productivity and high-quality development," Cai added.
JAPAN (BBG): Japan’s Ishiba Stresses Resolve to Stay, Avoid Political Vacuum
Japanese Prime Minister Shigeru Ishiba reiterated his resolve to stay on to avoid creating a political vacuum and to ensure that a trade deal with the US is fully implemented. “I intend to fulfill my responsibility so as to never create a political vacuum for the nation and its people,” Ishiba said Monday at the start of a rare meeting in which the ruling Liberal Democratic Party’s lawmakers have gathered to assess the reasons for the party’s recent election setback.
THAILAND (BBG): Thailand, Cambodia Start Ceasefire Talks Amid Trump Trade Threat
Thai and Cambodian leaders began talks aimed at ending their deadliest border conflict in more than a decade, as the US and regional powers push for a ceasefire and diplomatic resolution. Thailand’s acting Prime Minister Phumtham Wechayachai and Cambodian Prime Minister Hun Manet are holding discussions Monday in Putrajaya, Malaysia’s administrative capital. Malaysian Prime Minister Anwar Ibrahim is facilitating the dialogue in his role as the chair of the Association of Southeast Asian Nations, with Washington and Beijing dispatching envoys.
DATA
CHINA DATA (MNI): China Industrial Profits Decline in June
Over the weekend, the release of China's Industrial Profits for the year provided limited positive news for the current state for China's corporates. Industrial profits year-on-year declined -4.3% in June, following the decline of -9.1% in May. The year-to-date number declined further to -1.8% YoY from -1.1% in May. Intensive competition between companies has exacerbated deflationary pressures at a time when exports to the US remain pressurized.
RATINGS: Finland Downgraded at Fitch, Turkey Upgraded at Moody's
Sovereign rating reviews of note from after hours on Friday include:
- Fitch downgraded Finland to AA; Outlook Stable
- Fitch affirmed Turkey at BB-; Stable Outlook
- Moody's upgraded Turkey to Ba3, outlook stable
- Morningstar DBRS confirmed Belgium at AA, Stable Trend
- S&P affirmed Luxembourg at AAA; Outlook Stable
- Scope Ratings affirmed Ireland at AA; Outlook Stable
- Scope Ratings affirmed Sweden at AAA rating; Outlook Stable
FOREX: Strong Early Performance for the Dollar
- The Dollar was mostly mixed against G10s going into the European session and just ahead of the EU Cash Govie Open, but as Europe came in, the Dollar saw a broader base bid, after desks took in the overnight tariff news in their stride.
- The US and the EU agreed a 15% Tariff deal, Europe also agreed to cut its car import duty to 2.5% as part of the deal.
- Multiple desks are still somewhat perplexed at the strength of the Dollar in early trade, and aside from the trade news, new headlines or drivers have so far been limited.
- Instead some market participants also speculate that the Fed will stick to its hawkish stance at Wednesday's meeting when unchanged rate is expected from the FOMC, for some of the bid into the Dollar.
- G10 pairs/crosses have seen some decent early ranges, the EURUSD sees over a 100 pips range, with the EUR mostly under some small pressure following the fade off the highs in European equities.
- The Kiwi is the worst early performer within G10 against the Greenback, and the initial support will be seen at 0.5939 in NZDUSD, last week's low.
- Looking ahead, there are no Tier 1 data for the session, but the US-EU trade deal details continue to trickle down.
BONDS: Early Weakness Reversed, EGBs Lead
Core global FI markets reversed the Asia-Pac gap lower, with the inflation readthrough in the wake of the U.S.-EU trade deal and some ongoing questions surrounding trade between the two eventually outweighing any growth boost when it comes to bonds.
- Benchmark global equity index futures have eased back from Asia-London handover highs but remain comfortably firmer on the day.
- Bund futures as high as 129.74, bulls unable to test the 20-day EMA (129.97). Bears remain in technical control, Friday’s multi-month low (128.84) provides initial support.
- German yields are 2-3bp lower, belly and intermediates outperform. 10s hold below 2.75% after Friday’s brief move above.
- EGB spreads to Bunds little changed to 1bp tighter, aided by firmer equities.
- Gilts follow cues from peers with little in the way of meaningful UK news flow. Futures as high as 91.85, last +31 at 91.77. Initial resistance at the 20-day EMA (91.92) goes untested. Initial support comes in at the July 24 low (91.18).
- UK yields 1-4bp lower, curve flatter. 10s ~1bp wider vs. Bunds.
- ECB & BoE pricing little changed after the recent hawkish adjustments, 16bp of ECB easing showing through year-end, ~46bp of BoE cuts priced over the same horizon.
- Focus is on wider macro matters (any ongoing adjustment to the U.S.-EU trade deal and Sino-U.S. discussions in Stockholm).
- Note the BoE will sell GBP750mln of medium-dated gilts from its APF this afternoon.
- Plenty of EUR event risk as the week moves on, with the ECB’s inflation expectations survey (Tuesday), wage tracking data & (Wednesday), Eurozone GDP (Wednesday) & Eurozone HICP (Friday) all eyed.
EQUITIES: E-Mini S&P Starts the Week on a Bullish Note, at Fresh Cycle Highs
The trend condition in Eurostoxx 50 futures remains bullish and short-term weakness for now, appears corrective. Support at 5281.00, the Jul 1 / 4 low, remains intact. A clear break of this level would strengthen a bearish threat. For bulls, a resumption of gains would refocus attention on key resistance and the bull trigger at 5486.00, the May 20 high. It has recently been pierced, a clear breach of it would resume the bull cycle and open 5500.00. S&P E-Minis have traded to fresh cycle high today as the contract begins the week on a bullish note. The climb confirms a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Note that moving average studies are in a bull-mode position highlighting a clear dominant uptrend. Sights are on 6477.31, a Fibonacci projection. Key support is at the 50-day EMA, at 6153.14. Support at the 20-day EMA is at 6302.01.
- Japan's NIKKEI closed lower by 457.96 pts or -1.1% at 40998.27 and the TOPIX ended 21.13 pts lower or -0.72% at 2930.73.
- Elsewhere, in China the SHANGHAI closed higher by 4.282 pts or +0.12% at 3597.937 and the HANG SENG ended 173.78 pts higher or +0.68% at 25562.13.
- Across Europe, Germany's DAX trades higher by 111.22 pts or +0.46% at 24331.01, FTSE 100 higher by 11.81 pts or +0.13% at 9132.57, CAC 40 up 58.45 pts or +0.75% at 7893.03 and Euro Stoxx 50 up 51.53 pts or +0.96% at 5403.69.
- Dow Jones mini up 92 pts or +0.2% at 45178, S&P 500 mini up 20.5 pts or +0.32% at 6445.5, NASDAQ mini up 117.25 pts or +0.5% at 23539.25.
Time: 10:00 BST
COMMODITIES: Bearish Theme in WTI Futures Remains Intact, Despite Latest Gains
A bearish theme in WTI futures remains intact and the shallow recovery since Jun 24 still appears corrective. The sharp reversal from the Jun 23 high continues to highlight scope for an extension lower. Support to watch is the 50-day EMA, at $64.77. The average has been pierced, a clear break of it would expose $58.17, the May 30 low. On the upside, initial resistance to watch is $69.41, the 50.0% retracement of the Jun 23 - 24 high-low range. Gold has pulled back from its Jul 23 high. Short-term weakness is considered corrective and a bull cycle that started Jun 30 remains intact. Resistance at $3395.1, the Jun 23 high, has recently been cleared. A continuation higher would open $3451.3, the Jun 16 high. Note that moving average studies are in a bull-mode position highlighting a dominant uptrend. An initial firm support to watch is 3282.8, the Jul 9 low.
- WTI Crude up $0.39 or +0.6% at $65.54
- Natural Gas down $0.03 or -0.87% at $3.084
- Gold spot down $2.68 or -0.08% at $3335.16
- Copper down $0.3 or -0.05% at $578.35
- Silver up $0.06 or +0.15% at $38.2145
- Platinum up $1.47 or +0.1% at $1407.4
Time: 10:00 BST
| Date | GMT/Local | Impact | Country | Event |
| 28/07/2025 | 1000/1100 | ** |  GB | CBI Distributive Trades |
| 28/07/2025 | 1400/1000 | ** |  US | housing vacancies |
| 28/07/2025 | 1430/1030 | ** | US | Dallas Fed manufacturing survey |
| 28/07/2025 | 1530/1130 | * | US | US Treasury Auction Result for 2 Year Note |
| 28/07/2025 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 28/07/2025 | 1700/1300 | * | US | US Treasury Auction Result for 5 Year Note |
| 28/07/2025 | 1700/1300 | * | US | US Treasury Auction Result for 13 Week Bill |
| 28/07/2025 | - | US | FOMC Meeting | |
| 29/07/2025 | 2301/0001 | * | GB | BRC Monthly Shop Price Index |
| 29/07/2025 | 0600/0800 |  SE | Flash Quarterly GDP Indicator | |
| 29/07/2025 | 0700/0900 | *** |  ES | GDP (p) |
| 29/07/2025 | 0800/1000 | ** |  EU | ECB Consumer Expectations Survey |
| 29/07/2025 | 0830/0930 | ** | GB | BOE Lending to Individuals |
| 29/07/2025 | 0830/0930 | ** | GB | BOE M4 |
| 29/07/2025 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 29/07/2025 | 1230/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 29/07/2025 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 29/07/2025 | 1300/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 29/07/2025 | 1300/0900 | ** | US | FHFA Home Price Index |
| 29/07/2025 | 1300/0900 | ** | US | FHFA Home Price Index |
| 29/07/2025 | 1400/1000 | *** | US | Conference Board Consumer Confidence |
| 29/07/2025 | 1400/1000 | *** | US | JOLTS jobs opening level |
| 29/07/2025 | 1400/1000 | *** | US | JOLTS quits Rate |
| 29/07/2025 | 1430/1030 | ** | US | Dallas Fed Services Survey |
| 29/07/2025 | 1530/1130 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |
| 29/07/2025 | 1700/1300 | ** | US | US Treasury Auction Result for 7 Year Note |
