Asian stock markets dropped on Tuesday as investors grew concerned about the effects of a new U.S.-EU trade agreement. Although the deal averted harsher tariffs, Europe now faces a 15% levy—much higher than the previous 1–2%. Leaders in Germany and France cautioned that such measures could slow growth, pulling stocks and bond yields down across the region.
The MSCI Asia-Pacific index lost 0.8%. Japan's Nikkei fell 0.9%, while China's CSI 300 was flat. In Europe, stocks tried to rebound slightly after Monday's losses. Futures swapped hands with the EUROSTOXX 50, FTSE, and DAX, each 0.2% higher.
Euro Struggles as Dollar Gains Strength
The euro was little changed, at $1.1587, after declining 1.3% on Wednesday, its largest one-day decrease in two months. The dollar index climbed to 98.675, supported by investors unwinding short-dollar bets. The dollar was at 148.27 against the yen, slightly off the recent high.
In the meantime, Wall Street held steady, boosted by optimism about earnings from large tech companies such as Apple, Meta, Microsoft, and Amazon. Futures on the Nasdaq gained 0.2%, and those for the S&P 500 ticked up 0.1%. The Nasdaq added 0.3% on Monday to reach a record high, and the S&P 500 ended with its sixth straight record close.
Fed Rate Decision and Economic Data in Focus
Investors are also keeping a close eye on the U.S. Federal Reserve meeting next week. The Fed is widely expected to leave rates steady at 4.25%–4.5%, with markets pricing a 97% probability of no change. Even so, some members of the Fed may press for a rate cut, particularly if there is a deterioration in economic data.
GDP data due later in the week should show a 2.4% rebound for the second quarter after a 0.5% drop earlier this year. (too many job openings) on Tuesday and Friday's payroll report are critical in molding rate expectations.
Oil Prices Rise, Gold Steady
Oil prices rose slightly after President Trump gave Russia 10 to 12 days to make headway toward ending the war in Ukraine or suffer more severe oil-related sanctions. Brent crude was up 2.3 percent on Monday and traded at $69.90 a barrel on Tuesday, while U.S. crude closed at $66.60. The price of gold was unchanged at $3,315 an ounce.
