Caesars Entertainment misses Q2 earnings expectations, shares edge lower
Investing.com - Trade is set to be near the top of the agenda at the beginning of a pivotal week for financial markets. A U.S.-European Union trade deal over the weekend has helped to soothe concerns over tariff-fueled economic uncertainty, while Washington and China are reportedly considering extending a recent trade truce. Meanwhile, investors have a lot on their plates this week -- including a host of major tech earnings, key economic data releases, and much-anticipated central bank decisions.
1. U.S.-EU trade deal
The United States and European Union have reached a landmark trade agreement that includes a 15% tariff on EU goods entering the U.S., President Donald Trump announced Sunday while in Scotland.
The broad-strokes deal encompasses significant EU purchases of U.S. energy and military gear, along with substantial investments in the American economy.
According to Trump, the European Union has committed to purchasing $750 billion worth of energy from the United States. He also stated that the EU has agreed to make $600 billion in investments in the U.S.
"They are agreeing to open up their countries to trade at zero tariff," Trump told reporters. He added that the EU would "purchase a vast amount of military equipment" from the U.S.
European Commission President Ursula von der Leyen confirmed the agreement would include 15% tariffs across the board, noting that this measure would help "rebalance" trade between the two major trading partners. Of the $3.3 trillion in goods imported by the U.S. last year, more than $600 billion came from the 27-member EU.
The pact could help bring some calm to investors, who had been wary that both sides could fail to reach a deal before August 1, when Trump’s sweeping "reciprocal" tariffs are due to come into effect. The EU had been facing heightened levies of 30%, and had reportedly been pushing for a zero-for-zero agreement with the White House.
"[A]ny assessment has to be taken with more than only one pinch of salt. With this disclaimer in mind and at face value, [Sunday]’s agreement would clearly bring an end to the uncertainty of recent months," analysts at ING said in a note.
2. U.S. and China to extend trade truce - reports
The U.S. and China are expected to extend their tariff truce by an additional 90 days during trade talks starting Monday in Stockholm, the South China Morning Post (SCMP) reported on Sunday, citing sources close to the discussions.
The temporary suspension of most tariffs, agreed in May, is set to expire on August 12.
According to the SCMP report, both sides will use the third round of negotiations to outline their positions on unresolved issues, including U.S. concerns over China’s industrial overcapacity, rather than pursue immediate breakthroughs.
Sources told SCMP that during the extension, neither side plans to impose new tariffs or escalate the trade conflict. Beijing is also expected to seek clarity from Washington over the 20% tariffs imposed on Chinese goods in March related to fentanyl concerns, the report said.
Trump said Sunday the U.S. is “very close” to a deal with China, but did not elaborate. In an editorial on Sunday, China’s People’s Daily said Beijing remains committed to resolving disputes through equal dialogue and mutual respect.
Meanwhile, the Financial Times reported that the U.S. has paused curbs on tech exports to China to avoid disrupting these talks.
3. Jam-packed earnings week
Markets are now gearing up for a week that the ING analysts have described as "massive" for the U.S. economy.
Along with a possible string of trade deals before August 1, the coming days will see a raft of corporate earnings, including returns from mega-cap tech titans like Facebook-owner Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Amazon (NASDAQ:AMZN).
While tariffs will be hovering in the background of the earnings, investors will likely be keen for these firms to provide further details on their plans for artificial intelligence. The nascent technology has become a central pillar of the strategy of many tech groups, leading to a surge in expected capital expenditures in the coming months -- and, if Google-owner Alphabet’s (NASDAQ:GOOGL) expected capex raise last week is any indication, the appetite for AI spending is only growing.
Outside of tech, other earnings this week are due out from financial services groups Visa (NYSE:V) and Mastercard (NYSE:MA), which analysts say could provide some insight into the health of the American consumer.
4. Fed decision ahead
July’s nonfarm payrolls report and a reading of inflation closely monitored by the Federal Reserve are also scheduled to be released this week, while the Fed itself will unveil its latest interest rate decision on Wednesday.
Fed officials are widely anticipated to leave borrowing costs unchanged, even as President Donald Trump has placed intensifying pressure on the central bank -- and Chair Jerome Powell in particular -- to quickly lower rates.
Policymakers have recently signaled a "wait-and-see" approach to further rate decisions, partly citing uncertainty around the trajectory of Trump’s levies and their impact on the wider economy.
"The [rate-setting Federal Open Market Committee] [...] will probably sound the same as before, with resilient growth and uptick inflation risks keeping them on the sidelines, but there will likely be a dovish dissent (Waller), and Powell might acknowledge improved clarity on tariffs," analysts at Vital Knowledge said in a note to clients.
5. Bank of Japan decision
Elsewhere, the Bank of Japan is tipped to also keep short-term interest rates steady at 0.5% on Thursday, although a trade deal between Tokyo and the U.S. earlier this month could help brighten an otherwise murky economic outlook.
Although the agreement is likely to come as a source of relief for BOJ policymakers tasked with assessing the trajectory of Japan’s export-heavy economy, some doubts remain around the impact of U.S. levies on wider business activity.
Deputy Governor Shinichi Uchida flagged last week that while the deal removes some uncertainty, there are still unanswered questions around the knock-on effects of other potential pacts the U.S. notches with its trading partners.
Factoring in these concerns, markets are seen paying particularly close attention to the BOJ’s quarterly outlook report and post-meeting comments from Governor Kazuo Ueda.