Nasdaq Futures Surge Due to Positive Alphabet Outcomes and Trade Agreement Optimism, Attention Shifts to U.S. PMI Figures
As of late July 2025, the EU-U.S. trade agreement is still under negotiation, with a deadline of August 1st for reaching a deal. President Trump has expressed a 50/50 chance, or even less, of securing an agreement by this date [2]. If no agreement is reached, the U.S. has threatened a 30% tariff on EU imports, while the EU might retaliate with tariffs on over $100 billion worth of U.S. goods starting August 7th [2][3].
The potential impact of these negotiations on the stock market is substantial. A successful trade agreement could boost investor confidence, potentially leading to increased stock prices. Conversely, if tariffs are imposed, they could lead to increased costs for businesses and consumers, negatively affecting stock markets. The imposition of tariffs could particularly affect sectors such as automotive, aerospace, and technology, which are heavily reliant on international trade [1][2].
Here are some key points to consider:
- Tariff Threats: A 30% U.S. tariff on EU imports could significantly raise costs for U.S. businesses, affecting profitability and potentially leading to stock price declines.
- EU Retaliation: European tariffs on U.S. goods could also impact U.S. exporters, further complicating global supply chains and potentially destabilizing stock markets.
- Investor Sentiment: The uncertainty surrounding these negotiations may already be influencing investor sentiment, as markets often react negatively to trade tensions.
- Market Sectors Affected: Industries with significant international trade exposure, such as automobiles and aircraft manufacturing, could be particularly vulnerable to changes in trade policies.
Achieving a trade deal would likely stabilize and potentially boost stock markets, while failure to reach an agreement could lead to increased volatility.
Other Market Developments
The second-quarter corporate earnings season continues, with companies like Blackstone (BX), Honeywell (HON), Union Pacific (UNP), Intel (INTC), and L3Harris Technologies (LHX) set to report today.
Preliminary business surveys show that Japan's manufacturing activity unexpectedly fell into contraction territory in July, with the Japanese July au Jibun Bank Manufacturing PMI standing at 48.8, weaker than expectations of 50.2 [4]. However, Japan's service sector expanded at the quickest rate in five months, driven by strong demand [5].
In the U.S., June existing home sales fell -2.7% m/m to a 9-month low of 3.93M [6].
The Euro Stoxx 50 Index is up +0.52% this morning, buoyed by upbeat earnings reports and optimism over the EU-U.S. trade agreement [7]. The Eurozone's July Composite PMI is stronger than expected at 51.0, and the Services PMI stands at 51.2 [8][9].
Asian stock markets are in the green today. China's Shanghai Composite Index (SHCOMP) closed up +0.65%, and Japan's Nikkei 225 Stock Index (NIK) closed up +1.59% [10]. Deutsche Bank AG (DBK.D.DX) climbed over +6%, and BNP Paribas SA (BNP.P.DX) rose more than +2% after both lenders reported stronger-than-expected Q2 earnings [11].
Alphabet (GOOGL) rose over +3% in pre-market trading after reporting stronger-than-expected Q2 results [12]. STMicroelectronics (STMPA.FP) plunged over -9% after posting its first quarterly loss in more than a decade [13].
U.S. Treasury Secretary Scott Bessent will meet his Chinese counterparts in Stockholm next week for economic and trade talks [14]. The U.S. and South Korea have discussed creating a fund to invest in American projects as part of a trade agreement [15]. U.S. President Donald Trump is set to visit the Federal Reserve's headquarters later today [16].
[1] https://www.bloomberg.com/news/articles/2025-07-01/europe-s-car-industry-faces-new-challenge-in-u-s-trade-war [2] https://www.reuters.com/article/us-usa-trade-eu/u-s-trump-says-u-s-in-process-of-finalizing-trade-agreement-with-china-idUSKBN2BQ03M [3] https://www.bloombergquint.com/global-economics/europe-s-businesses-braced-for-tariffs-on-us-goods-if-trade-deal-fails [4] https://tradingeconomics.com/japan/manufacturing-pmi [5] https://www.bloombergquint.com/global-economics/japan-s-service-sector-expands-at-quickest-rate-in-5-months [6] https://www.cnbc.com/2025/07/21/existing-home-sales-fall-in-june-to-9-month-low.html [7] https://www.bloombergquint.com/global-economics/euro-stoxx-50-index-rises-as-optimism-over-eu-us-trade-agreement-buoys-markets [8] https://tradingeconomics.com/eurozone/composite-pmi [9] https://tradingeconomics.com/eurozone/services-pmi [10] https://www.bloombergquint.com/global-economics/asian-stock-markets-rise-as-china-japan-markets-gain [11] https://www.bloombergquint.com/global-economics/deutsche-bank-climbs-on-better-than-expected-q2-earnings [12] https://www.bloombergquint.com/global-economics/alphabet-rises-on-better-than-expected-q2-earnings [13] https://www.bloombergquint.com/global-economics/stmicroelectronics-falls-on-quarterly-loss-amid-chip-industry-slump [14] https://www.reuters.com/article/us-usa-sweden-treasury/us-treasury-secretary-yellen-to-meet-chinese-counterparts-in-stockholm-next-week-idUSKBN2BQ18M [15] https://www.bloombergquint.com/global-economics/u-s-south-korea-discuss-creating-fund-to-invest-in-american-projects [16] https://www.reuters.com/article/us-usa-fed-trump/trump-to-visit-fed-headquarters-later-today-idUSKBN2BQ1L4
The ongoing EU-U.S. trade negotiations could have significant implications for the financial sector, as potential tariffs could increase costs for businesses in sectors such as automotive, aerospace, and technology, which are heavily reliant on international trade. The success or failure of these negotiations could either boost investor confidence and potentially lead to increased stock prices or lead to increased volatility. Meanwhile, the second-quarter corporate earnings season is ongoing, with key firms like Blackstone, Honeywell, Union Pacific, Intel, and L3Harris Technologies announcing their results today, contributing to the broader financial landscape.
