Massive week ahead for earnings, central banks, and US jobs

Mainland European markets are leading the way higher today following the weekend announcement of a trade deal between the US and EU. The details of that deal involve a 15% tariff on EU exports alongside $750 billion worth of energy purchases and an additional $600 billion worth of investment into the US. To many this seems a very one-sided deal, but the optimism shows throughout European equities this morning highlights the welcome clarity. This brings in the face of a perspective 30% tax do you on reaching Fridays 1 August deadline. The market’s willingness to celebrate each trade deal despite the fact they all involve elevated tariff levels simply serves to highlight how Trump’s shock-and-awe tactics on Liberation Day have been played perfectly.

The strength scene In the US dollar today highlights the growing optimism that Trump’s apparent efforts to breakdown relationships with its trade partners were temporary in nature. Crucially Trump’s liberation day shocker managed to break the relationship which saw the US dollar strengthen when treasury yields rose. Instead, the perceived flight from US assets in response to Trump’s trade war brought both a higher cost of borrowing and weaker US dollar. Thus, as we approach the apparent endgame to Trump’s trade wranglings, the greater clarity provides us with curiosity over whether this dollar dump will draw to an end with each deal that is signed off. After all the perceived flight from US assets in the face of a breakdown in trade relations starts to come into question with each multi-billion investment deal Trump manages to strike.

Looking ahead, this week provides a huge amount of event risk on both the economic and corporate front. From a corporate perspective, the second quarter earnings season appears to be peaking with four of the mag seven stocks reporting midweek. While Tesla’s numbers failed to impress, the strength of Alphabet’s Capex spending will likely signal a similar story for the other AI hyperscalers this week. Meanwhile central banks in the US Japan and Canada provide market with guidance on where rates will go, as traders seek to ascertain the view in the wake of Trump’s recent achievements. Finally, the US provides a particular focus on the jobs market, with traders watching closely to see any potential deterioration in the face of Trump’s dramatic policy adjustments.