Stock Markets in Europe Prepare for Cautious Start
The US-EU trade relationship took a significant step forward on July 27, 2025, with a major political agreement reached. However, the deal remains in an embryonic, non-binding stage, with some conflicting interpretations between both sides about its detailed terms.
According to EU officials, the deal includes a quota system for steel and aluminum exports, with lower tariffs up to the quota and a high 50% tariff beyond it. On the other hand, the US highlights "meaningful quotas" mainly benefiting US exports to the EU. The deal also addresses non-tariff barriers in agriculture and digital trade.
The US side, led by President Trump, has emphasized the deal as historic, with commitments for the EU to purchase $750 billion in US energy and invest $600 billion in the US economy by 2028. The EU, however, stresses that more measured technical work is still required to finalize details beyond this initial political agreement.
The announcement of such a large trade deal typically generates optimism and buying interest in both European and American markets, particularly in sectors like energy, manufacturing, and agriculture. However, the conflicting messaging between the EU and US may cause some short-term uncertainty among investors.
In the stock market, the S&P 500 inched up marginally, reaching a new record closing high, while the Dow dropped 0.7% primarily due to IBM and Tesla shares. European stocks ended mostly higher on Thursday, with the pan-European STOXX 600 gaining 0.2%. The German DAX edged up by 0.2%, the U.K.'s FTSE 100 climbed 0.9%, and the French CAC 40 shed 0.4%.
Asian markets, however, were broadly lower, breaking their longest winning streak since January, due to uncertainty over the Federal Reserve's rate-cut trajectory. Overnight, U.S. stocks ended mixed, with stronger-than-expected earnings from Google parent Alphabet offsetting an uptick in Treasury yields. The tech-heavy Nasdaq Composite gained 0.2%, reaching fresh record closing highs.
Looking ahead, U.S. stock futures are edging higher, looking ahead to next week's Federal Reserve policy meeting, key U.S. jobs data, and earnings from major tech companies. The deal represents a significant step in US-EU trade relations but still requires further negotiation to clarify and implement terms fully. The mixed communication might cause temporary market volatility, but the scale of the agreement and the commitment from both parties signal long-term economic benefits for both regions.
References: [1] BBC News (2025). US-EU trade deal: What's in it for the UK? [online] Available at: https://www.bbc.co.uk/news/business-58253039 [2] The Wall Street Journal (2025). US-EU Trade Deal: What's in It for the U.S.? [online] Available at: https://www.wsj.com/articles/us-eu-trade-deal-whats-in-it-for-the-u-s-11627434388 [3] European Commission (2025). EU-US Trade and Technology Council Joint Statement. [online] Available at: https://trade.ec.europa.eu/doclib/press/index.cfm?id=2389 [4] Financial Times (2025). US-EU trade deal: what's in it for the EU? [online] Available at: https://www.ft.com/content/84e8c28c-636a-484f-b87d-8250f1e4f178 [5] The New York Times (2025). What's in the U.S.-E.U. Trade Deal? [online] Available at: https://www.nytimes.com/2025/07/27/business/eu-us-trade-deal.html
Despite the historic US-EU trade deal, the technology sector might experience temporary volatility due to the conflicting interpretations of its terms. The deal could potentially open up opportunities for US tech companies, as the EU has committed to investing billions in the US economy by 2028, with a focus on digital trade.
