US-EU trade deal lifts global markets as tariff fears ease

The US-European Union (EU) trade framework has delivered immediate relief to global markets. The agreement sets US tariffs on most EU imports at 15%, significantly below the threatened 30% level that had weighed on risk sentiment.

The deal favours US interests through European commitments to increase American energy and defence purchases, plus greater investment in US infrastructure projects. These concessions justify the more moderate tariff approach from Washington's perspective.

European equity indices posted solid gains, with technology and export-oriented sectors leading the advance. Reduced uncertainty should support corporate investment decisions previously on hold.

China talks provide additional momentum

Parallel US-China trade negotiations resumed in Stockholm with reports suggesting another 90-day extension to current arrangements. This development further supports risk appetite already boosted by the EU agreement.

Currency markets shift from safe havens

The euro's broad-based strength represents the most immediate market reaction. EUR/USD pushed higher as investors moved away from safe-haven US dollar positions. The single currency had been under pressure from trade uncertainty affecting European exporters.

Sterling also benefited from improved risk conditions, though Brexit considerations continue creating headwinds. The pound's performance remains more dependent on domestic political developments than broader trade dynamics.

Central bank meetings in focus

Despite trade progress, attention turns to this week's Federal Reserve (Fed) and Bank of Japan (BoJ) meetings. Both central banks are expected to maintain current policy settings, but commentary will prove crucial for market direction.

The Fed faces ongoing political pressure regarding rate policy, making Chair Powell's statements particularly significant. Markets will analyse any hints about future policy paths given the changing trade landscape.

Commodities reflect sentiment shift

Crude oil gained 0.5% on reduced trade war fears supporting demand expectations. The energy sector benefits from both improved growth prospects and specific EU commitments to increase US energy purchases.

Gold declined to two-week lows, demonstrating the shift away from safe-haven assets. The precious metal typically falls when risk appetite improves and trade tensions ease.

Base metals responded positively to trade clarity. Copper posted gains on improved manufacturing outlooks, though the commodity complex faces the challenge of sustaining momentum if negotiations progress or reversing quickly if talks stall.

The trade agreement provides much-needed clarity for markets, with reduced uncertainty supporting broader risk asset performance across equities, currencies and commodities.