DEAL OR NO DEAL?
US stocks continued to push higher as the "One Big Beautiful Bill" was passed and labour data showed continued resilience, while a trade deal was reached with Vietnam that led to hope of further deals with other trading partners.
Focus is likely to be on US trade policy this week as the 90-day pause on reciprocal tariffs ends on Wednesday, with many countries not agreeing a trade deal yet but some could be signed or an extension of the delay be granted by the Trump administration, with the EU and Japan important trading partners to watch. The Fed's June meeting minutes (Wednesday) may also be of note to gauge the timing of monetary easing.
The US reached a trade deal with Vietnam, with the latter's exports to have a tariff of 20% down from the 46% announced on "liberation day" while American exports to Vietnam will have no tariffs applied to them.
The "One Big Beautiful Bill" was passed by the House and signed into law by President Trump. This is set to be growth supportive as it will result in an estimated net $3.4tn of fiscal stimulus over the next 10 years, equivalent to some 1.2% of GDP annually. The debt ceiling was also raised by $5 trillion, which means that the limit is not likely to be reached until 2027.
June employment data was firm with 147K non-farm jobs added against 144K in May and 158K in April. The unemployment rate unexpectedly fell to 4.1% while average hourly earnings rose by 3.7%, all of which suggest a healthy labour market.
US equities pushed to new all-time highs as trade and fiscal policies as well as economic data supported sentiment, with the S&P 500 up by 1.7% last week. European stocks were weighed down by uncertainty around whether a trade deal between the EU and the US would be made before the July 9th deadline, with the Stoxx Europe 600 flat for the week.
The improved economic backdrop somewhat weakened the case for lower rates from the Fed, which helped push up US Treasury bond yields (bond prices fall as yields rise), with that for the 10-year rising by 6bps last week to 4.35%. The equivalent German bund yield was unchanged on the week at 2.58%.
- Mon 7th Eurozone - Retail sales • Germany - Industrial production
- Tue 8th US - NFIB small business survey
- Wed 9th US - Fed meeting minutes
- Thu 10th US - Initial jobless claims
This is intended as a general review of investment market conditions. It does not constitute investment advice and has not been prepared based on the financial needs or objectives of any particular person.