US and EU agree trade deal

The US and EU have agreed a new trade deal which will set a blanket tariff of 15% on EU exports to the US, including on the crucial automobiles, pharmaceuticals, and semiconductor sectors. Tariffs on metals would not be reduced however, The EU has also agreed to invest USD 600bn in the US and to buy USD 750bn of US energy products and also US military equipment.

WAM has reported that Dubai’s municipal utilities company DEWA (Dubai Electricity and Water Authority) welcomed a delegation from Shell over the weekend with a meeting focused on the major multinational’s recent report on Energy and Artificial Intelligence. Discussions included an examination of how to utilise the report in order to further the green energy transition in Dubai and exploring partnerships between DEWA and Shell in achieving this aim.

Durable goods orders in the US fell 9.3% m/m in June according to the preliminary release, though this followed a sharp 16.5% surge the previous month and was expected given Boeing’s earlier report of a slowdown in June orders. Stripping out the volatile transport component, orders were up 0.2% m/m, following a 0.6% rise in May. This was marginally above the predicted 0.1% rise. Core orders, stripping out defence orders as well as transport, fell 0.7% m/m, far short of the predicted 0.1% rise, with suggesting that companies remain cautious around long-term investment amid ongoing tariff regime uncertainty.

UK retail sales saw a partial rebound in June following the sharp fall logged in May but even the high temperatures seen through the month, traditionally supportive of higher spending, were insufficient to save what has been a weak Q2. Stripping out auto fuel, growth was 0.6% m/m and 1.8% y/y, following respective falls of 2.9% and 1.2% in May. This was still weaker than the predicted 1.2% m/m growth, however. Headline growth was 0.9% m/m and 1.7 % y/y, again falling short of expectations.

Today’s Economic Data and Events

14:30 India industrial production, June, % y/y. Forecast: 2.1%

Fixed Income

• US Treasuries were mixed last week. A fall in initial jobless claims saw yields on the short end rise at the back end of the week, and close up 5bps w/w on Friday at 3.9232% as bets on a Fed rate cut this week fell back further. There was a different trend on longer-dated USTs as yields on the 10yr closed at 4.3878%, down 3bps on the week as markets welcomed President Trump dialing back on the likelihood of his trying to oust Fed Chair Jerome Powell.
• The US Federal Reserve’s FOMC meeting is due to announce its rate-setting decision on Wednesday with the expectation that it keeps the upper bound of the Fed funds rate on hold at 4.50%. Other major central banks setting rates this week include Japan, Brazil, Canada, and South Africa.

FX

• The US dollar index gained against its basket of peers for the second day running on Friday, bolstered by US President Donald Trump’s downplaying of his dispute with Fed Chair Jerome Powell. Losses through the start of the week meant that it still ended Friday lower, however, dropping 0.9% w/w.
• The EUR was a notable gainer against the greenback as it added 1.0% w/w to close at 1.1742 on Friday after the ECB held rates steady on Thursday. GBP closed up 0.2% at 1.3438 while JPY strengthened 0.8% to 147.69.

Equity Markets

• It was a week of new record highs for a number of major global equity indices last week, as strong corporate earnings combined with some greater clarity around US tariff regimes to give stocks a boost. Even a paring of previous gains at the close of the week as President Trump gave the chance of an EU trade deal as 50-50 was not sufficient to derail the broadly positive trajectory.
• In Asia, the Hang Seng ended the week 2.3% higher, while on the mainland the Shanghai Composite added 1.7%. Japan’s Nikkei closed up 4.1% w/w. While the FTSE 100 closed down 0.2% on Friday as retail sales disappointed, the index was still up 1.4% on the week having hit a new record high on Thursday. The CAC added 0.2% on the week while DAX was the relative loser as it fell 0.3%.
• In the US, modest gains on Friday capped off a positive few days for the benchmark equity indices, boosted by some robust earnings. The NASDAQ, the Dow Jones, and the S&P 500 closed up 1.0%, 1.3%, and 1.5% respectively.

• Locally, gains on Friday saw both the DFM and the ADX end the week higher, up 0.9% and 0.8% respectively. In Saudi Arabia, the Tadawul ended its trading week down 0.6% on Thursday.

Commodities

• Oil futures fell again on Friday after a brief uptick on Thursday, leading to w/w losses for both benchmarks. Brent futures ended the week down 1.2% at USD 68.4/b while WTI was down by 3.2% at USD 65.2/b.