US Stocks Drive Higher on Trade Deals – Dow up 1.1%
All three of the major US stock indices drove higher in trading yesterday as news hit the market that a trade deal between the US and Japan had been locked in, with 15% tariffs agreed, and a similar deal was close with the EU. The Dow led the way, closing up 1.14%, followed by the S&P, which notched another fresh record after adding 0.78%, and the Nasdaq, which pushed 0.61% higher. Treasury yields pushed higher on the trade news, the 2-year up 4.7 basis points to 3.880%, and the 10-year gained 3.6 basis points to move up to 4.380%. The dollar, however, pulled back again against the majors, the DXY losing 0.18% to move back to 97.22. Oil prices were steady, Brent adding 0.13% to $68.68 a barrel and WTI up 0.18% to $65.43. Gold took a significant hit as haven flows unwound, down 1.28% on the day to close at $3,386.69 an ounce.
Japanese Markets Remain in Focus for Traders
Japanese markets kicked off the week in focus for traders as they assessed the impact of elections over the weekend, and the fallout from them is pushing through to financial products. Uncertainty was strong after a poor showing for the reigning LDP, which then pushed through to the possibility that Prime Minister Shigeru Ishiba may step down, and we have seen strong yen buying during the week and the 10-year JGB push to its highest level since 2008. However, news overnight that a deal has been struck with the US on lower (15%) tariffs has improved sentiment, and stocks are expected to rally on the back of that news in trading today. The yen has remained strong and is trading back into the middle of its monthly range; however, traders are expecting to see more volatility in the sessions ahead as the market comes to grips with the recent updates.
Big Calendar Day Ahead for Traders
It is a very busy economic calendar day ahead for financial markets today, with a raft of PMI numbers due out across jurisdictions and a major rate call due from the European Central Bank. Flash Services and Manufacturing PMI data is due out in all three trading sessions, with data due from Australia, France, Germany, the EU, the UK, and the US, and analysts will be looking closely at the outcomes for signs that tariffs and tariff threats are sinking in. The Asian session will also see a further focus on Australian markets, with RBA Governor Michelle Bullock set to speak midway through the day. The main event for the day, however, will come in the London session, with the ECB set to update the market on its latest interest rate call, with analysts firmly expecting the bank to hold rates on this occasion. The New York session sees more data out of the US, with the Weekly Unemployment Claims numbers (exp. 227k) due out early in the day, sandwiched between the ECB rate call and its press conference, while later in the day, New Home Sales numbers (exp. 649k) also come out. Canadian markets are also represented with Retail Sales numbers (exp. -0.9% m/m) and Core Retail Sales (exp. -0.2% m/m) due out at the same time as the US jobs update.
