European Stocks Gain as Earnings Soften Tariff Hit: Markets Wrap

(Bloomberg) — European stocks posted modest gains as positive earnings news diverted some of the market’s focus away from concerns about the outcome of tariff negotiations.

The Stoxx 600 index advanced 0.6%. Futures for the S&P 500 rose 0.2% after the index inched to its latest record high Monday. The dollar climbed to a five-week high, while the euro extended its slide, a day after its deepest decline in over two months. 

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Royal Philips NV shares surged 13% after the Dutch medical-technology firm increased its profitability outlook as the impact of the trade war was not as severe as it feared. AstraZeneca Plc rose after reporting better-than-expected sales and rising profit for the second quarter, spurred by its stable of cancer medicines. Barclays Plc fluctuated after its update. 

“Today’s reassuring results are somewhat compensating the concerns one can have on the impact of the US tariffs on the European economy,” said Amelie Derambure, a senior multi-asset portfolio manager at Amundi SA.

Investor attention is turning from recent US tariff deals with the European Union and Japan to a slate of key indicators — spanning jobs and inflation to broader economic activity. The spotlight will fall on the Federal Reserve’s policy decision Wednesday, where officials are expected to hold rates steady, followed by earnings from four megacap tech companies.

The key for markets this week is a rate decision by the Fed, while the Bank of Japan will also announce a policy decision.

Chair Jerome Powell and his colleagues will begin a two-day meeting Tuesday to deliberate on rates at a time of immense political pressure, evolving trade policy, and economic cross-currents.

Traders price no prospect of a US rate shift this week, and continue to lean toward a quarter-point reduction at the Fed’s meeting in mid-September, with around 100 basis points of easing seen over the next 12 months. Still, pressure from the White House for immediate rate cuts has the potential to sow dissent among Fed officials.

“President Trump continues to call for much lower interest rates,” Gabriele Foà, portfolio manager at Algebris Investments, wrote in a note. “With inflation not surging and the labour market softening, maintaining real rates at their current elevated levels will be increasingly difficult.”

In a rare occurrence, policymakers will convene in the same week that the government issues reports on gross domestic product, employment and the Fed’s preferred price metrics. Forecasters anticipate the heavy dose of data will show economic activity rebounded in the second quarter.

Meanwhile, US and Chinese officials finished the first of two days of talks aimed at extending their tariff truce beyond a mid-August deadline and hashing out ways to maintain trade ties while safeguarding economic security.

The EU dodged an imminent trade war with the US, but markets and a growing chorus of critics have dispelled early hopes that the deal will bring a sense of stability back to transatlantic relations. The EU and US will seek to clinch a non-legally binding joint statement by Aug. 1 that will expand on some of the elements negotiated over the weekend, according to a senior EU official.

German Chancellor Friedrich Merz, who initially cheered the deal as having “succeeded” in avoiding a trade conflict, seemed to sour on the accord. “The German economy will suffer significant damage from these tariffs,” he told reporters Monday. French Prime Minister Francois Bayrou also criticized the deal.

Corporate Highlights:

• Barclays Plc is buying back a further £1 billion ($1.3 billion) worth of shares after its traders turned in a better-than-expected quarter.
• AstraZeneca Plc reported better-than-expected sales and rising profit for the second quarter, spurred by its stable of cancer medicines.
• Royal Philips NV increased its profitability outlook as the impact of the trade war was not as severe as it feared.
• EssilorLuxottica SA posted better-than-expected revenue in the second quarter, as the world’s biggest eyewear maker showed strong gains in Europe
• Chinese childcare-related stocks advance after the government rolled out a new subsidy program across the nation in an effort to boost the birth rate.

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.6% as of 9:28 a.m. London time
• S&P 500 futures rose 0.2%
• Nasdaq 100 futures rose 0.4%
• Futures on the Dow Jones Industrial Average rose 0.1%
• The MSCI Asia Pacific Index fell 0.5%
• The MSCI Emerging Markets Index fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.2% to $1.1564
• The Japanese yen was little changed at 148.46 per dollar
• The offshore yuan was little changed at 7.1800 per dollar
• The British pound fell 0.1% to $1.3339

Cryptocurrencies

• Bitcoin rose 0.7% to $118,920.58
• Ether rose 2.1% to $3,869.32

Bonds

• The yield on 10-year Treasuries was little changed at 4.41%
• Germany’s 10-year yield advanced two basis points to 2.71%
• Britain’s 10-year yield advanced two basis points to 4.67%

Commodities

• Brent crude fell 0.1% to $69.95 a barrel
• Spot gold rose 0.4% to $3,327.36 an ounce

This story was produced with the assistance of Bloomberg Automation. 

–With assistance from Anand Krishnamoorthy and Michael Mackenzie.

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