US markets are kicking off a packed week with optimism after a weekend trade agreement between the US and EU lifted investor sentiment and set the stage for more record highs.
The deal — typical of a Trump-era negotiation — heavily favors the US. The EU has agreed to invest $600 billion into the American economy, purchase $250 billion of US energy annually for three years, and increase its spending on US military equipment. In return, the US will levy a 15% tariff on EU exports — half the 30% rate threatened earlier this month.
Markets responded positively. European stocks jumped, with gains in luxury, pharma, energy and semiconductor sectors. However, not all EU countries are on board just yet. Italy wants to review the deal, and France has called it “unbalanced.”
While the EU’s top official confirmed some retaliatory tariffs on US exports are still planned, President Trump claimed otherwise, suggesting a few twists in the story may still lie ahead.
Analysts say trade-related risks are now fading, positioning US equities for further outperformance.
“The direction of travel remains towards a cooler and calmer tone on trade,” said Michael Brown, senior research strategist at Pepperstone. “It’s tough to bet against the market continuing to print record highs.”
Beyond trade, attention now shifts to Wednesday’s Federal Reserve meeting. No rate move is expected, but markets are looking for signals that a September rate cut is on the table. Some Fed officials, including potential Powell successors, may vote for a cut, possibly as a show of alignment with Trump’s calls for looser policy.
Earnings season also heats up with results from Microsoft, Meta, Amazon, and Apple. AI investment is the top focus. Alphabet’s strong earnings and rising data center spending helped boost tech stocks last week — a trend investors hope continues.
Friday’s non-farm payrolls report wraps the week. Economists expect 109,000 jobs added in July, with unemployment ticking up to 4.2%. But continued strength in construction and logistics hiring suggests the labor market remains resilient.
With trade tensions easing, a steady Fed, and strong corporate earnings, many analysts see little standing in the way of US markets pushing higher.
“Those who thought the US economy would weaken will need to recalibrate,” said Kathleen Brooks, research director of XTB. “Momentum is building as we move through the second half of the year.”