Stock Market Update

Equity futures are modestly higher this morning following Friday's session that saw the S&P 500 and Nasdaq Composite establish new record highs.

Trade developments are at the top of today's headlines after the U.S. and EU reached a trade agreement on Sunday that sets a 15% baseline tariff on European imports, including automobiles. This is higher than the current tariff rate of 10%, but lower than the 30% rate that was set to go into effect on August 1. Additionally, Europe will buy hundreds of billions of U.S. goods, including military and energy products.

The U.S. and China are expected to extend their tariff truce (which was set to expire on August 12) an additional 90 days during trade talks this week, according to South China Morning Post.

Separately, President Trump froze restrictions on technology exports to China as part of the trade deal negotiations, according to Financial Times.

South Korea is also said to be preparing a mutually favorable trade package, according to Reuters.

In addition to developments on the trade front, the market faces a pivotal week with roughly 38% of the S&P 500 by market cap reporting earnings, which is more than double last week's weight. Key tech giants Microsoft (MSFT), Meta (META), Apple (AAPL), and Amazon (AMZN) will all post results midweek, likely shaping market direction. In addition, important jobs data and a critical Federal Reserve meeting are expected to test the current optimism.

In corporate news:

• Amazon's (AMZN) pricing power is impacting Temu's (PDD) ability to find US suppliers, according to Financial Times.
• GE Vernova (GEV) was downgraded to Neutral from Buy at Guggenheim.
• Nike (NKE) was upgraded to Overweight from Neutral at JPMorgan.
• Tesla (TSLA) CEO Elon Musk announced a $16.5 billion semiconductor contract between Samsung Electronics (KRW) and Tesla.

Reviewing overnight developments:

Equity indices in the Asia-Pacific region began the week on a mostly higher note. Japan's Nikkei: -1.1%, Hong Kong's Hang Seng: +0.7%, China's Shanghai Composite: +0.1%, India's Sensex: -0.7%, South Korea's Kospi: +0.4%, Australia's ASX All Ordinaries: +0.3%

In news:

• The U.S. and China will reportedly extend the current tariff rates for three months to continue negotiations.
• Officials from Japan and the U.S. reportedly have a differing view on how the investment component of the trade deal with Japan will be utilized.
• China's Premier Li said that his country is setting up an international AI collaboration group.

• In economic data:
  • China's June Industrial Profit -1.8% YTD (last -1.1%)
  • Hong Kong's June trade deficit HKD58.90 bln (last deficit of HKD27.3 bln). June Imports 11.1% m/m (last 18.9%) and Exports 11.9% m/m (last 15.5%)
  • India's June Industrial Production 1.5% yr/yr (expected 2.0%; last 1.2%) and June Manufacturing Output 3.9% m/m (last 2.6%)

    ---Equity Markets---

• Japan's Nikkei: -1.1%
• Hong Kong's Hang Seng: +0.7%
• China's Shanghai Composite: +0.1%
• India's Sensex: -0.7%
• South Korea's Kospi: +0.4%
• Australia's ASX All Ordinaries: +0.3%

Major European indices trade mostly higher. STOXX Europe 600: +0.6%, Germany's DAX: +0.2%, U.K.'s FTSE 100: -0.1%, France's CAC 40: +0.5%, Italy's FTSE MIB: +0.9%, Spain's IBEX 35: +0.8%

In news:

• The EU and the U.S. reached a trade deal that will result in a 15% tariff rate on European imports into the U.S., call for $750 bln in energy purchases from the U.S., and a $600 bln investment into the U.S. Germany's mechanical engineering industry association said that the deal will cost German automakers "billions every year."

• In economic data:
  • U.K.'s July CBI Distributive Trades Survey -34 (expected -28; last -46)