Must read: US-EU trade deal excites bulls, US rates, Barclays, Heineken

GLOBAL MARKETS

The US and EU have reached a trade deal over the weekend, providing a boost to markets and risk appetite with European indices trading higher. 

The EU will face 15% US import tariffs covering sectors like autos, semiconductors and pharmaceuticals, while the EU will invest $600 billion into US sectors like defence and energy. Meanwhile, US-China trade talks continue in Stockholm today with a 12 August deadline to avoid tariffs of over 100%. 

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Reacting to the EU deal, German defense firms like Rheinmetall AG (XETRA:RHM) and Hendsoldt are under pressure while European automakers like Bayerische Motoren Werke AG (XETRA:BMW), Mercedes-Benz Group AG (XETRA:MBG), Volkswagen AG (XETRA:VOW) as well as semiconductors like ASML Holding NV (EURONEXT:ASML) and STMicroelectronics NV (EURONEXT:STMPA) are in the green. 

In the US, index futures are pointing to a higher open after the S&P 500 logged its fifth straight day of record closing highs. The Nasdaq also closed at an all-time high on Friday. Tesla Inc (NASDAQ:TSLA) is in focus after Elon Musk signed a $16.5 billion chip deal with Samsung. 

It is a mega week for markets including Friday’s US jobs report, a slew of inflation and GDP figures from the US and Europe and the Federal Reserve’s interest rate decision. The earnings calendar is nonstop on both sides of the Atlantic. Tech giants like Meta Platforms Inc Class A (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN) and Apple Inc (NASDAQ:AAPL) taking centre stage. And in the UK focus will be on earnings from Barclays (LSE:BARC) and Standard Chartered (LSE:STAN)d in the financial sector. Plus, Rolls-Royce Holdings (LSE:RR.), Unilever (LSE:ULVR) and BAE Systems (LSE:BA.) among others. 

Oil giants will be centre stage too in the US and UK with Chevron Corp (NYSE:CVX), Exxon Mobil Corp (NYSE:XOM) and Shell (LSE:SHEL) all releasing earnings.

HEINEKEN 

Heineken NV (EURONEXT:HEIA) reported first-half organic profit of 2.03 billion euros, up by 7.4%, beating analysts’ expectations for growth of 7%. First-half adjusted net revenue hit 14.1 billion euros, up by 2.1%, also topping forecasts for growth of 1.1%. Q2 organic beer volumes however declined by 0.4%, slightly worse than the 0.3% figure pencilled in by analysts. 

The brewer maintained its 2025 guidance for annual profit growth of between 4% and 8%. It now expects gross cost savings of over 500 million euros in 2025, higher than its previous target for 400 million euros. 

Hot weather and the timing of Easter have boosted sales at Heineken. However, these factors were partly offset by the weak macroeconomic backdrop and subdued consumer spending. Plus, it has been facing protracted price negotiations in European countries like France and Spain along with the US tariff uncertainty. 

Although this weekend’s EU-US tariff deal alleviates some of those unknowns, Heineken warned that the tariffs could affect profits and the brewer is considering shifting manufacturing elsewhere. 

Shares in Heineken have been remarkably resilient this year, gaining around 14% since the start of January.

FED INTEREST RATE DECISION PREVIEW 

The Federal Reserve is expected to keep interest rates on hold in the range of 4.25-4.5% on Wednesday. The Fed has held off from cutting interest rates all year, last easing monetary policy in December. 

While markets are still expecting a Fed rate cut in September, the odds of a reduction have been coming down slightly on the back of hot inflation data. The annual rate of inflation is above target, hitting 2.7% in June, a five-month high up from 2.4% in May, sparking concerns about price pressures in the US economy as Trump’s tariffs start to weigh. Markets will be looking for more clues into inflation next week and in turn the Fed from next week’s PCE price data, the Fed’s preferred measure of inflation. 

Recently, Fed governor Chris Waller called for an immediate rate cut - he is more worried about a US economic slowdown and less worried about tariffs pushing up inflation. 

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Meanwhile, the strength of the Fed’s independence in setting monetary policy is being tested by the current US administration. President Trump has been clashing with Fed Chair Jay Powell. Trump has repeatedly called for the Fed to slash interest rates and has even called for Powell to resign. Trump is also at loggerheads with the central bank over a $2.5 billion refurbishment. 

With Powell’s term as chair set to end in May 2026, there are concerns about who Trump nominates next. It is likely he will choose a major dove which would ring alarm bells for the inflation outlook. However, even if Powell’s successor wishes to sharply reduce interest rates, the replacement will still have an uphill battle to get the majority of FOMC panel members on side. The US dollar has majorly fallen out of favour under Trump’s term.

This year, the greenback shed more than 10% in the first six months of 2025, the worst H1 performance since 1973. International investors have shunned the currency amid the tariff uncertainty, high levels of government borrowing and Trump’s loud calls for lower rates. The US dollar is no longer considered to be the safe haven it once was.

BARCLAYS PREVIEW 

Richard Hunter, Head of Markets, interactive investor says: Barclays will report its half-year results tomorrow.  

Barclays’ financial strength and its geographical and business diversity have been key drivers of the group’s strong share price showing, which has risen by around 30% this year and by more than 50% over the last 12 months. 

The company’s exposure to investment banking will be of particular interest from the US, where banking behemoth JP Morgan recently reported net income growth of 9% due to increased fees and advisory activity, despite the expected slowdown in the M&A and IPO space.

Also of interest will be how credit card spending (and indeed delinquencies) are faring on both sides of the pond. At its latest update in April, Barclays reported no signs of deterioration across its portfolios and promisingly the level of defaults on its cards in both the US and the UK was broadly stable.