American stocks continued their standard bullish career with the support of reaching a trade agreement with Japan, and the increasing speculation about a similar deal with the European Union, at a time when the returns of treasury and the dollar bonds declined with the decline in demand for safe haven assets.
The S & B 500 index jumped to record levels after reports that the European Union and the United States are making progress towards an agreement that defines a 15% customs tariff for most commodities.
In post -closure trading, Alpabett announced revenues that exceeded expectations, but revealed a higher capital spending than expected, while the profits of “Tesla” without the estimates of “Wall Street”.
The return on treasury bonds increased for 10 years by 4 basis points to 4.39%. The bonds remained under pressure despite the success of a 20 -year -old bond -selling auction, while the Japanese bond auction recorded for 40 years the weakest request since 2011.
Race over time to save the trade agreement with Europe
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The United States and the European Union have intensified talks in the past weeks to avoid the outbreak of a comprehensive trade war. “Bloomberg” quoted European officials optimistic about the possibility of reaching an agreement, despite the continued negotiations in an unlimited framework.
“The momentum is escalating as the deadline approaches on the first of August,” said Mark Hackett of “Nationwide”.
Trump’s senior negotiators pointed out that the approach to dealing with Japan may constitute a role model in negotiations with the European Union, where Trade Minister Howard Lootnick said that Tokyo pledged billions of dollars in investments in America “may be” an example to be followed. For his part, Treasury Secretary Scott Besent refrained from confirming whether the European Union would have the same type of agreement.
Market optimism clearly the commercial image
“As the date of the first of August is approaching, the recent advertisements were encouraged by investor’s commercial deals,” said Ian Lingan and Fail Hartmann of the BM or Capital Markets, and explained that the progress on the trade war front “will provide clear and help the market to move towards absorbing the new global trade environment.”
Jose Torres of Intertetev Broskers said that news related to the consolidation of commercial agreements this week strengthens what he called the “emerging market instincts” that we are currently witnessing in stock markets, adding that “these agreements support economic growth expectations, and give investors confidence in the fact that the road growth is still wide open.”
Nevertheless, Torres warned that the hesitation on income prospects leads some to question the ability of companies to achieve strong results for profit and revenues while maintaining positive expectations, but he concluded by saying: “It is likely that the next quarterly performance reports will be welcomed by Wall Street, especially in light of a strong economic activity in the second quarter, and review the condition of ambiguity in the next stage.”
Fears of relaxation despite the strength of momentum
On the other hand, “GB Morgan” analysts, led by Khuram Chaudhry, warned of indications of a state of indolence in the market, with the coincidence of the strong rise in stocks with the acceleration of reducing profits categories, noting the presence of “an optimistic and conflicting environment and the growing manifestations of relaxation.”
They wrote: “Either analysts start raising expectations again, or that the market is exposed to a period of severe fluctuations and retreats. Something must change.”
The latest survey of “Markets Pass” showed that American stocks will ignore the risks of customs duties, and will benefit from the quarterly profit season for the second quarter. About two -thirds of the 102 participants in the poll, which took place between 10 and 17 July, indicated that the shares will outperform the bonds in terms of modified return according to the fluctuations.
The positive view of shares continues to rely on the performance of the technology sector, which is expected to be the strongest this season, according to the summons. “The trend is still positive, and profits continue to achieve results that exceed the averages,” said Luis Navle, chief investment official in Navle & Associated.
Despite the high assessments, Navleh considered that there are great opportunities to support low interest rates in the medium term, while expectations will be to conclude more trade agreements in a short term.
“The focus on trade and profits will remain,” said Tom Isai of “The Svens Report”, adding that the Japan Agreement “will enhance hopes to reach a similar agreement with the European Union before next Friday.”
Bets to reduce interest
At the same time, bond traders raised their bets that the Federal Reserve will reduce interest rates at a bolder pace next year, as about 75 basis points of discounts were priced, compared to only 25 points that were expected in April.
President Trump said that the Reserve Council “must move” to reduce interest, “but they have no courage to do so.” As for the Treasury Secretary Besent, he confirmed that there is “no urgency” to name a successor to the Speaker of the Council, Jerome Powell.
