Market Report.
📉 Yesterday, during our streaming session, we discussed that the charts of European stock markets were indicating a possible bearish pattern and that declines were likely to occur as the humiliating agreement signed by Europe was digested. For now, things seem to be heading in that direction. European stock markets have fallen since yesterday, and the euro has weakened.
🌍 Do you remember that over the past few months we have repeatedly said that the trade war had only two possible outcomes? If no agreement was reached, we would face a severe global recession and a sudden halt in the supply chain and international trade. In the best-case scenario, if an agreement were reached, the conditions would lead to an economic slowdown for both Europe and China. Well, I believe we are now in the second scenario.
📊 The reasons that led us to predict this were simple: the United States doubles the consumption of the Eurozone and is more than double the consumption of China. If Donald Trump imposes tariffs on the rest of the world, I could not foresee any outcome other than the one we described. If they stop buying, the global economy comes to an abrupt halt, hence Trump’s coercive conditions.
🇫🇷 France has strongly criticized the EU-US trade deal, calling it a “submission” to Trump and a “dark day” for Europe. French Prime Minister François Bayrou called it a “political, economic and moral fiasco” and argued that Europe capitulated to US pressure by accepting a 15% tariff on EU exports without securing equivalent concessions. French Trade Minister Laurent Saint-Martin argued the deal was unbalanced and that the EU should have been more assertive.
🇩🇪 German Chancellor Merz acknowledged that the German economy will face “serious damage” as a result of American tariffs, describing the situation as a significant blow to the nation’s economic stability. Speaking candidly, Merz admitted, “I cannot say that I am satisfied with this result; I only state: given the existing initial conditions, it was impossible to achieve more with the USA.” This statement underscores the challenges Germany faces in navigating its economic relationship with the United States amidst growing trade tensions.
🛢️ The press conferences that followed the agreement were also highly criticised. In particular, during one of them, Ursula von der Leyen announced that Europe would buy liquefied natural gas from the United States because it was better and cheaper than Russian gas. This, in general terms, is a blatant falsehood.
💡 “We have too much Russian LNG, which we no longer want; we want to get rid of Russian fuel. That’s why we are delighted to buy it from the US, which is cheaper and better.” said Von der Leyen.
📉 However, market fundamentals tell a different story. Russian pipeline gas remains substantially more cost-effective due to established infrastructure, lower operating costs without liquefaction/regasification processes, and geographical proximity.
📊 Even Russian LNG typically undercuts US imports, which require expensive liquefaction and transatlantic shipping. This price differential creates tension between Europe’s stated goal of reducing Russian energy dependence and the higher costs associated with American alternatives, potentially impacting European industrial competitiveness and consumer energy prices in coming quarters.
🏭 In fact, the harsh truth is that the German economy has been in recession since 2022, when it decided to terminate its energy agreements with Russia, thereby ending its competitive industrial advantage. This has led to factory closures and a political crisis in the country.
🇨🇳 But now it is China’s turn. Top U.S. and Chinese economic officials met in Stockholm on Monday for over 5 hours of talks aimed at resolving long-standing economic disputes and extending a trade war truce. The talks are focused on reaching a durable tariff agreement before an August 12 deadline, when additional U.S. duties could snap back to triple-digit levels. Negotiators are expected to resume discussions Today, with the goal of potentially extending the tariff and export control truce by another 90 days.
⚖️ However, U.S. senators plan to introduce bills targeting China over security issues, which could complicate the trade talks. The negotiations cover a broad range of economic issues, including U.S. complaints about China’s state-led, export-driven economic model and Beijing’s concerns over U.S. tech export controls.
🇺🇸 Europe is merely a wildcard for the US economy. The main course will be the trade agreement with China, and we will keep you updated on the key details here.
Geopolitics:
🕊️ President Trump has reduced his deadline for Russian President Putin to reach a peace deal with Ukraine from 50 days to just 10-12 days. Trump previously gave Putin a 50-day deadline, set to expire in early September, but said he does not see “any progress being made” towards a deal.
⚠️ Trump said he will likely formally announce the revised, shorter deadline “tonight or tomorrow” and that the U.S. will impose sanctions along with “secondary tariffs” on Russia’s trade partners if a deal is not reached.
🛑 Dmitry Medvedev, former President of Russia and member of the Kremlin Security Council, issued a stern warning to President Donald Trump, criticising his approach towards Russia and cautioning against escalating tensions. “Trump’s playing the ultimatum game with Russia: 50 days or 10… He should remember two things: Russia isn’t Israel or even Iran, and each new ultimatum is a threat and a step towards war. Not between Russia and Ukraine, but with his own country,” Medvedev stated.
🛡️ He also urged Trump to avoid following what he called the “Sleepy Joe road,” referencing former US President Joe Biden. This remark highlights the growing strain in rhetoric and the risks of miscalculation in international relations.
Market Review:
📉 US stock markets retreated during yesterday’s session, with Mini S&P 500 futures now positioned above 6,430 points, while Nasdaq 100 futures are holding around 23,550 points.
📉 In contrast, European markets have reacted less favourably, with the recently signed trade agreement weighing on values. DAX 40 futures fell by 2.5% yesterday but are attempting to recover today, currently reaching 24,160 points. Meanwhile, Eurostoxx 50 futures dropped below 5,400 points, declining less sharply than the DAX, and are now at 5,375 points.
💵 The US dollar strengthened significantly, with the DXY index rising to 99 points. This has led to abrupt declines in currency pairs such as EUR/USD, which has fallen 2% since the start of the week and is now at 1.1540.
🛢️ Crude oil saw a slight uptick during yesterday’s session but remains within its recent range. Brent crude is trading near $69.30 per barrel, up slightly from $68.50 in recent weeks. Gold has been pressured by the stronger dollar, dropping near $3,300 per ounce, though it has rebounded in recent hours to $3,320.
💰 Bitcoin, however, has managed to hold steady amidst the turbulence in European and US markets, currently trading at $118,865.
