Stocks markets on both sides of the Atlantic rallied on reports the European Union is following Japan’s lead in nearing a trade deal to dilute the impact of US President Donald Trump’s upcoming tariff regime.
Wall Street’s S&P 500 hit new highs with the frothier sentiment coming as the US earnings season hits its stride with telecommunications carrier AT&T and hotelier Hilton beating expectations, ahead of results from megastocks Tesla and Google-parent Alphabet after trading closes.
Meanwhile, meme stocks are back on the menu with increased chatter in Reddit’s WallStreetBets forum, this time about the likes of doughnut maker Krispy Kreme, online real estate firm Opendoor Technologies, and department store chain Kohl’s.
And in the antipodes, central bankers are in view with Reserve Bank of Australia governor Michelle Bullock speaking about the dual mandate of employment and inflation, while New Zealand’s central bank chief economist Paul Conway is talking tariffs today.
Let’s talk
Stock markets in the US and Europe followed Japan’s Nikkei higher as reports started emerging that the European Union is nearing a deal with US President Donald Trump’s administration where it would accept 15% tariffs on most exports, in a similar agreement to the US-Japan agreement.
Optimism about the speed with which trade deals are being reached before US tariffs come into effect next week buoyed risk-sensitive assets, with the kiwi dollar climbing to 60.44 US cents at 7am in Auckland from 60.16 cents yesterday.
Meanwhile, the Australian Financial Review reported prime minister Anthony Albanese’s government has lifted biosecurity restrictions on US beef, removing a key barrier cited by Trump’s White House to impose steep tariffs on its ally.
The S&P 500 was up 0.7% in late trading on Wall Street, while the UK’s FTSE 100 advanced 0.4% and Germany's DAX30 gained 0.8%.
“Risk sensitive assets remained well supported amid optimism about the US reaching deals with key trading partners ahead of the August 1 deadline,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “A deal was announced with Japan yesterday and there is a growing expectation of a similar deal with the European Union.”
The US corporate reporting season continues with electric vehicle maker Tesla and software giant Alphabet poised to release their quarterly results after trading closes.
Telco AT&T nudged higher after beating expectations with increased wireless and broadband subscribers in the June quarter, while hotelier Hilton Worldwide declined as it warned about the soft economic outlook, even as its earnings came in above analysts’ forecasts.
Across the Atlantic, Germany’s SAP fell 4.1% after it beat earnings estimates but refrained from raising its annual guidance.
Little investors
The major news organisations cottoned on to the latest round of meme stocks with reports in The Wall Street Journal and Bloomberg about the new favourites on Reddit’s WallStreetBets forum. Krispy Kreme was up 5.5% in late trading, while Opendoor sank 19% and Kohl’s was down 16%.
Australian futures are pointing a 0.1% increase for the S&P/ASX 200 index when trading opens, following yesterday’s gain in the regional rally.
New Zealand’s S&P/NZX 50 index sat out yesterday’s gains, with heavyweight stocks dragging the benchmark index lower.
No local data is scheduled for today, while Reserve Bank chief economist Paul Conway is scheduled to speak on the economic impacts of tariffs on the local economy.
And across the Tasman, RBA governor Michelle Bullock will deliver a speech on the central bank’s dual mandate of inflation and employment, with investors seeking clues on whether a rate cut next month is looking more likely. The kiwi dollar traded at 91.58 Australian cents from 91.60 cents yesterday.
Reporting by Paul McBeth. Image from Robert Bye on Unsplash.
This story has been updated to correct Alphabet reporting after the bell, not Microsoft
