Daily Newsletter 7/29/25

The market response to the US-EU trade agreement announced was mixed yet generally cautious, reflecting some relief that a more severe trade conflict was averted. European equities declined yesterday following an initial rally as optimism surrounding the deal waned. It is quite possible that U.S. markets may respond to this news with greater optimism compared to European markets.

Overall sentiment in Europe was tempered by criticism and apprehension. Some leaders like German Chancellor Friedrich Merz praised the deal for preventing a trade war and providing stability, though others, including French Prime Minister Francois Bayrou, described it as a "dark day" and a capitulation to the US.

As anticipated, the European Union chose not to follow the example of Canada and China and refrained from retaliatory measures.

It is important to note that the European Union comprises 27 member states, each with varying perspectives on this trade agreement based on their individual trade relationships with the United States.

Another important consideration is that, although this trade agreement appears focused solely on transatlantic commerce, it would be shortsighted to assume it will not have significant global implications for the economies of various nations as well as geopolitical dynamics.

From the outset of discussions surrounding potential tariffs and a trade war, we have believed that a primary consideration has been the geopolitical balance and the restructuring of global power—particularly from the perspectives of Europe and the United States, where China is viewed as the principal competitor and strategic challenge. "China's response to this evolving environment will also be a critical factor in this equation. Negotiations between China and the United States have continued as the August 12 trade truce deadline approaches.

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S&P Global announced the release of the S&P CoreLogic Case-Shiller Indices, which indicated a 2.3% year-over-year increase in U.S. home prices, representing a decline from the 2.7% gain recorded in April 2025. This data reflects a continued but slowing appreciation in U.S. home prices, signaling moderation in the housing market growth.This index's result, combined with ongoing trends like high mortgage rates and supply-demand imbalances, suggests a U.S. housing market in 2025 that is more subdued, which has significant implications for economic growth, labor markets tied to construction, and consumer spending patterns.