The More Deals Trump Gets, The More Confidence Markets Gain

7 hours ago 1

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(Bloomberg) — The world’s investors are enjoying a confidence boost after months of uncertainty as President Donald Trump finally starts signing trade deals.

Financial Post

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Global stocks extended a record and risk-sensitive currencies strengthened after a trade agreement with Japan contained lower tariffs than Trump had threatened earlier this month. The big picture takeaway seems to be a light at the end of a negotiating tunnel that will further fuel investor optimism that the worst of their fears on trade are behind them.

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As a major trading partner, the Japan deal is potentially a big step forward toward the conclusion of tariff-related uncertainties, according to Jane Foley, head of FX strategy at Rabobank.

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“Overall the deal will justify the market’s rolling back of the fears related to US recession and inflation seen earlier in the year and should help support risk appetite,” she said. “It raises pressure on the European trade negotiators, though at the same time it will also raise hope that they can still pull something out of the bag ahead of the deadline.”

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The deal with Japan sets tariffs on the nation’s imports at 15%, including for autos — by far the biggest component of the trade deficit between the two countries. A separate agreement with the Philippines set a 19% rate, the same level as Indonesia agreed and a percentage point below Vietnam’s 20% baseline level, signaling that the bulk of Southeast Asia is likely to get a similar rate.

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Japan’s Topix Index rallied more than 3% to hit a one-year high, with Toyota Motor Corp. surging as much as 16%, the most since 1987. Hopes that the deal could pave the way for an agreement in Europe also boosted shares in the region, with Europe’s Stoxx 600 gauge rising 1.1%, led by automakers such as Porsche, up 8% and Stellantis, up 6.5%.

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Trump Deals Bring Some Clarity for World’s Manufacturing Base

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Earlier this year, Trump’s rapidly-shifting tariff policies sent global markets spiraling amid recession fears and worries about the outlook for US equities, bonds and even the status of the dollar as the world’s reserve currency. But risk assets have rebounded as investors saw signs of progress in negotiations and the greenback has steadied.

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“Since this news counters the ‘Sell America’ trade that was exhibited in the first 5 months of the year, if should help support short-covering in the dollar,” Rabobank’s Foley said.

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Japan’s deal might be setting a precedent for trade negotiations happening with Europe, according to Fabien Yip, a market analyst at IG in Australia. That will provide some optimism for global markets in their expectations for what will eventually happen with Europe and China, she said.

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“It looks like Trump has been making a few concessions with several key trading partners, including Vietnam, Indonesia, and now Japan,” Yip said. “So the deal today will be quite meaningful for the global rally.”

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