European Shares Rise As Trumps Signals 'major' Trade Deal

Stocks

Summary:

European shares climbed on Thursday after U.S. President Donald Trump signalled progress toward a first trade deal in his global tariff dispute, boosting market sentiment.

German share price index DAX at the stock exchange in Frankfurt

European shares climbed on Thursday after U.S. President Donald Trump signalled progress toward a first trade deal in his global tariff dispute, boosting market sentiment.

The pan-European STOXX 600 index was up 0.3%, as of 0707 GMT. Other regional indexes were also trading in positive territory, except for Spain, which fell 0.4%.

Trump posted on Truth Social that he will hold a news conference later in the day about a "major trade deal with representatives of a big, and highly respected, country".

Citing three people familiar with the plans, the New York Times reported on Wednesday that the deal could be with Britain.

This comes ahead of potential ice-breaker talks between Washington and Beijing trade tsars this weekend, that have firmed hopes for de-escalation in trade tensions between the world's two leading economies.

Overnight, in a widely expected decision, the Federal Reserve held its interest rates steady, with the U.S. central bank flagging that the risks of higher inflation and unemployment had risen.

Markets are also closely watching the Bank of England's policy meeting, due later in the day, with expectations for a quarter-point rate cut.

Separately, Trump's administration plans to rescind and modify a Biden-era rule that curbed the export of sophisticated artificial-intelligence chips, said a spokeswoman for the U.S. Department of Commerce.

Shares of A.P. Moller-Maersk fell 2.1% after the shipping group lowered its global container market forecast for this year due to increased economic and geopolitical uncertainty, although it left its profit outlook unchanged.

Anheuser-Busch InBev rose 4.2% after the beer brewer reported a nearly 8% rise in first-quarter operating profit, beating analysts' estimate by more than double.

Source: Yahoo Finance

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Gerik

Economic

Exports Rebound on Pre-Tariff U.S. Demand Surge

German exports rose by 1.1% month-on-month in March, exceeding the 1.0% forecast in a Reuters poll. This improvement was largely driven by a front-loading of shipments to the United States, which is preparing to implement sweeping tariffs under President Donald Trump’s administration. As the U.S. remained Germany’s top trading partner in 2024, with €253 billion in bilateral goods trade, the anticipatory surge in demand from American buyers provided short-term support to German exporters.

While the uptick is encouraging, analysts caution that it reflects exceptional one-off dynamics rather than a sustained recovery. As new tariffs take effect, German exporters may face significant headwinds in the months ahead, particularly in automotive and machinery sectors that are heavily exposed to U.S. markets.

Industrial Production Surprises to the Upside

Industrial output also saw an unexpected surge, growing 3.0% in March compared to February—far outpacing the 0.8% forecast by economists. The figures suggest a potential stabilization in Germany’s industrial sector, which has been plagued by weak global demand, energy price pressures, and supply chain disruptions over the past two years.

The combination of rising exports and stronger output points to a temporary lift in momentum, especially as firms accelerate production to fulfill orders ahead of trade barriers. However, this front-loaded activity may mask underlying weakness, with production likely to soften once U.S.-bound shipments taper off under the new tariff regime.

Trade Balance Strengthens Despite Import Weakness

Germany’s trade surplus widened to €21.1 billion in March, up from €18.0 billion in February. This expansion was not only supported by stronger exports but also by a notable 1.4% drop in imports, reflecting softer domestic demand and possibly early signs of tightening financial conditions.

Although a stronger trade surplus is typically viewed as a positive macro signal, the contraction in imports could be a warning sign of weaker internal consumption and investment, particularly if companies and consumers are growing more cautious in response to global uncertainty and rising costs.

Outlook Clouded by Tariffs and External Pressures

Looking ahead, the export-oriented German economy faces renewed challenges. The U.S. tariffs—set to be among the most severe in recent history—could significantly erode competitiveness for German goods. Furthermore, geopolitical volatility, tight monetary conditions in Europe, and weak Chinese demand add to the uncertainty.

Still, March’s data suggests that German industry remains resilient and capable of responding to short-term external shocks. Whether this resilience can be maintained will depend heavily on how firms navigate the rapidly changing global trade environment in the second half of 2025.

Source: Reuters

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Gerik

Economic

Global Gateway Becomes Cornerstone of EU Trade Diplomacy

In response to an increasingly fragmented global order, the EU has redoubled its efforts to forge strategic economic partnerships. The Global Gateway initiative—a cornerstone of the bloc’s infrastructure and investment diplomacy—is now at the forefront of EU trade expansion. Overseen by European Commissioner for International Partnerships Jozef Sikela, the strategy is broadening from hard infrastructure to encompass digital, telecommunications, and critical mineral supply chains.

Sikela emphasized that the current geopolitical shift is the most consequential since World War II. He asserted that new global alliances are emerging and that support for European integration is strengthening internally. In this environment, the EU is positioning itself as a stable force advocating for rules-based trade and long-term economic collaboration.

Mercosur Deal Signals Renewed Ambition

The clearest example of this renewed ambition is the long-awaited EU-Mercosur free trade agreement, finalized in principle after two decades of negotiations. Though initially met with firm resistance from France due to environmental concerns—especially relating to Amazon deforestation—recent developments suggest a softening of opposition, with both France and Austria reconsidering their stance.

The deal, if ratified, would significantly expand EU access to Latin America’s largest economies and could be approved by the EU Parliament as early as autumn 2025. It represents a strategic pivot to Latin America at a time when relations with China and the United States are increasingly complex.

Diversifying Trade Beyond Traditional Partners

The EU already maintains robust trade agreements with partners like South Korea, Japan, Singapore, Vietnam, and New Zealand. Negotiations are advancing with Australia, Malaysia, and the Philippines, with particular emphasis on sustainability, digital governance, and supply chain resilience.

Most notably, the EU is re-engaging in negotiations with India and Indonesia—two populous and rapidly growing markets. These countries are central to the EU’s broader Indo-Pacific strategy, as the bloc recognizes that 37% of its imports originate from the region, while a quarter of its exports are destined for the same area. Ensuring access to these markets is now both an economic imperative and a geopolitical necessity.

Challenges of Standard Setting and Strategic Flexibility

Despite its proactive outreach, the EU faces structural obstacles. Many developing nations are hesitant to accept stringent EU conditions on carbon border taxes, rules of origin, and environmental standards, which are often perceived as disguised protectionism. Moreover, some countries remain cautious, balancing their renewed openness to the EU with efforts to maintain or restore trade relations with the United States.

European negotiators are increasingly aware that rigid policies could jeopardize deals. There is a growing consensus that a more flexible approach—tailoring rules to specific regional contexts and development levels—may be necessary to secure partnerships. The leverage once held by the EU’s market size is now being counterbalanced by the strategic self-confidence of emerging economies.

A Strategic Push for Trade Amid Multipolar Competition

The EU’s intensified pursuit of trade agreements is both a response to growing global fragmentation and an assertion of its role as a normative power. While initiatives like Global Gateway aim to project economic influence through cooperation, the success of this strategy depends on Brussels’ ability to balance its regulatory ambitions with pragmatic diplomacy.

With traditional global leadership in flux, the EU must offer an appealing alternative—not through inflexible standards, but through adaptive, mutually beneficial frameworks. As the trade architecture of the 21st century continues to evolve, Europe’s relevance may well hinge on how effectively it listens, negotiates, and aligns its principles with global realities.

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Fiona Harper

Economic

Political

Malaysia's trade talks with the US may yield positive results, but the existing 10% blanket import tariff is expected to stay, according to Ministry of Investment, Trade and Industry (Miti) official Raveendran Nair.

Raveendran, who was among the Miti entourage that visited Washington DC to set up talks, shared that US Secretary of Commerce Howard Lutnick confirmed the 10% tariff would remain for all countries, despite ongoing negotiations.

“We are looking for a positive outcome, but just to indicate, the secretary of commerce did mention that most probably that 10% [blanket tariff] will remain for the entire world,” Raveendran said at a forum organised by Hong Leong Bank Bhd (KL:HLBANK) on Thursday.

When asked by panel discussion moderator Hong Leong Bank global markets managing director Hor Kwok Wai if keeping only the blanket tariff was the best possible outcome from talks with the US, Raveendran confirmed it was.

“The rest we can negotiate on is the modification of the reciprocal tariff (additional 14%, totalling 24% in reciprocal tariff),” Raveendran said. He did not disclose any further details regarding specifics of the negotiations, citing a non-disclosure agreement inked with the US.

Small and Medium Enterprises Association (Samenta) chairman of international trade Eugene Tan said the 10% blanket tariff is a major challenge for businesses, especially manufacturers, as it matches the profit margins for many, such as in the electrical and electronics sector.

“I think for manufacturing, like E&E (electrical and electronics) for example, I think 10% is practically their margin. So, this is something that we need a bit of runway to build up — the pricing, cost reduction — as it's not something that we can absorb right away.

“We will still see an impact. It will take time for us to figure out how to resolve that additional margin,” Tan warned.

Meanwhile, Raveendran also shared that the US is not open to countries approaching the trade negotiating table as a bloc.

He stated that the US prefers bilateral negotiations over countries approaching as a bloc, warning that negotiating as a group would be seen as "ganging up" on the US.

“Furthermore, we must understand that even though Asean is a bloc, each country has its own interests, different products, and tariff rates. So, they have to negotiate bilaterally,” he added.

The reciprocal tariff, originally set for April 9, is now delayed until July 9. Several countries, including Malaysia, are pushing for its removal. Malaysia began official talks with the US on Tuesday (May 6), led by Miti deputy secretary general Mastura Ahmad Mustafa.

Source: Theedgemarkets

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China–U.S. Trade War

Economic

Firm Stance on Tariffs Undermines Negotiation Optimism

As high-level US and Chinese officials prepare to meet in Switzerland this weekend, President Trump has confirmed that he will not ease tariffs on Chinese imports, challenging earlier speculation of a possible de-escalation. His decision maintains a confrontational posture just days before the anticipated talks between Treasury Secretary Scott Bessent, US Trade Representative Jamieson Greer, and their Chinese counterparts.

Despite suggesting on NBC’s Meet the Press that tariff relief might eventually be considered to facilitate trade, Trump has since reversed course, insisting that the US “loses nothing” by refusing to trade with China and arguing that Beijing "deserves" to pay the steep import duties.

Beijing Seeks De-Escalation Without Concession

China, meanwhile, has implemented a partial response by exempting certain US goods from its 125% retaliatory tariffs, a move seen as a face-saving gesture aimed at stabilizing relations without openly conceding to pressure. However, Beijing’s restraint has not swayed Washington’s position, as Trump continues to frame the tariff war as a justified response to long-standing trade imbalances.

Trump’s claim that the US “does not have to sign a deal” further reinforces the administration’s unilateral strategy. During a meeting with Canadian Prime Minister Mark Carney, Trump reiterated that the burden of engagement lies with America’s trading partners, not the White House.

Fed Holds Steady Amid Policy Uncertainty

While Trump pushes for aggressive trade enforcement, Federal Reserve Chair Jerome Powell has taken a more cautious approach. Speaking Wednesday, Powell emphasized that the “tariff shock” has not yet fully materialized in macroeconomic data. Accordingly, the Fed has left interest rates unchanged, awaiting clearer signals on how trade disruptions will affect inflation, employment, and consumer sentiment.

Powell’s remarks suggest that while business sentiment is deteriorating, central bank intervention remains on hold until empirical evidence warrants a policy shift. Nonetheless, prolonged uncertainty could pressure the Fed to act if market conditions worsen or consumer prices begin to respond to import taxes.

Corporate Concerns Mount as Economic Risks Rise

Major US corporations are increasingly voicing concern over the impact of tariffs on operations and supply chains. Ford Motor Company recently issued a warning about "significant" business disruptions stemming from the tariff regime, joining a growing list of firms facing higher costs and margin pressures.

In another unexpected move, Trump threatened to impose a 100% tariff on foreign-produced films by the end of the week—though no specifics were provided. This highlights the administration’s willingness to expand the trade war into cultural and intellectual property domains, adding yet another layer of uncertainty for global industries.

Brinkmanship Continues, but Economic Costs May Escalate

President Trump’s refusal to soften tariffs before US-China negotiations reflects a deliberate strategy of brinkmanship, aimed at extracting maximum leverage at the cost of near-term economic pain. However, with corporate America sounding alarms and global markets increasingly fragile, the margin for error is narrowing.

Whether this hardline approach yields a breakthrough or drives the two largest economies further apart remains uncertain. For now, the message is clear: Washington is not backing down, and the world must adjust to a trade regime where economic diplomacy is governed by unilateral assertiveness rather than mutual compromise.

Source: Yahoo Finance

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Economic

White House to Deliver Budget Proposal Amid Policy Shifts

On May 2, President Donald Trump will submit his administration’s fiscal year 2026 budget to Congress, offering a sweeping vision of federal priorities shaped by a push for tax cuts, elevated defense spending, and a drastically leaner government. The proposal arrives in the context of heightened internal Republican debate over how to reconcile deep spending reductions with expansive tax legislation targeted for July 4.

Although presidential budget submissions are largely symbolic, serving as policy statements rather than enforceable fiscal blueprints, they often signal political intent. Trump’s plan is expected to include broad agency-level outlines and economic forecasts, setting the stage for contentious appropriations battles in Congress.

Defense Spending Surges While Social Programs Face Austerity

Trump’s budget is likely to feature a proposed military budget exceeding $1 trillion—a historically unprecedented figure. The administration claims this expansion is essential for “strategic deterrence,” especially amid rising geopolitical uncertainty and shifting global alliances. Trump has publicly framed the defense investment as central to “restoring American strength.”

Offsetting this increase, the White House intends to cut more than $160 billion from key discretionary programs. These include environmental protections, renewable energy research, public education, and foreign aid—areas the Trump administration views as peripheral to core national interests. According to the Wall Street Journal, many of these reductions are politically and legally contested, with some still pending resolution in federal courts due to ongoing litigation.

Tariffs, Tax Cuts, and Fiscal Risks Collide

In a notable departure from traditional conservative orthodoxy, Trump claims that revenue from sweeping tariff hikes will offset both defense increases and his flagship tax reform bill. This proposal, dubbed a “big beautiful bill,” is the centerpiece of the administration’s economic strategy. However, critics warn that relying on tariff revenues—especially amid slowing global trade and retaliation from key partners—could worsen the fiscal deficit and dampen domestic investment.

Complicating matters, the economic impact of these trade policies is beginning to emerge. Supply chain disruptions, inflationary pressures on imports, and weakening global demand are beginning to strain key sectors of the U.S. economy. Lawmakers are reportedly considering how to mitigate these shocks within the budget framework.

Administrative Cuts and Executive Restructuring Advance

Aligned with his 2024 campaign pledge to “streamline government,” Trump has enacted significant administrative restructuring with assistance from private sector allies, notably Elon Musk. Several federal agencies have been dissolved or consolidated, and the federal workforce has been reduced by tens of thousands. While the administration touts these cuts as evidence of efficiency, several of them are mired in legal battles over jurisdictional authority and employment protections.

Unconventionally, Trump will not be in Washington when the budget is unveiled. He concluded a week-long celebration of his first 100 days in office with a commencement address at the University of Alabama on Thursday and will spend the weekend in West Palm Beach. His absence from the capital underscores the theatrical nature of modern budget politics—where executive proposals serve more as ideological blueprints than governing documents.

Trump’s 2026 budget proposal arrives at the confluence of fiscal ambition and political constraint. It reflects his administration’s priorities—military strength, deregulation, and lower taxes—while exposing the trade-offs between growth aspirations and social investment. As Congress takes up the budget process, key debates will center on the sustainability of this fiscal approach in an environment shaped by trade disruptions, social polarization, and economic fragility.

Source: CNBC

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Economic

Forex

Rupee Seeks Stability Amid Geopolitical Strain

The rupee is expected to recover slightly at the open on Thursday, following a steep decline the previous session prompted by India’s missile strikes in Pakistan-administered Kashmir. The 1-month non-deliverable forward (NDF) suggests the rupee will open around 84.72–84.74 against the dollar, improving from Wednesday’s 84.8250 close.

Wednesday marked the rupee’s largest single-day percentage drop in nearly a month. The move followed India’s military operation and Pakistan’s pledge of retaliation, which injected fresh geopolitical volatility into regional financial markets. However, the absence of an immediate response from Islamabad has helped ease investor concerns, albeit temporarily.

A senior trader at a local bank noted, “If Pakistan retaliates by targeting military infrastructure, renewed selling pressure on the rupee is likely. But for now, the market is in a wait-and-watch mode.”

Foreign Inflows Reflect Tentative Market Confidence

Despite geopolitical tension, foreign institutional investors were net buyers of Indian equities on May 6, purchasing a net $474.5 million according to NSDL data. The positive equity inflows suggest that investors are cautiously optimistic, betting that the situation will not escalate into a full-scale conflict. Meanwhile, $84.9 million worth of Indian bonds were sold, reflecting a slight hedging behavior in fixed income markets.

This divergence underscores that equity markets are responding more to macroeconomic resilience and earnings momentum, while bond markets are pricing in short-term uncertainty and potential liquidity risks.

Regional Currencies Under Pressure as Dollar Finds Support

Across Asia, most currencies dipped on Wednesday after the U.S. Federal Reserve held interest rates steady but acknowledged rising risks of both inflation and unemployment. The dollar index rose to 99.66, lending support to the greenback and weighing on regional currencies.

The Chinese offshore yuan fell past 7.2350, reflecting broader sentiment shifts following the Fed’s cautious policy stance. MUFG Bank noted that with simultaneous inflation and job market risks, the Fed faces significant policy trade-offs, further complicating its next move. These developments are likely to keep the rupee’s upward momentum in check despite local resilience.

Oil Prices and U.S. Yields Add to Macro Pressure

Brent crude rose 0.4% to $61.3 per barrel, a moderate increase that does not yet threaten India’s import bill but could add pressure if sustained. Meanwhile, the U.S. 10-year Treasury yield stands at 4.28%, offering global investors an attractive risk-adjusted return, which could limit capital flows into emerging markets, including India.

Despite these global headwinds, the rupee’s one-month onshore forward premium remains at a healthy 16.5 paise, reflecting some degree of forward market stability. This indicates that while the spot market remains sensitive, there is still confidence in medium-term rupee performance.

Rupee Caught Between Local Tensions and Global Forces

While the Indian rupee is expected to see a minor technical recovery at the open, its trajectory remains vulnerable to both geopolitical developments on the subcontinent and shifts in global risk sentiment. Investors will closely monitor any retaliatory actions from Pakistan as well as further policy signals from the U.S. Federal Reserve in the coming days.

With India’s strong foreign equity inflows providing a cushion and the global dollar environment turning cautiously bullish, the rupee’s outlook will depend on the delicate balance between regional stability and international policy dynamics.