Morning in New York: US-China trade talks take center stage

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

This Monday's trading will be determined by the conclusion of a new U.S.-European trade agreement that has eased general uncertainty about the global economy. Under the terms of the agreement, most goods shipped to the U.S. from the European Union, including automobiles, pharmaceuticals and semiconductors, will be subject to a 15% duty. Thus, Washington's threat of a 30% rate has not materialized. The tariff on imports of steel and aluminum by the U.S. was kept at the general level of 50% for their trading partners. At the same time, airplanes, components, some types of chemical and agricultural products will not be subject to import duties. European Commission head Ursula von der Leyen said that the agreement will provide temporary stability, despite its imbalance, and confirmed the EU's plans to invest more than $1.3 trillion in the U.S. economy over three years. Of that amount, $600 billion will be invested in the U.S. military-industrial complex. Another $750 billion will be directed to the energy sector, including LNG, oil and nuclear fuel, which should reduce Europe's dependence on Russian energy resources. The possibility of a separate agreement in the semiconductor industry is being discussed. The total trade turnover between the US and the EU in 2024 amounted to about $976 bln, of which $606 bln was accounted for by supplies from Europe.

The focus is on U.S.-China talks starting in Stockholm. The delegations will be led by Vice Premier Guo Lifeng and U.S. Treasury Secretary Scott Bessent, who will hold their third meeting in less than three months. Its main goal is to extend the trade agreement, which expires on Aug. 12. The two sides will discuss tariffs related to fentanyl shipments as well as China's purchase of oil from Russia and Iran. Given that the deadline for the United States to conclude trade agreements with dozens of its trading partners is August 1, we believe an extension of the temporary arrangements with the PRC is the most likely outcome. Such an outcome would help reduce global trade tensions. Investors will take this as a signal of continued stability in relations between Washington and Beijing, despite the continued pressure of tariff rates on Chinese exports.

In today's macro statistics, the Dallas Fed Manufacturing Index for July is of interest. The auction of two- and five-year treasuries will also take place on Monday.

Enterprise Products Partners (EPD), Revvity (RVTY) and New Gold (NGD) will report quarterly results before the main session opens. Cadence Design Systems (CDNS), Waste Management (WM), Nucor (NUE), Welltower (WELL), Celestica (CLS), Hartford Financial Services (HIG) and Brown & Brown (BRO) will release their results at the postmarket.

Futures on US stock indices are trading in the plus on the back of news about reaching a trade agreement between the US and the EU. According to our forecasts, the upcoming session will be held in the green sector. We assess the balance of risks as positive with an average level of volatility. We focus on S&P 500 movements in the range of 6350-6450 points (from -0.6% to +1% to the previous session's closing level).

- Tesla (TSLA) has signed a $16.5 billion contract with Samsung Electronics to produce next-generation AI6 chips. According to Ilon Musk, the corresponding division will appear at the Samsung plant under construction in Texas. Tesla will have the opportunity to participate in the optimization of the production process, which Musk intends to control personally. The realization of these plans will strengthen the company's position in the development of its own AI chip architecture, which could give a positive impetus to TSLA quotes. Samsung's stock rose more than 6% on this news.

- Paramount Global (PARA) announced the closing of its merger with Skydance Media on August 7. Once the merger is finalized, shares of the new entity, called New Paramount, will begin trading on Nasdaq under the ticker PSKY. The news reinforces expectations of a transformation of Paramount's corporate structure and may cause a revaluation of its assets ahead of the key deal closing date.

- Generative AI startup Anthropic, one of whose largest investors is Amazon (AMZN), could be valued at more than $150 billion in a new funding round after $61.5 billion in the previous round. The FT reports that funds from the Middle East, including Abu Dhabi-based MGX, are showing interest in the deal. A possible investment of between $3bn and $5bn is being discussed.

July 25 trading on American stock exchanges ended in the plus. S&P 500 and NASDAQ 100 once again updated historical highs, adding 0.4% and 0.23% respectively. The Dow Jones rose 0.47% and the Russell 2000 gained 0.40%. The "Magnificent Seven" showed mixed dynamics. Tesla (TSLA: +3.52%) traded better than the others amid a rebound after a strong drop the day before and news about the launch of a robotaxi service in San Francisco. Quotes of Amazon (AMZN: -0.34%) declined slightly amid mixed reports of other representatives of the sector. Material producers (XLB: +1.18%) emerged as the broad market's top gainers, supported by Newmont's (NEM) quarterly release, which beat earnings and revenue forecasts. Telecoms (XLC: -0.93%) were the outsiders due to a sharp decline in Charter Communications (CHTR) shares following a weak report and a shrinking internet service user base.

The main positive driver was the expectation of progress in trade negotiations between the US and the EU.

Macroeconomic statistics of the day was mixed. The volume of orders for durable goods in June decreased by the maximum for more than five years 9.3% m/m, but the consensus suggested a decline of 10.4%. The main contribution to this dynamics was made by the decline in orders for transportation equipment, which amounted to 22.4%. The sharpest (-51.8%) was the decline in orders for civil aircraft and their components. The volume of orders for capital goods decreased by 22.2%, including those excluding defense products - by 22%. Excluding defense spending, the figure declined 9.4%, while excluding transportation, the figure increased 0.2% m/m, softening investors' perception of the report. In addition, the May result was revised to +16.5%.

- Charter Communications (CHTR: -18.5%) shares collapsed as its quarterly adjusted EBITDA fell short of average expectations on revenue within consensus. In addition, the number of new Internet connections declined more strongly than forecast despite a smaller-than-expected decline in the video segment. The company lowered its capital expenditure guidance for 2025 due to a shift in the timing of investments in network development, as well as lower spending in the commercial segment and government programs.

- Aon (AON: +4.6%) reacted positively to the release of its quarterly results, in which revenue and profit exceeded expectations and organic growth amounted to 6%. The Commercial Risk, Reinsurance and Health Solutions businesses made the biggest contribution to the overall result, with revenues each growing by the same 6%. Investor optimism was supported by the maintenance of the annual guidance.

This article was AI-translated and verified by a human editor