Top story for the morning: the US has a trade deal with the EU, European futures are rising

After weeks of uncertainty, the U.S. and the European Union reached a sweeping tariff agreement, removing the threat of an escalating trade war. Against this backdrop, futures on European indices, including the Euro Stoxx 50 and DAX, went up, and the euro strengthened. The oil market shows contradictory dynamics: despite the current deficit and stable prices around $70 per barrel, analysts warn of an impending oversupply in 2025-2026 due to production growth both within OPEC+ and outside the cartel. On these and other topics - in our review of key events for the morning of July 28.

Donald Trump announced that the U.S. has reached a trade agreement with the European Union days before the Aug. 1 deadline for imposing duties, writes CNBC. According to Trump's announcement, the agreement calls for a 15% duty on most European goods, including cars.

Some product categories - including airplanes and their components, a number of chemicals and pharmaceutical products - are not subject to the new tariffs, European Commission President Ursula von der Leyen said at a briefing after the deal was announced. She also emphasized that the new 15% is not added to the already existing duties.

The 15 percent rate was softer than Trump's earlier threat to impose 30 percent duties on goods from the EU, the U.S.'s largest trading partner. But some EU officials had hoped for a 10 percent rate during the negotiations.

Trump also said the EU has agreed to buy $750 billion worth of U.S. energy resources and invest an additional $600 billion in the U.S. economy beyond current levels.

In addition, he said, the EU will "purchase hundreds of billions of dollars" of military equipment, but he did not name a specific amount. "This is a very powerful agreement. It's a very big deal - the biggest deal of all," Trump said in the presence of von der Leyen.

"It's a good agreement, it's a grand agreement, the negotiations were tough," she confirmed.

Oil traders have found themselves in a tricky situation: despite increasingly insistent warnings of an impending market weakening by the end of 2024 and into 2026, prices have so far remained steady at around $70 a barrel, wrote Bloomberg.

France's TotalEnergies last week warned of oversupply amid OPEC+ easing production curbs and a slowing global economy putting pressure on demand. Norway's Equinor said its new Johan Castberg field is operating at full capacity and the Brazilian offshore project is expected to start up soon - all of which are boosting the flow of new non-OPEC+ volumes.

The International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) raised their estimates of future oversupply in July. Both bodies forecast that supply will exceed demand by record amounts since the pandemic. The IEA forecast is for a surplus of 2 million bpd in 2025.

That oversupply could drive down oil prices, which would help curb inflation, hit producers and likely please U.S. President Donald Trump, who has been demanding cheaper energy since the start of his term.

The forecast contrasts sharply with the current situation: stocks in key storage facilities remain low and the market structure still signals a deficit. Oil-to-fuel refining margins are significantly above seasonal norms, which supports demand for raw materials.

"One of the factors supporting prices has been the seasonal summer strengthening in demand," Francisco Blanch, head of commodities at Bank of America, said in an interview with Bloomberg TV. - The surplus could reach 200 million barrels in the second half of the year, which will eventually put pressure on prices."

European stock futures rose after the U.S. and European Union reached a trade agreement, wrote Bloomberg.

Euro Stoxx 50 index futures were up 1 percent by 2:18 a.m. Paris time Monday, while contracts on Germany's DAX were up 0.9 percent. The euro rose 0.2% against the dollar to $1.1768, extending gains after strengthening 1% last week.

John Plassar, head of investment strategy at Cité Gestion, called the agreement "good enough to give markets what they were most looking forward to - predictability." "The risk of duty escalation is off the table, and with it the main macroeconomic brake has disappeared. For investors, this is not just a relief - it's a green light," he said.

Sectors most dependent on trade - including auto and consumer goods - were already showing gains Friday amid expectations of an agreement before Aug. 1, when new duties are due to take effect.

European stocks have remained in a sideways trend since May due to global trade uncertainty. The Stoxx 600 index is still 2.3% below its March record. UBS calculates that the index of duty-sensitive stocks has lagged the overall regional market this year, creating upside potential.

"I think we'll see a relief rally once the details are finalized. This is exactly the kind of momentum that European equities need in the midst of the corporate reporting season," said Jeff Yu, EMEA macroeconomist at BNY Mellon.

Samsung Electronics has signed a $16.5 billion contract to supply semiconductors to Tesla, according to the South Korean giant's regulatory filings and Tesla CEO Ilon Musk's postings on the X social network, reports CNBC.

Samsung's documents, which do not identify the contractor, say the contract took effect on July 26, 2024 - when orders were received - and will end on Dec. 31, 2033.

Musk later confirmed in X that Tesla was the counterparty, but his post was soon deleted. He then wrote: "Samsung's giant new factory in Texas will be producing next-generation AI6 chips for Tesla. The strategic importance of this cannot be overemphasized. Right now, Samsung is producing the AI4. TSMC will produce AI5, a project that has just been finalized; first in Taiwan, then in Arizona."

Samsung had previously said that details of the deal, including the name of the counterparty, would not be disclosed until the end of 2033 at the request of the second party "to protect trade secrets."

"As the main provisions of the contract are not disclosed due to the need to maintain confidentiality, investors should be cautious and consider the possibility of contract modification or termination," the statement said. 

Samsung declined to comment to CNBC on details about the counterparty. Tesla did not respond to a request for comment.

- Japan's broad Topix index was down 0.6 percent.

- In South Korea, the Kospi index was up 0.3%, while the Kosdaq small-company index was down the same amount.

- The benchmark Nikkei 225 fell 1%.

- Australia's S&P/ASX 200 was up 0.4 percent.

- Mainland China's CSI 300 index was little changed, while Hong Kong's Hang Seng Index, which includes China's largest companies, added 0.5 percent.

- S&P 500 futures were adding 0.4 percent, the Nasdaq 100 was up 0.5 percent and Dow Jones Industrial Average futures were up 0.4 percent.

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