Trump’s EU Trade Deal Is a Big Win. Stock Markets Still Face These Risks.

European Commission President Ursula von der Leyen meets U.S. President Donald Trump in Scotland. (Andrew Harnik/Getty Images)

Better the devil you know seems to be the current market motto. President Donald Trump’s trade deal with the European Union will relieve some of the uncertainty about the global economy, but there are more hazards to negotiate in a big week for investors.

The EU deal cements 15% as the baseline tariff for imported goods to the U.S., broadly the same as the agreement with Japan. That leaves China as the big trade question to be resolved and with talks taking place between Beijing and Washington officials this week, a grand bargain could be coming.

So a clear road ahead for the market rally? Not quite. Tariffs still act as a tax on consumers, at least according to classical economic theory. Setting the rate is one thing, dealing with the results is another.

Ensuring tariffs don’t cause an inflationary spiral is the Federal Reserve’s job, but the central bank’s meeting this week is unlikely to clear up anything. It’s odds on that rates will remain unchanged and attention will turn to inflation and jobs data —due Thursday and Friday, respectively. With the payroll report landing the same day as Trump’s Aug. 1 deadline for trade deals to be done before higher tariffs kick in, there’s the chance of a shock at the end of the week.

Before then, earnings reports will provide a window onto the economy. Big Tech will grab the headlines with Microsoft, Meta, Amazon and Apple all updating, but it’s worth watching what the likes of consumer-goods manufacturer Procter & Gamble and payments processor Visa say about import taxes, and whether they are affecting household spending.

Since the lows of April, stocks have been rebounding in a bet that tariffs won’t be as bad as feared. Now the market finally knows what devil it’s dealing with, it just needs to figure out how to handle the consequences.

—Adam Clark

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A Flood of Economic Data Is Coming as Fed Decides on Rates

It’s the busiest week in recent memory for economic news, featuring the Federal Reserve’s latest interest-rate policy meeting, the release of monthly jobs data for June, and the Trump administration’s Aug. 1 tariff deadlines. While the Fed isn’t expected to budge on rates, two Fed governors are expected to dissent.

• A rate cut is more likely to happen in September. Futures markets put a 62% probability on a quarter-point cut then, according to CME’s FedWatch tool. There’s about a 64% probability of at least a second quarter-point drop by December, consistent with recent projections by Fed officials.
• Fed officials won’t have the July jobs report before they announce their rate decision on Wednesday. That report comes on Friday, with economists expecting a 106,000 rise in nonfarm payrolls, with nearly all the increase coming in the private sector. That is lower than June’s 147,000 rise.
• The July report could show a drop in the unemployment rate, from the most recent reading of 4.1%, not because of increased hiring but fewer job seekers, according to a client note from 22V Research, headed by Dennis DeBusschere. “The shrinking labor supply issue is underappreciated,” it said.
• A jobless rate of 4% or below could pressure markets and further complicate Fed decisions. A low unemployment rate could obscure signs of weakness in payroll growth. JPMorgan’s Bruce Kasman says the political blowback could worsen if the Fed is seen as reluctant to respond to a slowing economy.

What’s Next: This week also features the latest estimates for gross domestic product and employment costs for the second quarter, the release of June’s measure of the personal consumption expenditures price index, and Treasury’s latest borrowing plans.

— Randall W. Forsyth

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U.S. Officials in Stockholm Talking Trade with China After EU Deal

An American trade delegation led by Treasury Secretary Scott Bessent was meeting in Stockholm today with Chinese officials after President Donald Trump announced a deal with the European Union that set a 15% blanket rate on EU products imported into the U.S.

• China’s trade talks are likely to linger well beyond Friday’s deadline for other countries. While the deadline for China was reset to Aug. 12, officials are expected to extend it possibly for another three months, according to the South China Morning Post.
• The EU agreed to buy $750 billion of energy from the U.S., and to invest $600 billion into the U.S. above their current investment, Trump announced on Sunday after meeting with European Commission President Ursula von der Leyen. Tariffs on EU automobiles will be 15%.
• Trump told reporters the EU rate doesn’t apply to 50% tariffs the U.S. has set on imports of steel and aluminum, which are a “worldwide thing.” It was also not known whether the deal exempted certain products such as wine and spirits. The 15% tariff is the same as the Japan deal.
• While light on specifics, the EU deal calms the trans-Atlantic trade tensions that have been escalating for weeks, with threats of retaliation by the bloc on imports of U.S. products into the region. On Sunday, von der Leyen said the deal will “rebalance but enable trade on both sides.”

What’s Next: Earlier China talks netted deals on rare earth minerals and Nvidia’s H20 chips. Whether this third round will include talks on TikTok’s future in the U.S. is unclear, Commerce Secretary Howard Lutnick said Sunday. Otherwise Trump and Bessent know “exactly how they’re going to play” talks, he said.

— Liz Moyer

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Big Tech Earnings on Deck This Week Amid AI Spending Spree

Expect more details about how much Big Tech is spending on artificial intelligence this week, when earnings reports from more of the Magnificent Seven hit. Even amid brewing worries about an AI bubble, the tech giants including Meta Platforms and Microsoft are likely to continue raising the bar.

• Microsoft and Facebook parent Meta report on Wednesday, while Apple and Amazon.com weigh in on Thursday. They come after last week’s results from Alphabet revealed raised expectations for capital spending this year to $85 billion as it plows investments into AI.
• Meta CEO Mark Zuckerberg plans to spend hundreds of billions of dollars to build out a “superintelligence” network, something it could talk about on the earnings conference call. Wall Street expects Meta’s capital expenditures to reach $16.4 billion in the June quarter, double a year ago, FactSet said.
• Apple’s critics say it hasn’t embedded AI features deeply enough into its devices and is trailing rivals, according to MarketWatch, which cited Melius Research analysts encouraging the iPhone maker to take more chances. Apple’s capex is expected to rise to $2.6 billion from $2.2 billion a year ago.
• Analysts have high expectations for Microsoft’s Azure cloud business despite uncertainty. UBS analyst Karl Keirstead estimated around 22% of Azure revenue would come from AI workloads. Analysts expect capex spending for the quarter to rise to $17.8 billion from $13.9 billion a year ago, FactSet said.

What’s Next: Together, Microsoft, Meta, Amazon, and Alphabet are poised to spend more than $300 billion on the technology this year, MarketWatch reported. The spending spree contrasts with trends in consumer spending, which has been slowed by inflation-weary shoppers and possible tariff costs.

— Liz Moyer

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Elon Musk and Tesla’s $30 Trillion AI Supersonic Tsunami

Tesla CEO Elon Musk has some lofty aspirations for his fledgling humanoid robot business, projecting a $30 trillion revenue opportunity over the weekend. That’s based on his view that Tesla could make one billion robots a year and sell them for $30,000 each, though he admits that’ll be a while.

• Musk made the comments during a virtual appearance at the Tesla Owners of Silicon Valley 2025 “Takeover” party in San Mateo, Calif. The group is, essentially, a fan club and community for Tesla and Musk enthusiasts. Its Takeover event draws attendees from all over the world, according to organizers.
• Tesla is using its artificial intelligence and manufacturing capabilities to build Optimus humanoid robots. Tesla plans to make a few hundred by the end of 2025. Originally, Tesla planned to have a few thousand, but a new design slowed things down. It still plans for higher production in 2026.
• Robots are “probably the world’s biggest product,” Musk said. “There’s a market for 20 billion robots,” he added. Hypothetically if Tesla made one billion of them at $30,000, “I’m just guessing here, that’s $30 trillion in revenue.” He added there’s a “long way to go between here and making one billion robots a year.”
• There isn’t a significant market for humanoid robots yet. Nvidia CEO Jensen Huang has said that robots can become the world’s largest market. (Housing, consumer electronics, and cars are three of the largest today.)

What’s Next: Futurum chief market strategist Shay Boloor says the world spends about $50 trillion on human labor a year currently, and that useful robots are “pretty disruptive if you can conquer it.” Musk describes the advancement of AI technology as a “supersonic tsunami.”

—Al Root

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Disney’s ‘Fantastic Four’ Rockets to $118 Million Debut

The latest Marvel movie, Fantastic Four: First Steps, rocketed to a $118 million first-place debut in domestic theaters this weekend. Combined with overseas box-office sales, the superhero flick took in $218 million globally, according to Comscore.

• Marvel Studios is owned by Walt Disney, whose shareholders have been stuck in a lost decade because the stock trades close to where it did 10 years ago. But Wall Street is bullish —more than three-quarters of analysts covering the shares recommend buying them.
• Other movies are also doing well this summer. Superman, the latest from Warner Bros., notched another $24.8 million in domestic ticket sales in its third weekend, coming in second behind the Marvel film. The latest Superman has brought in a cumulative $289.5 million in ticket sales. So far this year, Hollywood’s domestic box-office sales are outpacing the same time a year ago—up 12% to nearly $5.2 billion, according to Comscore.
• “The lesson is that if you build great movies, audiences will head to the multiplex, and that’s what’s happening over this final weekend of July,” said Comscore senior media analyst Paul Dergarabedian. Three other summer blockbusters, Comcast-owned Universal’s Jurassic World Rebirth, Warner Bros.’ F1 The Movie, and Paramount’s Smurfs, rounded out the weekend’s top five.
• This August’s calendar includes the premieres of Universal’s The Bad Guys 2, Paramount’s The Naked Gun, Warner Bros.’ Weapons, and Disney’s Freakier Friday, among other films.

What’s Next: Dergarabedian said he had confidence the industry would cross the $4 billion domestic summer box-office threshold, which has only been reached one other time since 2020. That was the “Barbenheimer” summer of 2023, when Barbie and Oppenheimer drove up sales.

— Liz Moyer

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MarketWatch Wants to Hear From You

Coca-Cola confirmed last week what President Donald Trump had already unveiled: that it is going to offer a U.S. version of its iconic soft drink sweetened with cane sugar. The announcement has thrown a spotlight on a commodity market that has been subject to strict government oversight since the 1930s. What could the move mean for consumers?

A MarketWatch correspondent will answer this question soon. Meanwhile, send any questions you would like answered to thebarronsdaily@barrons.com.

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner