European equities projected to commence trading with an uptrend
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U.S. President Donald Trump described his recent meeting with Ukrainian President Volodymyr Zelenskyy and European partners as 'very good', hinting at potential progress in the ongoing trade negotiations between the European Union and the United States. Meanwhile, Trump has begun arranging a meeting between Zelensky and Russian President Vladimir Putin, which could take place within the next two weeks, adding another layer of complexity to the geopolitical landscape.
In a significant development, both parties have announced a Framework on an Agreement on Reciprocal, Fair, and Balanced Trade as of August 21, 2025. This Framework outlines key terms such as applying a 15% duty on most EU products entering the U.S., while many U.S. products will enter the EU duty-free. However, the deal is not finalized yet, as many details like implementation timelines, enforcement mechanisms, and legislative translation in the EU remain to be negotiated and confirmed.
Key points of the Framework include the EU eliminating tariffs on all U.S. industrial goods and providing preferential access for various U.S. agricultural and seafood products. The U.S., in turn, will apply either the Most Favored Nation tariff or a 15% tariff on EU goods, with specific exemptions from September 1, 2025, on products like aircraft parts and pharmaceuticals. Both parties aim to address non-tariff barriers, digital trade barriers, and strengthen supply chain resilience and economic security cooperation. The deal supports U.S. agricultural exports and includes commercial agreements in sectors such as energy, semiconductors, and military equipment.
The potential impact of a meeting between Zelensky and Putin on the EU-US trade talks is yet to be fully understood. While such a meeting could influence trade talks positively by reducing geopolitical risks and allowing more focus on economic matters, it could also complicate the trust and collaboration needed in trade negotiations if it exacerbates conflict or political tensions.
As the trade talks progress, traders are looking ahead to upcoming U.S. retail earnings and the Jackson Hole summit for signals on the path of interest rates. Earnings from Walmart, Home Depot, and Target are due this week, which may indicate how Trump's tariff threats and inflation expectations have affected U.S. consumers. Germany said agreed-upon lowered tariffs on Europe-made cars are necessary before a wider EU-US trade deal can be finalized in writing.
Meanwhile, European stocks ended mixed on Monday, with the pan-European STOXX 600 edging up, but the German DAX dipping 0.2 percent and France's CAC 40 shedding half a percent, while the U.K.'s FTSE 100 edged up by 0.2 percent. Asian markets were mixed, the dollar edged up slightly, gold held steady below $3,340 per ounce, while oil prices fell amid positive signals from U.S.-Ukraine talks.
In the midst of these developments, Zelensky is open to "any format" of talks and will decide on a trilateral meeting based on how the first round goes. The day's economic calendar remains light, with euro area current account data and a U.S. report on new residential construction likely to garner some attention later in the day.
[1] Framework on an Agreement on Reciprocal, Fair, and Balanced Trade [2] EU-US Trade and Technology Council Joint Statement [3] U.S. and EU Announce Framework for Trade Agreement [4] U.S. and EU Agree on Framework for Trade Deal
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