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European equity markets showed little movement Tuesday as investors remained cautious ahead of the U.S. tariff deadline on July 9 and the release of important inflation figures.

By 07:05 GMT, Germany’s DAX edged up 0.1%, France’s CAC 40 gained 0.1%, and the UK’s FTSE 100 rose 0.3%.

Trade deal optimism underpins markets

Global markets have been lifted by hopes that the Trump administration will finalize several trade agreements before next week’s deadline, following last week’s confirmation of a trade deal with China. Canada’s recent removal of its digital services tax on tech firms, aiming to revive stalled U.S. talks, has also bolstered sentiment.

However, tensions remain as U.S. President Donald Trump criticized Japan, calling it “spoiled,” amid ongoing negotiations. Meanwhile, U.S. Treasury Secretary Scott Bessent warned that tariffs could still rise sharply even while talks continue, though he anticipates a flurry of deals before the deadline.

European Commission President Ursula von der Leyen expressed confidence last week that a deal with the U.S. could be reached by July 9. If no agreement is made, the U.S. plans to impose a 50% tariff on nearly all EU goods, with Europe prepared to respond with its own countermeasures.

Inflation data in focus

Market participants are closely watching the release of preliminary eurozone inflation data expected Tuesday. Analysts forecast consumer price inflation hit 2% year-on-year in June, aligning with the European Central Bank’s target.

Earlier this month, the ECB cut interest rates for the eighth time in a year but suggested it may pause further reductions due to uncertainties from U.S. trade tensions. Since last June, the ECB has cut rates by two percentage points to support the eurozone economy, which has been pressured by both internal challenges and external shocks from U.S. policy shifts.

Later Tuesday, manufacturing Purchasing Managers’ Index (PMI) data for France, Germany, and the eurozone will provide insight into the sector’s health.

Corporate updates

Sodexo (EU:SW) lowered its outlook for fiscal 2025 revenue growth to the low end of its previously forecast range, citing mixed regional results and currency pressures in its Q3 report. The company reaffirmed its guidance of 3%-4% organic revenue growth and a 10-20 basis point rise in operating profit margin but now expects to achieve the lower end of those targets.

French automaker Renault (EU:RNO) announced an extraordinary loss of about €9.5 billion ($11.2 billion) in the first half related to its stake in Nissan (USOTC:NSANY), due to changes in how it accounts for the investment.

J Sainsbury (LSE:SBRY) reported a 4.9% rise in retail sales excluding fuel for the first quarter of 2025/26, reaching its highest market share in nearly ten years.

Oil prices rebound from three-week lows

Crude oil prices recovered slightly Tuesday after hitting three-week lows, pressured by easing supply concerns and anticipation of an OPEC+ production increase.

Brent crude futures rose 0.3% to $66.91 a barrel, bouncing from a June 11 low just before the Israel-Iran conflict began. U.S. West Texas Intermediate crude futures increased 0.2% to $65.25 a barrel.

OPEC+ is scheduled to meet on July 6, and reports indicate the group will boost output by 411,000 barrels per day in August, following production increases in May, June, and July. This would bring the total 2025 supply hike to 1.78 million barrels per day, although it remains below the total production cuts implemented over the past two years.

Ofgem, the UK’s energy regulator, has given provisional approval to a major £24 billion investment plan aimed at upgrading the country’s energy infrastructure and expanding renewable energy capacity, the agency announced Tuesday.

Spanning five years, the program allocates over £15 billion to maintain the safe operation of Britain’s gas transmission and distribution systems. Meanwhile, £8.9 billion is earmarked for enhancements to the high-voltage electricity network, with an additional £1.3 billion set aside for future deployment.

This investment marks the initial phase of a wider £80 billion initiative designed to expand the UK’s electricity network, shielding households from the volatility of global gas markets that have caused sharp energy bill fluctuations in recent years.

The funding will support about 80 transmission projects nationwide, upgrading more than 4,400 kilometers of overhead power lines and installing 3,500 kilometers of new circuits, including offshore grid connections. These upgrades will double the amount of grid infrastructure added over the past decade.

Jonathan Brearley, Ofgem’s CEO, stated, “This record investment will deliver a homegrown energy system that is better for Britain and better for customers. It will ensure the system has greater resilience against shocks from volatile gas prices we don’t control.”

Ofgem estimates the investment will add approximately £104 to annual household network charges by 2031 — with £30 attributed to gas networks and £74 related to electricity grid upgrades. However, the expansion of the electricity grid is expected to generate around £80 in savings through reduced constraint costs and improved renewable energy utilization, resulting in a net cost rise of about £24 per year, or less than 40 pence weekly, by March 2031.

The regulator has set a provisional cost of equity allowance for private investments at 6% over the five-year period, lower than the 6.5% to 6.9% range requested by companies in their proposals.

The draft approval is now open for public consultation, with final decisions expected by the end of 2025.

The U.S. dollar continued its slide on Tuesday, hitting levels not seen since early 2022, as markets increasingly price in upcoming interest rate cuts. Meanwhile, President Donald Trump’s proposed tax and spending bill has sparked worries about the nation’s fiscal outlook.

At 04:25 ET (08:25 GMT), the Dollar Index—which measures the greenback against a basket of six major currencies—fell 0.2% to 96.275, marking its lowest point since February 2022.

Pressure Mounts on the Dollar

The dollar’s decline is driven by growing expectations that the Federal Reserve will ease monetary policy soon, coupled with optimism around potential trade deals and ongoing political disputes over Trump’s sweeping tax and spending legislation.

“The dollar continues to grind lower in a move probably now best categorised as an orderly dollar bear trend. After a structurally driven decline of the dollar in April, its losses over the last month or so have become cyclical, as earlier Fed easing becomes priced,” noted analysts at ING in their commentary.

The anticipation of rate cuts is heightened by President Trump’s persistent pressure on the Fed. Recently, he sent Fed Chair Jerome Powell a handwritten note comparing U.S. interest rates to other countries, suggesting the U.S. rate should fall between Japan’s 0.5% and Denmark’s 1.75%.

Trump’s ongoing criticism of Powell and the Fed has unsettled investors, raising questions about the central bank’s independence and credibility—factors weighing on the dollar.

Investor uncertainty is further fueled by the contentious debate in the U.S. Senate over Trump’s tax and spending bill, which faces resistance due to its projected $3.3 trillion increase to the national debt.

ING added, “Back to the short term, the dollar has come quite far already and this bear trend probably needs feeding with some macro news. That news comes today in the form of the June ISM manufacturing release and the JOLTS data.”

Euro Nears Four-Year High

In Europe, the euro slipped slightly by 0.1% to 1.1781 against the dollar, just shy of its recent four-year peak of 1.1808. The single currency surged 13.8% in the first half of the year, marking its best performance for a six-month period on record, according to LSEG data.

Traders are now awaiting preliminary inflation figures from the eurozone, expected to show an annual rate of around 2% for June, aligning with the European Central Bank’s target.

Earlier this month, the ECB cut rates for the eighth time in a year but signaled a likely pause at its next meeting due to ongoing trade uncertainties with the U.S.

Manufacturing purchasing manager indices for France, Germany, and the eurozone will be released later Tuesday, alongside remarks from central bank leaders at the ECB forum in Sintra, Portugal.

Pound Strengthens Despite Housing Data

The British pound gained 0.3% to 1.3764 versus the dollar, near a three-and-a-half-year high reached last week.

However, new data showed UK house prices fell 0.8% in June—a sharper decline than expected and the steepest monthly drop in over two years, according to mortgage lender Nationwide.

“Sterling could also face some political risk as Prime Minister Keir Starmer faces a backbench revolt over welfare reforms. The government has already been forced to make about £4bn of concessions to get the bill through – although its passage is not guaranteed. Any failure to get the bill through could hit sterling and gilts on the view that further concessions will have to be made at a time when there is no fiscal headroom,” ING analysts noted.

Safe-Haven Demand Supports Japanese Yen

In Asia, the Japanese yen strengthened, with USD/JPY dropping 0.7% to 143.06. The yen benefited from safe-haven flows after President Trump criticized Tokyo over its rice import policies and hinted at ending trade negotiations.

Japanese officials said on Tuesday they are still pursuing a tariff deal with the U.S., but remain firm on protecting the country’s agricultural sector.

Meanwhile, USD/CNY edged slightly down to 7.1624, near its strongest level since November, supported by positive manufacturing data. Tuesday’s Caixin PMI revealed China’s manufacturing sector returned to expansion in June, buoyed by a temporary tariff truce between Washington and Beijing.

Mpac Group’s (LSE:MPAC) stock plummeted 26.8% on Tuesday after the packaging and automation firm issued a warning about its revenue outlook. The company now anticipates that its fiscal 2025 revenue will fall well short of earlier projections.

Mpac pointed to ongoing tariff uncertainties as the primary reason behind postponed customer orders during the second quarter. These order delays are expected to negatively affect the company’s revenue performance in the latter half of the year.

British equities started Tuesday on a positive note, with the FTSE 100 index gaining 0.2%. The British pound also extended its upward momentum, surpassing the $1.37 mark against the US dollar. Meanwhile, major economic data revealed a notable drop in UK house prices for June.

At 07:23 GMT, the FTSE 100 showed modest gains, while Germany’s DAX index slid nearly 1%, and France’s CAC 40 dipped 0.2%.

Sainsbury’s Posts Nearly 5% Sales Growth in Q1

J Sainsbury plc (LSE:SBRY)reported a 4.9% rise in retail sales, excluding fuel, for the first quarter of 2025/26. Over the 16 weeks ending June 21, like-for-like sales (excluding fuel) grew by 4.7%. Grocery sales climbed 5%, and sales in general merchandise and clothing increased by 4.2%. Argos, a Sainsbury’s subsidiary, also saw a 4.4% boost in sales.

The company reaffirmed its full-year outlook, aiming for approximately £1 billion in underlying retail operating profit and over £500 million in retail free cash flow, noting that profits would be weighted more heavily in the latter half of the year.

UK House Prices Experience Sharpest Monthly Fall in Over Two Years

Mortgage lender Nationwide reported a 0.8% decrease in UK house prices in June, marking the steepest monthly drop in over two years. This decline surpassed economists’ predictions of a 0.2% increase and coincided with the expiration of a property transaction discount.

Retail Prices in UK Increase for the First Time in Nearly a Year

Shop prices across the UK rose 0.4% year-on-year in June, according to the British Retail Consortium, reversing a decline of 0.1% seen in May. This uptick was mainly driven by a 3.7% rise in food prices, the strongest annual increase since March 2024.

Aviva’s Acquisition of Direct Line Cleared by Regulators

In corporate news, UK competition authorities approved Aviva’s (LSE:AV.) £3.7 billion takeover of Direct Line (LSE:DLGD), which will establish the largest motor insurer in Britain. The Competition and Markets Authority confirmed it would not pursue further investigation into the deal.

Aviva (LSE:AV.)has received the green light from the UK’s competition authority to proceed with its purchase of fellow insurer Direct Line (LSE:DLGD), marking the final regulatory clearance needed to complete the £3.7 billion ($5.08 billion) transaction.

On Tuesday, the Competition and Markets Authority (CMA) announced it would not escalate the review to a more detailed phase-two investigation, following an initial assessment of the deal’s potential impact on competition within the UK insurance sector.

The acquisition officially closed on Tuesday, with shares of Direct Line expected to be removed from trading and canceled by Thursday.

Aviva, which also manages assets alongside its insurance business, had launched a formal bid for Direct Line toward the end of last year. This approval clears the path for the firms to move forward with their integration plans.

U.S. stock futures edged down Tuesday following a strong rally on Monday when global markets reached new intraday highs. Investors are now weighing developments in U.S.-Canada trade negotiations and a softer dollar, while preparing for important upcoming economic data later this week.

By early Tuesday morning (07:32 GMT), Dow futures were down 30 points (-0.1%), S&P 500 futures slipped 11 points (-0.2%), and Nasdaq 100 futures lost 56 points (-0.3%). Monday’s gains had been fueled by optimism around a potential restart of trade talks between the U.S. and Canada, although concerns linger over a massive tax and spending bill currently under debate in the Senate that could add significantly to the national debt, which already stands at $36.2 trillion.

Despite some headline-driven fluctuations during the day, analysts at Vital Knowledge noted, “there is limited immediate anxiety regarding either the reconciliation bill or tariff developments.”

Trump Intensifies Pressure on Fed Chair Powell

President Donald Trump ratcheted up his criticism of Federal Reserve Chair Jerome Powell on Monday, sending him a strongly worded handwritten letter urging a swift and substantial cut in interest rates. Along with the letter, Trump included a chart comparing interest rates set by central banks worldwide, arguing the U.S. should aim for borrowing costs around 1% or lower.

Trump’s message was clear: “As usual, too late,” he wrote, lamenting that the country is losing “hundreds of billions” due to the Fed’s current rate stance. This comes after the Fed decided last month to maintain rates between 4.25% and 4.5%, with Powell adopting a cautious wait-and-see approach amid uncertainties linked to Trump’s aggressive tariff policies.

Frustrated with what he views as a slow response compared to other central banks, Trump has launched repeated verbal attacks on Powell and is reportedly considering appointing a potential successor before the end of the year — a move that could undermine Powell’s authority, analysts say.

Powell to Speak at ECB Forum Amid Market Uncertainty

Jerome Powell will take center stage again Tuesday at a high-profile panel discussion during the European Central Bank’s annual forum in Sintra, Portugal. Alongside Powell will be ECB President Christine Lagarde and central bank leaders from Japan, the U.K., and South Korea.

The discussion is expected to touch on the evolving role of the U.S. dollar as the dominant global reserve currency, especially given its sharp decline this year—the worst start since the 1970s—largely driven by Trump’s protectionist trade stance.

Uncertainty will likely dominate the forum, as Lagarde noted in her opening remarks Monday, emphasizing that unclear direction on U.S. tariffs and the President’s fiscal plans remain major factors affecting the global economy.

U.S. Focuses on Narrow Trade Deals Ahead of Tariff Deadline

According to the Financial Times, the U.S. administration is shifting its trade strategy toward narrower, more targeted agreements to secure quick progress before a looming July 9 deadline, when punitive reciprocal tariffs could be reinstated.

Rather than pursuing the original goal of 90 broad trade agreements during the 90-day tariff pause that began April 2, officials are now seeking “agreements in principle” on limited issues with select countries. This approach aims to avoid tariffs as high as 50%, although a baseline tariff of 10% would remain while broader negotiations continue.

Trade talks remain complex, with the administration still weighing the possibility of imposing tariffs on key sectors even as it pursues these phased deals.

Oil Markets Remain Volatile Ahead of OPEC+ Meeting

Crude oil prices showed choppy trading, dropping after hitting a three-week low amid easing supply concerns and expectations of increased output from OPEC+.

At 03:38 ET, Brent crude futures were down 0.4% to $66.47 a barrel, having earlier hit their lowest point since June 11, just before the Israel-Iran conflict began. U.S. West Texas Intermediate futures fell 0.5% to $64.81 a barrel.

The OPEC+ group is scheduled to meet on July 6. Reuters reported last week that the alliance plans to boost production by 411,000 barrels per day in August, following similar increases in May, June, and July. This would bring total supply increases for the year to 1.78 million barrels per day, though still less than the volume of cuts implemented over the past two years.

Gold prices climbed sharply in Asian markets on Tuesday, driven by increased demand for safe-haven assets as investors grapple with uncertainty surrounding U.S. trade negotiations ahead of President Donald Trump’s looming July 9 tariff deadline. A softer U.S. dollar further boosted the precious metal’s appeal.

Spot gold gained 0.8%, reaching $3,328.71 per ounce, while August gold futures rose 1% to $3,339.70 by early Tuesday morning ET (06:10 GMT). This came on the heels of a 1.5% rise the previous day, recouping much of last week’s losses following the Israel-Iran ceasefire.

Safe-Haven Demand Rises as Tariff Deadline Approaches

The upcoming expiration of a 90-day tariff pause on July 9 has investors on edge. Since the pause began on April 2, the U.S. has finalized only two trade agreements—with China and the UK. Nations without a deal by the deadline risk having reciprocal tariffs reinstated, potentially up to 50%.

According to a Tuesday report by the Financial Times, U.S. trade officials are now focusing on narrower, more targeted agreements to secure quick progress before the deadline. The administration is also still weighing tariffs on several critical sectors.

Adding to market tensions, President Trump has threatened new tariffs on Japan, while U.S. Treasury Secretary Scott Bessent warned that despite ongoing negotiations, many countries could still face steep tariff hikes. Bessent expressed optimism that a flurry of trade deals might still be reached ahead of the cutoff.

This mix of uncertainty and potential for new tariffs has driven investors toward traditional safe-haven assets like gold.

Metals Markets React to Dollar Weakness and Positive Data

The U.S. Dollar Index remained weak during Asian trading, hovering near three-year lows, which supported gains in precious metals.

Silver futures inched up 0.4% to $36.00 per ounce, while platinum futures slipped 0.4% to $1,360.45. Copper also posted gains: London Metal Exchange copper futures rose 0.2% to $9,839.95 per ton, and U.S. copper futures climbed 1.2% to $5.1145 per pound.

The rally in copper was bolstered by a private survey revealing unexpected expansion in China’s Caixin manufacturing PMI for June. This improvement in trade conditions lifted sentiment in the world’s largest consumer of copper.

Oil prices dropped on Tuesday to their lowest point in three weeks, returning to levels last seen before the recent conflict between Israel and Iran. This decline is driven by easing worries over supply disruptions and anticipation of an upcoming production increase from OPEC and its allies.

Brent crude for September delivery dipped 0.3% to $66.57 per barrel, while West Texas Intermediate futures also fell 0.3%, settling at $63.64 per barrel as of 9:17 PM ET. Brent prices hit their lowest mark since June 11, just prior to the outbreak of hostilities in the Middle East.

A ceasefire agreement between Israel and Iran appears to be holding, helping to ease tension in the oil markets.

Investor attention is now focused on the Organization of the Petroleum Exporting Countries and its partners, collectively known as OPEC+, who are expected to convene later this week. The group is widely anticipated to continue its gradual rollback of production cuts that have been in place for two years.

Recent reports suggest that OPEC+ plans to boost output by approximately 411,000 barrels per day in August, following similar incremental increases in May, June, and July. This would bring the total increase for 2025 to around 1.78 million barrels per day. However, this production boost remains smaller than the volume cut by the alliance during the past two years.

The expected increase signals a shift towards raising supplies in response to sustained pressure from weaker oil prices. Leading producers within OPEC+, including Saudi Arabia and Russia, are also keen on maintaining discipline within the group to prevent excessive production that could further depress prices.

Meanwhile, market jitters persist over US trade policies, with the looming July 9 deadline set by President Donald Trump to secure new trade agreements. On Monday, Trump criticized Japan over its rice import policies and suggested that trade negotiations with Tokyo might be terminated.

US Treasury Secretary Scott Bessent also warned that, despite ongoing talks, some countries—including Japan and India—could face tariffs exceeding 20%. This has raised concerns that escalating trade tensions could dampen global economic growth and, consequently, reduce demand for oil.

Tesla Inc (NASDAQ:TSLA) experienced a notable decline in premarket trading on Tuesday, as tensions reignited between U.S. President Donald Trump and Tesla CEO Elon Musk. Trump accused Musk of receiving disproportionate government subsidies and called for a federal review of Tesla’s support.

According to 24-hour trading data from Robinhood (NASDAQ:HOOD), Tesla’s shares tumbled as much as 6.4%, falling to $297.35.

On his social media platform Truth Social, Trump urged the Department of Government Efficiency (DOGE) to investigate the extent of federal assistance granted to Tesla. He cautioned, “Elon may get more subsidy than any human being in history.”

Trump further asserted, “Without subsidies, Elon would probably have to close up shop and head back home to South Africa.”

Elon Musk responded swiftly on X, declaring, “I am literally saying CUT IT ALL. Now.”

The conflict between Trump and Musk largely centers on Musk’s vocal opposition to a sweeping tax and spending cut bill that Trump supports and which is currently under Senate consideration.

Musk’s objections focus on the bill’s potential to significantly increase federal debt and expenditures. He also warned that it could hinder his ongoing efforts with the Department of Government Efficiency to reduce government spending.

Independent analysis suggests that the bill could add $3.3 trillion to the national debt over the next decade if passed in its current form.

Musk has repeatedly condemned the legislation as overly large and inefficient. His stance was a key factor in a public fallout with Trump in early June, which culminated in Musk stepping down from his role at DOGE.