Wall Street Waits for Trade Deals to Unlock Further Upside: July 7, 2025

Markets are tilting to a risk-off posture as participants brace for the chance of Trump tariff-sparked turbulence in the coming hours and days. Indeed, the US President threatened a 10% import tax on any nation uniting with the “Anti-American” agenda of BRICS, the intergovernmental organization led by Brazil, Russia, India, China and South Africa. Meanwhile, the July 9 deadline marking the 90-day break of the Commander in Chief’s reciprocal levies announced in early April is approaching this Wednesday, but there will be some additional flexibility since the duties are scheduled to be implemented on August 1. The White House is expected to announce wide ranging trade deals imminently as Secretary Bessent signals the potential for closed agreements with 18 top partners. He told CNBC he expects several frameworks to be publicly declared in the next 48 hours and I believe equity and fixed-income assets alike are poised to rally following a few settlements as each incremental accord removes a cloud of uncertainty from the economic landscape.

Markets Bearish for Now

But on a quiet day from a stateside calendar perspective, stocks and rates are waiting for evidence from Washington before adding to their year-to-date gains. Investors are indiscriminately trimming shares from all 11 major equity sectors while also reducing Treasury holdings with a long-end bias, as the yield curve ascends in bear-steeping fashion led north by duration. Similarly, ex-energy commodities and bitcoin are facing selling pressure as traders worry about the possibility that cross-border commerce arrangements won’t go as smoothly as the Oval Office anticipates. Conversely, the greenback, volatility protection instruments and forecast contracts as well as natural gas and crude oil futures are catching bids today.

Wide Path for Continued Rally from Here

With investors awaiting progress on trade policy before adding to stock and Treasury holdings and Secretary Bessent pointing to the potential for a plethora of deals in the double-digits being announced shortly, there’s a wide path for markets to rally from here. The conditions for further upside are even more favorable considering the passing of the GOP’s signature taxation bill last week, which left out a lot of the Elon Musk supported austerity initiatives that would have weighed on short-term economic performance and risk asset momentum. Cross-border commerce settlements with major jurisdictions from a global share of gross domestic product perspective are likely to be the most fruitful for a bullish recovery, with the EU, India, Japan and South Korea top of mind for traders and economists alike. Indeed, agreements with the world’s largest economies are poised to bolster confidence, remove significant uncertainties, support growth, limit inflationary pressures and pave the way for animal spirits to thrive into year-end as a result.

International Roundup

Europe Retails Sales Plummet

Eurozone retail sales were down 0.7% in May relative to the preceding month but were still up 1.8% compared to the year-ago period, according to Eurostat. The median economist forecast called for a 0.8% m/m dip following April’s 0.3% growth. The forecast also expected sales to be up 1.2% year over year (y/y) after a 2.7% expansion in April. The weak results are believed to have been driven by uncertainty about tariffs.

But Sentiment Improves in June

Strengthening of the eurozone economy pushed market participants’ attitudes upward last month with the Sentix Investor Confidence Index moving from 0.2 to 4.5 and exceeding the consensus forecast of 1.1. 

Wages in Japan Fall for Fifth Consecutive Month

Real wages in Japan sank in May y/y for the fifth consecutive month and at the fastest pace in more than four years, according to the Ministry of Labor. After sinking 2% y/y in April, wages in May declined 2.9%, considerably worse than the economist consensus estimate for a 1.7% drop. Nominal wages, which don’t reflect the impact of inflation, rose only 1% y/y, falling below the 2.4% gain estimated by economists and April’s 2% climb. Also in May, the total number of hours worked dipped 1.9%, a slightly faster decline than April’s 1.3% descent, while overtime pay climbed 1%, down from 1.3% in the preceding month. The labor market data come as Prime Minister Shigeru Ishiba and the Liberal Democratic Party prepare to seek re-election during 17-days of polling starting July 20 for the upper house of the Diet. In a related matter, Bank of Japan policymakers will meet on the last day of this month to discuss if they should continue to normalize monetary policy.

As Country’s Leading Indicator Strengthens

The Japan Leading Index climbed 1.1% month over month (m/m) in May after falling 3.4% during the fourth month of the year. Conversely, the Coincident Index pointed to current conditions weakening with the metric falling 0.1%. It climbed 0.2% in April.

UK Home Prices Are Flat

UK residential real estate prices, having been hit with the one-two punch of an expired tax break and an increase in sellers, were flat m/m in June following a May decline of 0.3%, according to Halifax. A consensus of economists anticipated a 0.1% fall. For the y/y print, prices were up 2.5% after heading north 2.6% in May.