EU Trade Deal Pushes Stocks to Another Record, but Cautiously This Time: July 28, 2025

The EU and US trade deal announcement has stocks cautiously marking fresh all-time highs against the backdrop of critical economic events and paramount earnings reports in the next few days. New records for the S&P 500 and Nasdaq 100 benchmarks arrive prior to this week’s monumental profitability updates from four of the magnificent 7 constituents as well as a pivotal Fed rate decision, the first read on second-quarter GDP, and a plethora of labor, inflation and consumption data. Meanwhile, participants are growing increasingly confident about progress on the cross-border commerce front, in light of several agreements sealed with top partners. And there’s speculation that President Trump will extend deadlines on Beijing and Moscow to build a more comprehensive settlement with the former while seeking peace in Ukraine with the latter. Investors are responding to the mix of news by hesitantly scooping up equities while volatility protection instruments also catch bids in case there are negative surprises in a heavy week ahead. The greenback and forex forecast contracts are seeing strong interest too as traders cheer international collaboration while the US currency is additionally being bolstered by a bear flattening yield curve as rates climb led by the long-end on firmer global growth projections. And as Treasuries are trimmed, so are bitcoins and the major commodities minus crude oil, which is strengthening as the White House may provide Putin with more time to reach a truce in Kyiv while threatening significant tariffs.

Treasury to Focus on Bills

On a relatively quiet day for the economic calendar, we will see the US Treasury’s refunding financing estimates this afternoon. I’m expecting auction sizes to arrive steady in an effort to quell concerns related to substantial issuance. But an emphasis on shorter-term bills is poised to remain the strategy as a way to reduce pressure at the long-end of the curve. Indeed, an avoidance of offering heavy volumes of longer duration limits the potential for a bond sale to experience reduced demand, thereby incrementally fostering market stability. Meanwhile, significant tariff revenues have been a pleasant surprise that are helping to subdue the country’s fiscal deficit; however, lighter costs of capital are likely needed prior to Secretary Bessent and his team moving to extend the maturity profile of the nation’s debt.

International Roundup

Hong Kong Trade Deficit Grows

Hong Kong’s exports of goods grew for the 16th consecutive month in June, but its trade deficit was the largest since January 2024. Strong demand from other Asian trading partners pushed shipments to foreign markets up 11.9% year over year (y/y), a deceleration from 15.5% in May. Demand from Asian countries climbed 17.2%, led by Malaysia, the Philippines, Vietnam and mainland China with exports to those destinations climbing 52.6%, 48.3%, 37.6% and 18.3%. The value of shipments to the Netherlands and the US, however, fell 35.5% and 12.1%. Categories that experienced the strongest demand from foreign buyers included electrical machinery, apparatus and appliances, and electrical parts, up 20.2%, and office machines and automatic data processing machines, which ascended 10.4%.

Meanwhile, imports expanded 11.1%, slowing from 18.9% in May. Vietnam, the UK, and Mainland China accounted for the largest increases, with their exports to Hong Kong climbing 50.6%, 44.7%, and 17.3%. Conversely imports from Korea sank 27.1%.

Hong Kong’s trade deficit in June grew from $27.3 billion to $58.9 billion. It was the largest trade deficit since January 2024, when imports outpaced exports by $59.9 billion.

China’s Industrial Profits Continue to Fall

Producer price deflation, a subdued economy and weak domestic demand caused China’s industrial profits to sink 4.3% y/y in June, easing from the 9.1% drop in the preceding month.

For the first six months of 2025, profits were down 1.8% year-to-date (ytd) compared to the 1.1% fall from January to May.

For the ytd period, state-owned enterprises were the biggest laggards, recording earnings that descended 7.6%. Private company results were 1.7% higher and foreign companies enjoyed a 2.5% gain.

The earnings decline comes as Chinese officials have pledged to clamp down on aggressive price cutting and are trying to stimulate the country’s economy with a trade-in program for items such as appliances and autos. They have also sought to lower mortgage rates and expanded fiscal stimulus, among other measures.

Canada Wholesalers’ Growth Picks Up

Canada wholesale transaction grew 0.7% month over month (m/m) in June, up from the nearly flat 0.1% May print, according to preliminary data for Statistics Canada. June reversed a three-month trend of declining activity ranging from 0.4% to 2.3%.

The print, which excludes petroleum, petroleum products, and other hydrocarbons, depicted growth in five of seven subsectors.