Stocks Slip After Record Quarter as Trade, Tax Tensions Resurface – Europe Market Wrap
US equity futures retreated slightly after the S&P 500 notched its best quarter since 2023, as investors monitor progress on trade talks and wrangling in Washington over President Donald Trump’s tax bill.
Contracts for the US benchmark slipped 0.2% following two successive closes at a record high. European stocks also dipped. Tesla Inc. fell more than 4% in premarket trading after Trump again threatened to withdraw subsidies from Elon Musk’s companies.
Stock bulls have seized control of a market that was rattled by Trump’s trade overhaul, a war in the Middle East and persistent uncertainty over growth and inflation. Yet unpredictability persists, with US trade talks racing toward a July 9 deadline and Trump pushing to finalize a budget that’s projected to add more than $3 trillion to the US deficit over the next decade.
US Treasuries extended Monday’s late rally, with the 10-year yield declining three basis points to 4.19% as investors increased wagers on the scale of potential Federal Reserve interest rate cuts this year. Rising expectations for policy relief are also weighing on the dollar, which fell 0.3% on Tuesday.
While economists are widely expecting Trump’s tariffs to drive inflation higher, subdued price growth so far has cast doubt on that view, emboldening the White House and increasing its pressure on Fed Chair Jerome Powell.
Although the Fed has so far held off on cutting interest rates, two governors have recently publicly diverged from Powell, suggesting a reduction could be appropriate as early as July.
Swaps imply at least two quarter-points of monetary easing by the end of the year, with an about 65% chance of a third cut by December.
The euro is on the verge of its longest winning streak against the greenback in more two decades. The common currency gained as much as 0.4% to $1.1829, and a higher close would extend its rally to a ninth straight day, the longest stretch since 2004.
Powell and other top central bankers are set to discuss monetary policy at the European Central Bank’s annual retreat later on Tuesday in Portugal. Also on investors’ radar is a slew of economic data, including a wave of PMI readings and the US job openings report ahead of Thursday’s nonfarm payrolls.
