- US equities rose and S&P500 ended the week higher for the sixth consecutive week.
- EU leaders managed to reach a seven-year budget deal.
- Most markets in Asia are closed due to public holidays.
Friday night, European Union leaders reached a seven-year budget agreement that for the first time cut expenses compared to the last multiannual framework. The agreement means that baseline payments will be reduced by EUR38bn compared to the previous seven-year budget plan to a total of EUR908bn. The deal also includes a significant shift in spending priorities with fewer subsidies for farmers, while funding for infrastructure projects and programmes to fight youth unemployment will rise substantially. The deal is seen as a victory for the UK and the Netherlands who insisted on sharp cuts in expenditures, while Denmark won a refund of around EUR130m. The deal must now be approved by the European Parliament. This process is likely to take several months and an approval is far from guaranteed.
US equity markets continued to rise on Friday as the US trade deficit declined to the smallest in almost three years and EU leaders managed to settle a budget deal. S&P500 rose 0.6% while Dow Jones ended the day 0.4% higher. The ongoing earnings season has been especially positive for US equities and it was the sixth consecutive week where S&P 500 ended higher. According to Bloomberg, around 75% of the S&P 500 companies that so far have released results have exceeded profit estimates, while 67% have topped sales estimates.
In Asia many equity markets are closed for public holidays today and overnight trading volume has been lower than normal. Markets in China, Japan and Hong Kong, Taiwan, South Korea, Singapore and Malaysia are closed today.
In the FX markets there has been very little activity. Over the weekend, EUR/USD took a sudden dive from 1.3360 to 1.3325 in a very thin market without any news related. However, EUR/USD has recovered from the drop and is currently seen trading around 1.3375, almost where it was when the European trading session ended Friday afternoon.
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