Bloomberg Daybreak Europe: US-UK Trade Deal Begins (Podcast)

President Trump's country-specific tariffs are set to resume, while Canada withdrew its digital services tax to restart US trade talks. Domestically, Senate Majority Leader Thune faces Republican opposition on a massive tax and spending bill, and a buyer for TikTok's US operations has been identified. Significantly, European stocks recorded their largest dollar-terms outperformance against US peers on record in the first half, signaling a major market resurgence for the region after a decade of underperformance.

Analysis

A significant rotational shift in global equity markets is underway, evidenced by European stocks outperforming their US peers by the largest margin on record in dollar terms during the first half. This marks a potential turning point for the region's markets after more than a decade of underperformance. This macro trend contrasts with a complex US policy environment, where the White House is poised to resume country-specific tariffs in 10 days, having fallen short of its broader trade reform goals. In a positive development for specific US technology firms, Canada has withdrawn its digital services tax on companies including Meta Platforms and Alphabet, a move designed to restart trade talks and which removes a notable regulatory and financial headwind for these entities. Domestically, the legislative agenda faces hurdles, as a major tax and spending bill is encountering opposition from approximately eight Republican senators, casting doubt on its passage by the target July 4 deadline. Finally, in the M&A space, President Trump's announcement that a buyer has been identified for TikTok's US operations reduces a key source of uncertainty for the social media sector, though the final outcome remains pending.

Key Decisions for Investors

• Given the record outperformance of European equities, investors should review their geographic allocation and consider increasing exposure to European markets to capitalize on this significant trend reversal.
• The removal of Canada's digital services tax is a direct positive for Meta and Alphabet, potentially warranting a re-evaluation of positions in these names as a key international regulatory risk has been eliminated.
• Monitor US trade policy announcements closely, as the imminent resumption of tariffs could reintroduce volatility and negatively impact sectors with high international exposure.
• Investors should temper expectations for a large, swift US fiscal package due to legislative opposition, and watch for developments that could influence domestic-facing industries.