Introduction: Stock markets cheer US-Japan trade deal
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Financial markets are cheering the news that Donald Trump has announced a trade deal with Japan.
Stocks are surging in Tokyo, where the Nikkei index has jumped by 3.75% and the wider Topix has rallied by 3.55%.
Other markets across Asia-Pacific are also higher, while the relief rally could drive Britain’s FTSE 100 to a new record high when trading begins.
Nikkei jumps and Yen gains as #Japan‘s assets enjoy relief from US trade agreement. The headline 15% reciprocal tariff is a considerable discount from the 25% in the letter earlier this month. Toyota shares rising as much as 10% after NHK reported the US would impose a tariff… pic.twitter.com/Mi24v5uME8
— Holger Zschaepitz (@Schuldensuehner) July 23, 2025
Under the deal, Japanese goods will incur a 15% tariff at the US border, below the 25% level which Trump had threatened to impose from 1 August earlier this month (but still above Trump’s ‘baseline’ tariff of 10%)
Announcing the deal, Trump declared on Truth Social:
We just completed a massive Deal with Japan, perhaps the largest Deal ever made. Japan will invest, at my direction, $550 Billion Dollars into the United States, which will receive 90% of the Profits. This Deal will create Hundreds of Thousands of Jobs — There has never been anything like it.
Perhaps most importantly, Japan will open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things.
The breakthrough is lifting hopes that more countries will reach trade deals with the US, and avoid the hefty tariffs threatened by Trump
Tony Sycamore, market analyst at IG, explains:
While the details of the Japan trade deal are still limited and there may be some disagreement from the Japanese side, on face value, the deal announced this morning appears to be a positive outcome for markets overall, as it is well below the 25% level previously threatened.
Furthermore, this morning’s trade deal with Japan becomes the sixth US trade agreement in recent months, following deals with Britain, Vietnam, the Philippines, Indonesia, and China. US Treasury Secretary Scott Bessent is scheduled to meet with his Chinese counterpart next week to discuss extending the August 12 deadline for tariffs on Chinese imports. Reaching an agreement there would significantly help to defuse the impact and lessen the importance of the August 1 deadline.
Trade deal progress with the EU before the August 1 deadline would make the date a non-event.
The agenda
-
9.30am BST: Supreme Court to rule on appeal against LIBOR and EURIBOR convictions of Tom Hayes and Carlo Palombo
-
Noon BST: US weekly mortgage approvals data
-
3pm BST: US new home sales
Key events
Deutsche Bank: Tariff risks remain…
The US-Japan trade deal has helped to ease investor fears that tariffs are about to snap back higher on 1 August, reports Jim Reid, market strategist at Deutshe Bank.
1 August is the latest in a series of deadlines set by Donald Trump for trade partners to reach deals, before higher tariffs kick in.
Reid adds, though, that trade war risks remain:
But of course, the threat of much higher tariffs still remains for several large economies, including the 30% on the EU, 35% on Canada and 50% on Brazil.
And there’s also the pledge of higher sectoral tariffs, including 50% on copper, so this is far from the end just yet, and those tariffs would each have a significant impact if they did come in.
We also know from experience that we might not know the outcome until hours before the deadline, which happened in early February where the 25% tariffs on Canada and Mexico were postponed for 30-days on the day before they were due to be implemented.
Shares in European car makers, and luxury firms, jump
Shares in European car manufacturers are roaring higher in early trading, as the US-Japan trade deal renews hopes that Brussels can reach an agreement with Washington DC.
Porsche (+7%), Mercedes-Benz (+5.5%) and Volkswagen (+5.5%) are leading the risers on Germany’s DAX share index.
In Paris, Stellantis (+5.3%) and Renault (+2.9%) are the top risers on the CAC 40 index.
Luxury goods makers are also in demand, such as fashion-to-champagne firm LVMH (+2.2%) and Kering (+2.8%), which owns brands including Yves Saint Laurent and Gucci.
The US-Japan trade agreement has “changed the mood” in the markets, says Kathleen Brooks, research director at XTB:
The Cac 40 is higher by more than 1%, as luxury companies and Airbus lead the index higher. These companies are most exposed to US tariffs and are reacting to any hint that tariffs could be milder than expected.
German car makers are also higher, as hopes rise for lower tariffs. BMW and Volkswagen are some of the top performers on the Eurostoxx 50 index, as hopes rise for Europe to achieve a similar deal to Japan especially on auto levies
Global markets are in a “buoyant mood” after the US and Japan secured a trade deal, reports Neil Wilson, UK investor strategist at Saxo Markets, adding:
It’s unclear right now if the positive news on the Japan trade deal means anything material for Europe striking a trade deal with the US – you would think that it does, and European stock markets are taking their clues from Japan this morning, rising sharply on the hope that the Japan deal means the EU is about to achieve the same.
After slipping 1% yesterday the DAX firmed up by the same margin to around 24,300, led by carmakers, while the CAC in France also rose more than 1% as luxury stocks were buoyed on the news, too.
European markets rally too
Stock markets have risen across Europe in early trading.
In Paris, the CAC 40 has gained almost 1.2%, while Germany’s DAX has risen by 0.8% in Frankfurt.
Italy’s FTSE MIB has gained 1.1%, and Spain’s IBEX is 0.5% higher.
FTSE 100 hits record high amid trade war relief
Boom! Britain’s main share index has hit a fresh record high, amid the market relief over the US-Japan trade deal.
The FTSE 100 share index has opened almost 0.5% higher, gaining 44 points to 9068 points, a fresh intraday high.
Firms exposed to tariff risks, including pharmaceuticals firms AstraZeneca (+1.7%) and GSK (+1.5%), and drinks maker Diageo (+1.6%) are aong the top risers.
It’s just a week since the ‘Footsie’ hit the 9,000 point for the first time. It has gained more than 10% so far this year, outpacing the US stock market.
A range of factors have pushed shares in London higher. Some investors have been diversifying away from Wall Street, while others have been seeking out sectors such as financial services and commodity-linked companies.
A boom in military spending has pushed up defence company stocks this year too.
Japan’s currency has also weakened a little today, despite the trade deal relief.
The yen has dipped by 0.2% today, to ¥146.9 to the dollar, amid the uncertainty over prime minister Shigeru Ishiba’s future.
Equity markets around the world are rallying following the US-Japan trade deal, on the view that deals reduce uncertainty.
The yen, however, is less certain of what this all means – especially given the prospect of an imminent resignation from PM Ishiba. https://t.co/thEpJs4Ewu
— ING Economics (@ING_Economics) July 23, 2025
Demand for long-dated Japanese bonds hits 14-year low on PM resignation fears
While shares are rallying, there’s more nervousness in the Japanese bond market after a disappointing debt auction today.
A sale of a Japanese 40-year government bond auction attracted the weakest demand since 2011.
The bid-to-cover ratio, a measure of demand, fell to 2.127, compared to 2.214 at the previous auction. That means today’s auction was still technically successful, as Tokyo received bids for twice as much debt as was available, but it also indicates weakening demand for Japan’s debt.
The auction came amid swirling speculation that prime minister Shigeru Ishiba could soon resign, despite nailing the US trade deal.
Ishiba’s position has been shaky since his coalition lost its upper house majority in elections last weekend.
Japan’s Mainichi newspaper has reported that Ishiba would announce his resignation as prime minister by the end of next month.
Both the Philippines and Indonesia also reached trade deals with the US yesterday.
The US president announced a new 19% tariff rate for goods from the Philippines on Tuesday, after a visit to the White House from Philippine president Ferdinand Marcos Jr. Trump said there would be no tariffs from the Philippines on US goods.
Later, the White House confirmed the same 19% tariff rate for Indonesia, down from an initial 32%, as it released terms of a deal reached last week that calls for Indonesia to eliminate tariff and non-tariff barriers on most US goods.
Japanese auto shares surge on tariff deal
Shares in Japan’s carmakers have soared, on relief that a trade deal with the US has been reached.
Japan’s prime minister Shigeru Ishiba revealed overnight that auto tariffs on Japanese cars will be cut to 15% under the agreement, without any quota on the number of imports.
Toyota’s share price has jumped by 14.5%, Honda are up 10.8%, Subaru rose by 16.8% and Mazda gained 17.75%.
Introduction: Stock markets cheer US-Japan trade deal
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Financial markets are cheering the news that Donald Trump has announced a trade deal with Japan.
Stocks are surging in Tokyo, where the Nikkei index has jumped by 3.75% and the wider Topix has rallied by 3.55%.
Other markets across Asia-Pacific are also higher, while the relief rally could drive Britain’s FTSE 100 to a new record high when trading begins.
Nikkei jumps and Yen gains as #Japan‘s assets enjoy relief from US trade agreement. The headline 15% reciprocal tariff is a considerable discount from the 25% in the letter earlier this month. Toyota shares rising as much as 10% after NHK reported the US would impose a tariff… pic.twitter.com/Mi24v5uME8
— Holger Zschaepitz (@Schuldensuehner) July 23, 2025
Under the deal, Japanese goods will incur a 15% tariff at the US border, below the 25% level which Trump had threatened to impose from 1 August earlier this month (but still above Trump’s ‘baseline’ tariff of 10%)
Announcing the deal, Trump declared on Truth Social:
We just completed a massive Deal with Japan, perhaps the largest Deal ever made. Japan will invest, at my direction, $550 Billion Dollars into the United States, which will receive 90% of the Profits. This Deal will create Hundreds of Thousands of Jobs — There has never been anything like it.
Perhaps most importantly, Japan will open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things.
The breakthrough is lifting hopes that more countries will reach trade deals with the US, and avoid the hefty tariffs threatened by Trump
Tony Sycamore, market analyst at IG, explains:
While the details of the Japan trade deal are still limited and there may be some disagreement from the Japanese side, on face value, the deal announced this morning appears to be a positive outcome for markets overall, as it is well below the 25% level previously threatened.
Furthermore, this morning’s trade deal with Japan becomes the sixth US trade agreement in recent months, following deals with Britain, Vietnam, the Philippines, Indonesia, and China. US Treasury Secretary Scott Bessent is scheduled to meet with his Chinese counterpart next week to discuss extending the August 12 deadline for tariffs on Chinese imports. Reaching an agreement there would significantly help to defuse the impact and lessen the importance of the August 1 deadline.
Trade deal progress with the EU before the August 1 deadline would make the date a non-event.
The agenda
-
9.30am BST: Supreme Court to rule on appeal against LIBOR and EURIBOR convictions of Tom Hayes and Carlo Palombo
-
Noon BST: US weekly mortgage approvals data
-
3pm BST: US new home sales
