Key Facts
• On July 4, German 2-year bond yields fell 3 basis points to 1.80%, lowest since June 13.
• German 10-year bond yields dropped 1 basis point to 2.60% amid safe-haven demand.
• European Central Bank rate cut expectations increased, with 27 basis points priced in for 2025.
• UK bond yields rose approximately 1 basis point across the curve.
• STOXX Europe 600 Index fell 0.5% after hitting an intraday low of 0.9%.
• US-EU trade talks remain uncertain ahead of the July 9 tariff deadline.
• President Trump announced new tariffs effective August 1, pressuring trade-sensitive stocks.
• Swiss pharmaceutical firms Novartis (+1.4%) and Roche (+0.9%) gained on potential US-Switzerland trade deal.
• Mining and auto stocks declined, while healthcare and telecom stocks showed resilience.
Summary
European markets on July 4 reflected risk-off sentiment as the US-EU tariff deadline approached. German bonds saw gains, with 2-year yields dropping to 1.80%, the lowest since mid-June, while 10-year yields fell to 2.60%. The European Central Bank’s potential rate cuts further influenced short-term financial markets. UK bonds weakened slightly, with yields rising by 1 basis point. Stocks in Europe declined, with the STOXX Europe 600 Index closing 0.5% lower, driven by trade uncertainties and President Trump’s announcement of new tariffs starting August 1. Swiss pharmaceutical companies Novartis and Roche outperformed, benefiting from reports of a US-Switzerland trade deal exempting Swiss pharmaceutical exports from tariffs. Meanwhile, trade-sensitive sectors like mining and automotive suffered losses, while defensive sectors such as healthcare and telecoms remained stable.
