Money Flow & EU Premarket: Traders Avoid Weekend Risk Amid Caution – European Markets Set for Hesitant Open

Futures on U.S. and European indexes are trading with slight gains and no clear direction during the Asian session, as traders remain cautious ahead of the weekend, when senior officials from China and the U.S. are scheduled to meet in Switzerland. U.S. indexes ended yesterday’s session higher amid optimism over the upcoming talks with China. However, the full impact of the trade war may surface later this month or even in June. WTI crude oil continues its upward momentum, having surged on Thursday following the trade deal between the U.S. and the U.K. Equities are likely to remain supported after President Donald Trump encouraged investors to buy stocks, forecasting tangible progress in trade talks with China and hinting at the possibility of tariff reductions as a result. Such statements will be closely analyzed in the coming days. For now, it seems investors are betting that the worst days of the tariff dispute may be behind us.

Still, the last temporary trade truce during Trump’s first term required several rounds of prolonged negotiations. This history serves as a reminder to keep expectations realistic. The same applies to Thursday’s deal between the U.S. and the U.K., which leaves many areas still open for negotiation. In Asia, the trading week ends on a positive note, except for Chinese indexes, where economic data showed only limited impact from the trade war. Exports exceeded expectations, with shipments rising 8.1% year-on-year, surpassing the consensus forecast of a 2% increase. This may offer some relief to investors, considering that high-frequency indicators had pointed to a sharp decline in April. Furthermore, the effective tariff rate increased significantly by the end of March, and freight traffic to the U.S. collapsed in the second half of April. All of these factors pointed to weaker results, which were indeed reflected in U.S. data, where Chinese exports dropped 21% year-on-year.

Nonetheless, as with other international agreements, tariffs won’t disappear easily—duties on cars remain at 10%, and metal tariffs are at a standstill. Additionally, the finalization of trade deals takes time. It has also been noted that agreements with countries like South Korea and Japan may take significantly longer to finalize compared to framework arrangements with other partners. Negotiations are likely to be long and complex, as they were during Trump’s previous administration. Tangible progress in U.S.–China talks could lead to a reduction in punitive tariffs, which would be crucial for overall market sentiment. Therefore, investors will cling to any positive news, especially if there is a delay or reduction in excessive tariffs. But the risk of a decline in global markets increases if no clear results are achieved.