Investing.com - Markets seem to be more encouraged that a clarity to longstanding uncertainty around aggressive U.S. tariff policy could soon emerge, according to analysts at Barclays.
Even with unexpectedly solid labor market figures and President Donald Trump’s sprawling policy bill now in the rearview mirror, a lack of clarity around U.S. trade plans has dampened an otherwise upbeat vibe in markets heading into the Fourth of July weekend.
Attention is now turning to the upcoming expiration of a pause to Trump’s sweeping "reciprocal" levies on July, with investors unclear over how the president will approach the deadline.
Despite claims at the beginning of the 90-day delay that the Trump administration would pursue individual trade deals with dozens of countries, Washington has only revealed framework pacts with three nations: China, Britain and, earlier this week, Vietnam. Trump has suggested that a "couple" more could soon be revealed.
But Trump has appeared to pivot away from the goal of securing a series of these agreements, saying that he will start sending letters out to trading partners on Friday specifying what tariff rates they will incur on imported goods into the United States.
He seemed to acknowledge the difficulty of negotiating trade deals with as many as 170 countries, saying "they’re very much more complicated."
Writing in a note to clients, the Barclays analysts led by Emmanuel Cau argued that while "formal progress" on trade talks has been limited and few "concrete deals struck," there is still room for the deadline to be extended or more incremental pacts to be forged. These could help lead to further de-escalation in recent trade tensions "down the road," they said.
"[M]arkets appear increasingly hopeful the endgame is in sight," they wrote, noting that European equities exposed to tariff risks have recovered in recent days.
Trades on so-called European "momentum" stocks, or regional names experiencing a sustained trend in either an upward or downward direction, have also been hit, the analysts said.
"[P]ositioning remains heavily skewed towards the domestic names -- a trend that has defined much of the year. This has made any rotation toward exporters particularly painful, as momentum is largely aligned with the domestic and defensive bias," they said.
"As a result, the recent shift away from domestic leaders is beginning to weigh on the momentum factor, which we flagged as particularly stretched last month."
Against this backdrop, they recommended that investors "cautiously" readjust their positioning in European equities as tariff risks ease and "global green shoots" set currently rangebound EU stocks up for a break-out in the second half of 2025.