A look at the day ahead in European and global markets from Wayne Cole

As far as investors are concerned, Japan's upper house election has been a sell on the rumour, buy (a little) on the fact.

Japanese markets are closed for the Marine Day public holiday so liquidity has been lacking, but so far the yen is up a shade on the dollar and euro while Nikkei futures traded in Chicago are much in line with Friday's cash close. Wall Street futures are up a fraction and European futures down a touch.

While the ruling coalition lost control of the upper house, by three seats, Prime Minister Shigeru Ishiba seems to be safe for now, though he will have to find support from minor parties to pass legislation.

The government can also continue its fraught tariff negotiations with the U.S. administration. The talks still seem deadlocked, partly over agricultural imports which are politically and culturally very sensitive for Japan, as President Donald Trump's arbitrary August 1 deadline approaches fast.

The European Union is in much the same situation. U.S. Commerce Secretary Howard Lutnick says he's confident a deal can be struck, but the EU side is preparing a list of U.S. products for retaliation levies.

The EU is also trying to use China as leverage with Commission President Ursula von der Leyen and Council President Antonio Costa meeting with President Xi Jinping there on Thursday.

Meanwhile, reports suggest Trump might meet Xi sometime in October or November, with the U.S. already having allowed the export of chips to China apparently in return for a resumption of rare earth shipments.

Markets are assuming the worst will be avoided on tariffs, though analysts suspect the effective U.S. tariff rate could well be a bit above the 1930's levies that contributed so much to the Great Depression.

Much of that optimism rests on earnings with the first of the mega caps reporting this week in the shape of Alphabet and Tesla. Results from Lockheed Martin and General Dynamics should also confirm the windfall from a ramp up in global defence spending.

The diary for the rest of Monday is virtually blank, but there's always Trump to watch.

Key developments that could influence markets on Monday:

- No major data or central bank speakers