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 ( LMT )

and General Dynamics ( GD ) 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