LONDON (Reuters) - What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Finance and Markets

What had been a quiet week in markets was electrified by a U.S.-Japan trade deal overnight, catapulting Japan's Nikkei stock index up more than 3% to its best level in a year, prodding Japanese 10-year yields to their highest point in almost 17 years by nudging the yen up.

The deal - which cuts planned U.S. tariffs on Japanese goods to 15% from 25% in return for $550 billion of Japanese investments and loans in America - drove a spike in auto stocks worldwide, with Toyota's share price jumping 14%. Separately, local media reports said Japan's embattled Prime Minister Shigeru Ishiba may now resign after all following poor weekend election results. He later denied that.

* The agreement with Japan spurred hopes for other major deals before next week's tariff deadline, lifting European bourses too. Meanwhile, futures on record high Wall Street stock indexes rose further, and the dollar weakened broadly.

* With the focus on what other deals might happen before the August 1 tariff deadline, U.S. President Donald Trump said representatives from the European Union are due for trade negotiations with the United States on Wednesday and Treasury Secretary Scott Bessent said U.S. and Chinese officials will meet in Stockholm next week.

* Wall Street now switches back to earnings season, with two of its so-called "Magnificent Seven" megacap firms - Alphabet and Tesla - reporting after the bell on Wednesday. The performance of the former, in particular, will test the durability of the artificial intelligence theme that's still having profound effects on the whole economy.

Today I'll take a look at just how the AI boom - and the data center and infrastructure boom around it - is still flattering U.S. GDP growth.  

Today's Market Minute 

* U.S. President Donald Trump struck a trade deal with Japan that lowers tariffs on auto imports and spares Tokyo from punishing new levies on other goods in exchange for a $550 billion package of U.S.-bound investment and loans.

* European shares climbed on Wednesday, buoyed by hopes of a trade agreement between the European Union and United States after Trump's deal with Japan sent Japanese stocks to a one-year high.

* China has broken ground on what it says will be the world's largest hydropower project, a $170 billion feat capable of generating enough electricity each year to power Britain.

* Wall Street's concentration in the red-hot tech sector is, by some measures, greater than it has ever been, eclipsing levels hit during the 1990s dotcom bubble. ⁠ROI markets columnist Jamie McGeever asks if this means history is bound to repeat itself.

* The first half of 2025 featured a slew of U.S. electricity and power milestones, with generation, demand and retail prices all scaling records during January to June. Get the key data points from ROI columnist Gavin Maguire. 

Chart of the day

In the trade deal announced late Tuesday, Japan's auto sector, which accounts for more than a quarter of its U.S. exports, will see existing tariffs cut to 15% from levies totaling 27.5% previously. Duties that were due to come into effect on other Japanese goods from August 1 will also be cut to 15% from 25%. Two-way trade between the two countries reached nearly $230 billion in 2024, with Japan running a trade surplus of nearly $70 billion. Japan is the fifth-largest U.S. trading partner in goods.

Japan's side of the deal involves U.S. investments and includes loans and guarantees from Japanese government-affiliated institutions of up to $550 billion to enable Japanese firms "to build resilient supply chains in key sectors like pharmaceuticals and semiconductors," according to Prime Minister Ishiba. Japan is the largest foreign investor in the United States, with an investment position of $819 billion at the end of 2024. Japan will also increase purchases of agricultural products such as U.S. rice, a U.S. official said. 

Today's events to watch

* U.S. June existing home sales (10:00 AM EDT); Canada June house price index (8:30 AMEDT ); euro zone July consumer confidence (10:00 AM EDT)

* U.S. corporate earnings: Alphabet, Tesla, IBM, AT&T, General Dynamics, Boston Scientific, CSX, CME, Thermo Fisher Scientific, Hilton, Otis, Chipotle, Northern Trust, Moody's, Hasbro, Fiserv, Lamb Weston, Teledyne, O'Reilly Automotive, Globe Life, Crown Castle, NextEra, Las Vegas Sands, Packaging Corp of America, Rollins, Lennox, United Rentals, Molina Healthcare etc

* U.S. Treasury sells $13 billion of 20-year bonds

* German Chancellor Friedrich Merz hosts French President Emmanuel Macron for talks in Berlin

* UK Prime Minister Keir Starmer and India's Prime Minister Narendra Modi meet in London

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