Evening Briefing: Europe

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US President Donald Trump put the odds of striking a trade deal with Europe to reduce the tariff rate on their imports at 50-50.

But, in a signal of how quickly fortunes can turn in the trade negotiations, Trump then said US and EU negotiators were working “closely” to strike a deal and predicted an agreement could come to fruition.

Diplomats from the trading bloc, meanwhile, have expressed optimism in recent days that an agreement could be near. —Caroline Alexander

What You Need to Know Today

The risk of a bubble in stock markets is rising as monetary policy loosens alongside an easing in financial regulation, according to Bank of America strategists. The team said the world policy rate has fallen to 4.4% from 4.8% in the past year as central banks in the US, UK, Europe and China slashed borrowing costs. The rate is forecast to drop further to 3.9% in the coming 12 months. Also, policymakers are considering regulatory changes to boost the share of retail investors in the US. “Bigger retail, bigger liquidity, bigger volatility, bigger bubble,” Michael Hartnett wrote in a note.

Iranian and European diplomats met today in Istanbul, and agreed to continue talks on sanctions and Tehran’s nuclear program. About a month ago the US bombed three key nuclear sites in Iran, triggering a break in international inspections of its atomic activities and raising questions over the location of its stockpile of enriched uranium. The strike also derailed separate nuclear negotiations between the Islamic Republic and the Trump administration.

Iran’s Bushehr nuclear power plant in 2019 Photographer: Atta Kenare/AFP/Photographer: Atta Kenare

Europe needs to increase joint-bond sales to create a regional safe asset that can rival US Treasuries, according to a top economist at Citadel. It’s “now or never,” if the EU wants to compete with China and the US for global influence, Angel Ubide, Citadel’s head of economic research for fixed income and macro, told Bloomberg Radio.

Russia’s central bank slashed its key interest rate to the lowest level in nearly a year amid slowing inflation and worries the country’s economy could tip into recession. The Bank of Russia reduced the benchmark rate by 200 basis points to 18%. Governor Elvira Nabiullina said the bank would “proceed cautiously” in making future rate decisions.

LVMH sales fell as shoppers reined in purchases of costly Louis Vuitton bags and Dior jackets, a sign the luxury titan remains stuck in its post-pandemic slump. Revenue at the French group’s fashion and leather goods division, its largest unit, dropped 9% on an organic basis in the second quarter, worse than analysts’ estimates for a 7.8% drop.

A Louis Vuitton tote bag in Venice in 2021 Photographer: Edward Berthelot/Getty Images

A UK government minister said Keir Starmer’s administration won’t introduce a wealth tax, pouring cold water on an idea that has been promoted by some in the Labour Party. The UK is already seeing an exodus of wealthy individuals due to Chancellor of the Exchequer Rachel Reeves’ reforms to the so-called non-dom system and increases to other taxes.

Citigroup pushed a trading desk head to delete a social-media post that was critical of Israel’s actions in Gaza and drew attention to widespread starvation in the region. Akshay Singal, the London-based global head of short-term interest rate trading, published the note with photos of malnourished children yesterday. Before the end of the day, the bank asked for it to be removed and is conducting a review, we’re told. Meanwhile, talks for a ceasefire in Gaza were dealt a new blow after the US and Israel withdrew their negotiating teams.