Trade Deal Sparks Global Market Optimism Amid Tariff Uncertainty

German Bund prices declined as hopes for new U.S.-UK trade deals stirred risk appetite, pushing yields up. President Trump and PM Starmer's pact fuels optimism for tariff reductions but uncertainty looms. European markets wrestle with implications, impacting ECB rate predictions and economic growth forecasts.

German Bund prices saw a decline on Friday, leading to higher yields, as investors distanced themselves from safe-haven assets. This shift was prompted by a U.S.-UK trade agreement, which has renewed hopes for similar tariff arrangements globally, thereby lifting risk appetite in the markets.

U.S. President Donald Trump, alongside British Prime Minister Keir Starmer, unveiled a bilateral accord that, despite its limitations, has sparked optimism regarding further international trade deals. The trade pact has implications for global tariffs, with Trump forecasting substantive dialogue with China.

Despite positive signals, investors remain wary about ongoing tariff-related uncertainties and their medium-term economic impact. European policy responses differ from the U.S., aiming to counter falling inflation amidst concerns about deteriorating growth and potential de-escalation in global trade tensions.

(With inputs from agencies.)