European stocks are up 0.93% today, and the STOXX Europe 600 index is again approaching an all-time high. (By contrast, S&P 500 futures are only up 0.28% this morning.) Given that the U.S. just slapped Europe with a 15% tax on all its exports to America, why are investors in Europe so bullish?<\/p>\n
One theory is that they are trading as if one of two conditions will turn out to be true:<\/p>\n
That would explain why, this morning, Goldman Sachs moved its estimate of E.U. GDP upward by 0.1%, following the deal, according to a note from Sahar Islam and Ayushi Mishra.<\/p>\n
Analysts hint this morning that E.U. officials appear to have pulled the wool over Trump\u2019s eyes in the negotiations. The deal includes $750 billion in \u201cstrategic purchases,\u201d $600 billion of private investment, and \u201cvast quantities\u201d of military equipment purchases. But there is near unanimity on Wall Street that the private investment was going to happen anyway in the normal course of business.\u00a0<\/p>\n
\u201cThe $600bn represents existing investment plans, not new investment,\u201d Mark Wall and his team at Deutsche Bank<\/a> wrote this morning.\u00a0<\/p>\n \u201cPie in the sky\u201d<\/p>\n And the Financial Times reported this morning that Europe\u2019s \u201cpromise\u201d to buy $750 billion of energy from the U.S. cannot actually be fulfilled because the European fuel market is controlled by private companies, not their governments. \u201cEven if Europe did want to increase its imports, I don\u2019t know the mechanism by which the EU goes to these companies and tells them to buy more U.S. energy,\u201d Matt Smith, an exec at the energy consultancy Kpler, told the FT<\/a>. He called it \u201cpie in the sky.\u201d<\/p>\n The E.U. government doesn\u2019t have the power to compel private companies to buy American oil, the price of energy is coming down, and the long-term trend in Europe is to phase out fossil fuels in favor of renewables. \u201cEuropean gas demand is soft and energy prices are falling. In any case, it is private companies, not states, that contract for energy imports,\u201d Bill Farren-Price, head of gas research at the Oxford Institute for Energy Studies, told the FT<\/a>. \u201cLike it or not, in Europe the windmills are winning.\u201d<\/p>\n The military purchases are unsurprising given that Russia is waging war on Europe\u2019s eastern flank. NATO will be happy to buy from the U.S.\u2014it needs all the weapons it can get.<\/p>\n