Dow Jones futures climb as market sentiment improves due to US-EU trade deal

• Dow Jones futures gains ground as the US-EU trade agreement boosts trade optimism.
• The US and China are expected to extend their tariff truce by another 90 days.
• Traders expect the Fed to keep the benchmark interest rate steady between 4.25% and 4.50% on Wednesday.

Dow Jones futures rise ahead of the US market opening on Monday, trading around 45,160, up by 0.18%, during European hours. Meanwhile, S&P 500 Futures are up by 0.31% to 6,445, and Nasdaq 100 Futures appreciate 0.50% to trade near 23,530.

US stock index futures gain ground as market sentiment improves following the trade agreement between the United States (US) and the European Union (EU). Additionally, US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are scheduled to meet on Monday in Stockholm.

The US and EU reached a framework trade agreement on Sunday that sets 15% tariffs on most European goods, against the 30% initially expected, taking effect on August 1. This deal has ended a months-long stand-off, per Bloomberg. European Commission President Ursula von der Leyen noted that the bloc agreed not to impose retaliatory tariffs and pledged $600 billion in investment in the US on top of existing expenditures.

The US and China are expected to extend their tariff truce by another 90 days, according to a source cited by the South China Morning Post (SCMP) on Sunday. The US has reportedly frozen export controls on key technologies to China in an effort to maintain smoother trade relations, according to a source cited by the Financial Times.

Markets are also gearing up for a busy week of corporate earnings, with more than 100 S&P 500 companies scheduled to report, including tech giants Meta Platforms, Microsoft, Amazon, and Apple. Moreover, the S Federal Reserve (Fed) policy decision will be eyed on Wednesday, with expectations to keep the benchmark interest rate steady between 4.25% and 4.50% in July.

Additionally, traders will also likely observe the upcoming Personal Consumption Expenditures (PCE), the Fed's preferred inflation measure, for the second quarter, to gauge tariffs' impact on consumer prices. Moreover, the FOMC press conference will be observed for any signs that rate cuts may start in September. Markets have priced in 62% odds of a rate cut in September, according to the CME Group's FedWatch tool.