Trade progress supports market optimism despite ongoing policy risks

Global markets are starting the week with cautious optimism as positive signals from US trade talks, corporate strength, and policy developments lift sentiment across major asset classes. However, uncertainties surrounding global trade policy, central bank direction, and currency volatility continue to shape the broader outlook.

Equities: Trade progress, corporate strength, and fragile gains

US equity futures extended recent gains after progress in trade negotiations between the US and major partners added to optimism. With the July 9 tariff deadline approaching, negotiations with China, the EU, and Canada show signs of momentum, helping lift risk appetite:

• S&P 500 futures rose 0.4%, following a record-high close last week.
• Nasdaq 100 futures gained 0.5%, fueled by tech momentum.
• Dow Jones futures added 0.6%.
• European equities were steady, with the Stoxx Europe 600 little changed.
• Asia-Pacific equities fell 0.1%, while emerging market stocks declined 0.5%.

Corporate highlights:

• Nvidia’s record-breaking rally continues to dominate headlines, with its market cap reaching $3.78 trillion, surpassing Microsoft as the world’s most valuable company.
• Sportswear stocks such as Adidas, Puma, and JD Sports advanced after easing signs in Nike’s sales slowdown.
• UBS announced a $2 billion share buyback.
• Vodafone launched a €2 billion debt tender and new bond offering.

Currencies: Dollar weakness extends, policy and trade in focus

The US dollar remains under pressure, declining for the fourth consecutive session as traders price in potential Fed rate cuts and react to global trade developments:

• Bloomberg Dollar Spot Index fell 0.2%, nearing a three-year low.
• Euro climbed to $1.1731; Sterling held near $1.3707.
• Japanese yen strengthened 0.4% to 144.08 per dollar.
• Offshore yuan rose slightly to 7.1619 per dollar.

The dollar is facing headwinds from speculation that President Trump may replace Fed Chair Jerome Powell by October, intensifying expectations of aggressive rate cuts. Seasonal patterns also signal further dollar softness through July.

Fixed income: Yields edge lower as markets await clarity

Bond markets reflect cautious positioning amid evolving policy signals:

• US 10-year Treasury yield fell two basis points to 4.26%.
• Germany’s 10-year yield declined to 2.58%.
• UK 10-year Gilt yield eased to 4.49%.

Markets remain sensitive to inflation data and Fed guidance, with investors awaiting the monthly payrolls report later this week to gauge the economic outlook.

Commodities: Energy and metals show diverging trends

Commodity markets posted mixed results amid easing geopolitical tensions:

• Brent crude slipped 0.1% to $67.70 per barrel, stabilizing after last week’s ceasefire-driven losses.
• Gold rose 0.6% to $3,294.92 per ounce, reflecting ongoing haven demand.
• Platinum reached a multi-year high, supported by tight supply and industrial demand.

Energy markets are also watching for further updates on OPEC+ production adjustments.

Trade developments: Canada drops digital tax to revive talks

In a move to de-escalate tensions, Canada rescinded its digital services tax targeting tech giants like Meta and Alphabet, aiming to restart trade talks with the US. President Trump had previously halted discussions and threatened tariffs, but both sides now plan to finalize a deal by July 21.

The Canadian dollar strengthened on the news, underscoring the economic importance of US-Canada trade, which accounts for significant exports in energy, autos, and commodities.

Cryptocurrency markets: Modest gains amid macro crosscurrents

• Bitcoin rose 0.2% to $107,676.
• Ethereum climbed 2% to $2,483.

Digital assets are showing tentative resilience, with performance tied closely to dollar movements and global risk sentiment.

Strategic takeaways for investors

• Equities: Maintain selective exposure, particularly in tech and AI sectors, while monitoring trade developments.
• Currencies: Expect continued dollar softness, with potential volatility around Fed leadership speculation and trade agreements.
• Fixed Income: Watch for rate signals from economic data and Fed commentary; yields remain sensitive to inflation and trade news.
• Commodities: Manage positions carefully amid supply risks, geopolitical developments, and shifting demand trends.
• Macro Risks: Geopolitical tensions, Fed policy uncertainty, and trade negotiations remain the key drivers shaping markets.

Overall, market sentiment is cautiously optimistic, but underlying risks and policy uncertainties require a nimble and diversified investment approach in the days ahead.

Prepared by Nour Hammoury, Chief Market Strategist at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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