On Monday, Asian stock markets saw gains due to positive developments in trade negotiations between the United States and Canada. Canada’s decision to drop its digital services tax, a concession to U.S. pressure, improved market confidence. These trade talks are now aiming for a deal by July 21, with most agreements potentially finalized by the September 1 Labor Day holiday.
Meanwhile, the U.S. dollar weakened over worries that upcoming jobs data might be soft enough to prompt larger interest rate cuts by the Federal Reserve. Investors are also closely watching a substantial U.S. tax-cutting and spending bill moving through the Senate, which is estimated to add $3.3 trillion to the national debt, potentially affecting demand for U.S. Treasuries.
Despite some broader market shifts, the U.S. tech sector, including major companies like Nvidia, Alphabet, and Amazon, continued to see strong demand, with Nasdaq and S&P 500 futures rising. European stock futures also showed increases, and the positive sentiment extended to Japan’s Nikkei and South Korean stocks. Chinese stocks edged up as manufacturing and service activity showed slight improvement in June.
U.S. Jobs Data and Interest Rates
The U.S. jobs report, due a day early this week, is expected to show a modest increase of 110,000 jobs in June, with the unemployment rate possibly reaching 4.3%—its highest in nearly a year. A weaker-than-expected report could increase speculation of a Federal Reserve interest rate cut in July, rather than September, as the Fed has largely held off on cuts, citing the strength of the labor market.
Dollar’s Decline and Global Currencies
The prospect of potential U.S. interest rate cuts has helped U.S. Treasuries, but the dollar has struggled. Concerns about the impact of tariffs and unpredictable White House policies on economic growth have contributed to the dollar’s decline. The euro and sterling have both strengthened against the dollar, reaching near multi-year highs. The dollar also fell against the Japanese and Canadian currencies. Analysts suggest this period could be pivotal for the dollar, potentially leading to further weakness.
Commodity Markets
In commodity markets, a general improvement in risk sentiment has led to a slight decline in gold prices. Oil prices continued to face challenges due to concerns about increased output from OPEC+, following a significant drop last week.
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