Strong start to the week for equities
Equity markets kicked off the week with optimism, as the S&P 500 and Nasdaq closed at record highs, marking the end of a robust first half of the year. Gains were led primarily by technology and financial stocks, following news that Canada had scrapped its digital services tax, which helped reduce friction with the U.S. This easing of trade tensions improved investor confidence.
Financials and M&A activity propel markets higher
Investor sentiment was also lifted after U.S. banks successfully passed the Federal Reserve’s annual stress tests. The results cleared the way for possible share buybacks and dividend increases. Meanwhile, Juniper Networks and Hewlett-Packard Enterprise surged after receiving regulatory approval for their merger. Oracle shares also advanced as the company outlined long-term growth guidance tied to its expanding cloud services footprint, part of a competitive strategy against Amazon, Microsoft, and Google.
Bond yields retreat as rate cut bets rise
Yields in the fixed income market slipped, with the 10-year U.S. Treasury yield falling to 4.24%, reflecting expectations of up to three rate cuts in 2025, exceeding the Federal Reserve’s current guidance.
Global economic picture remains mixed
While U.S. services activity remains solid and the broader economy continues to show strength, supporting labour market resilience and consumer demand, China’s official manufacturing PMI remains in contraction. In contrast, the Caixin Manufacturing PMI unexpectedly rose to 50.4 in June, pointing to modest expansion, particularly among smaller private manufacturers, helped by easing trade tensions. In Europe, stock indices weakened, although German inflation came down to target levels, signaling cooling price pressures.
Asia and Europe show diverging trends
Market sentiment varied across global regions, with Asia showing gains while Europe remained cautious.
Asia mixed amid trade developments
Most Asian equities advanced, led by South Korea’s Kospi, buoyed by trade hopes ahead of key tariff deadlines. China’s indices also rose modestly, supported by stronger factory data. Japan’s Nikkei, however, slipped 1% following negative commentary from President Trump about ongoing trade negotiations and potential tariffs.
European markets reflect caution
European equities closed broadly lower on Monday. The STOXX 50 and STOXX 600 both declined by 0.4%, dragged by fears of U.S. tariffs and mixed inflation readings. While L’Oréal outperformed with a 2.3% gain, industrials like Siemens and Schneider Electric posted declines. For June, the STOXX 50 fell 0.9% and the STOXX 600 declined 1.2%.
Currency and commodities update
The euro rose to 1.1790 USD, reaching a near four-year high. A weaker U.S. dollar was driven by concerns about the U.S. fiscal outlook, dovish commentary from Fed policymakers, and increasing bets on aggressive interest rate cuts.
Oil prices decline on supply optimism
Brent crude prices dropped below $67 per barrel, hitting a three-week low. This decline followed progress on a ceasefire between Israel and Iran and growing expectations that OPEC+ will increase production in August. Trade tensions and the looming July 9 tariff deadline also contributed to demand concerns.
US and EU trade developments
With a July 9 deadline approaching, the European Union has signaled openness to a trade agreement involving a 10% universal tariff on many exports, while pushing for lower rates in strategic sectors like pharmaceuticals and aerospace. The proposal also includes efforts to reduce non-tariff barriers and exemptions from existing U.S. tariffs to prevent a broader escalation in trade tensions.
Elon Musk slams spending bill
Elon Musk sharply criticized the proposed spending bill on the social media platform X, condemning its “insane spending” and a record $5 trillion increase in the debt ceiling. He described the U.S. system as a “one-party country – the PORKY PIG PARTY” and called for the creation of a new political party that represents public interests. President Trump is pushing for the bill’s passage before July 4.
Company news: Tech, AI, and M&A in focus
Apple is reportedly considering integrating Anthropic or OpenAI’s technology into Siri as it works to enhance its voice assistant capabilities. A full upgrade may not arrive until 2026, and internal leadership changes are aimed at accelerating development.
Robinhood expands EU offerings
Robinhood has introduced commission-free tokenized stocks in the EU, with access to over 200 U.S. stocks and plans to add private companies like OpenAI and SpaceX. The firm also aims to expand to thousands of token offerings, enable 24/7 trading, and roll out crypto futures and staking products for both EU and U.S. customers.
Oracle forecasts strong cloud growth
Oracle outlined ambitious growth targets, projecting cloud revenue to exceed $30 billion annually by 2028. The firm plans a 20% capital spend increase and aims to double its multicloud data center footprint. Total revenue is projected to grow 16–20% through 2027, supported by a 41% rise in contracted revenue.
Circle seeks a US trust bank license
Stablecoin provider Circle is applying for a U.S. national trust bank charter, allowing it to manage digital assets and reserves internally. The move follows its $18 billion IPO and is aimed at boosting institutional trust and compliance amid increasing regulatory clarity.
Analyst ratings and market movers
- Apple: MoffettNathanson maintained a Sell rating with a $139 target, citing tariff risks, discounting in China, delayed AI progress, and regulatory uncertainties. Revenue may be pressured by weaker pricing and uncertain Services growth.
- Oracle: Upgraded to Buy by Stifel, with a new $250 price target on the back of strong cloud growth potential.
- Disney: Jefferies upgraded the stock to Buy with a $144 target, citing streaming margin improvement, stronger theme park and cruise performance, and a robust content slate.
- Leonardo DRS: Initiated at Buy by Goldman Sachs, thanks to its strong U.S. defense exposure, contract structure, and growth in high-priority programs like the Columbia-class submarine.
- Alibaba, Meituan, JD.com: Jefferies lowered price targets to $153, HK$165, and $60, respectively, but maintained Buy ratings, citing long-term positioning despite short-term cost pressures. Entertainment platforms like Kuaishou and Bilibili were favored, while Trip.com continues to lead in online travel with limited competition from JD.com.
Economic events to watch
Key data points and events to monitor today include:
- Federal Reserve Chair Powell’s speech
- U.S. Manufacturing PMI
- ISM Manufacturing PMI
- JOLTs Job Openings
- Earnings from Constellation Brands, MSC Industrial Direct, and Sodexo
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