Global markets surge despite political chaos and policy uncertainty

​​​US markets defy political gridlock to hit fresh records

​The numbers tell the story. The S&P 500 jumped 10.57% and the Nasdaq 100 soared 17.75% for the quarter, both closing at record highs. Yet beneath the surface, all three major indices posted their weakest first-half since 2022.

​The Dow Jones managed a 4.98% gain while small caps outperformed with the Russell 2000 up 8.28%. Big banks led the charge after clearing Federal Reserve (Fed) stress tests, opening the door for bigger dividends and buybacks.

​But the rally wasn't built on volume. Trading came in at 17.12 billion shares, below the 20-day average of 18.23 billion. This suggests the gains were driven more by end-of-quarter window dressing than genuine conviction.

​The real test comes now. Can markets sustain these levels with Trump's $3.3 trillion tax bill facing Senate gridlock and trade tensions simmering globally?

​Asian markets split as yen strength hits Japan

​Asia delivered a mixed bag that perfectly captures the current market mood. South Korea's Kospi jumped 1.1%, leading regional gains, while Japan's Nikkei 225 tumbled 1.3% as the Japanese yen flexed its muscles against major currencies.

​That yen strength is bad news for Japanese exporters who've relied on a weaker currency to boost overseas earnings. It's a reminder that currency moves can instantly reshape regional market dynamics, regardless of underlying economic fundamentals.

​China's CSI300 managed just a 0.1% gain, hardly inspiring given the global backdrop. But there's a silver lining - factory activity and business sentiment data suggest the region is weathering trade tensions better than feared.

​Japan's manufacturing activity grew for the first time in over a year. The question is whether this momentum can continue if trade wars escalate further.

​European markets tread water ahead of central bank summit

​European futures tell the story of a market in wait-and-see mode. Euro Stoxx 50 futures were flat, German DAX 40 futures up just 0.2%. Hardly the stuff of breakouts.

​The focus shifts to Sintra, where European Central Bank (ECB) President Christine Lagarde is highlighting global uncertainty around trade, growth, and inflation. Her cautious tone suggests the ECB remains worried about external shocks hitting the eurozone.

​This week's central bank panel featuring heads from the US, Japan, UK, and South Korea could be crucial. Any hint of policy coordination - or lack thereof - will move markets.

​European traders are caught between two forces: decent domestic data and mounting global uncertainties. The question is which wins out.

​Currency chaos as dollar hits multi-year lows

​Currency markets are where the real action is happening. The US dollar is approaching multi-year lows, slipping 0.2% to 143.79 against the Japanese yen and hitting its weakest level against the euro since 2021.

​This isn't just about Fed policy expectations. It's about global confidence in US economic management as Trump's tax agenda stalls and trade rhetoric heats up again.

​The dollar's decline is rippling through commodity markets. Oil dropped for the second day to $64.80 per barrel on OPEC+ output increase expectations, while gold rose 0.6% to $3,322.62 as investors sought safety.

​Currency volatility creates opportunities, but it also signals underlying instability that traders need to respect.

​Trump's tax gamble faces Senate reality check

​Here's the political reality: Trump wants his $3.3 trillion tax bill passed before 4 July, but the Senate isn't playing ball. Concerns about the $36.2 trillion national debt are creating fierce opposition from fiscal conservatives.

​Treasury Secretary Bessent's warning that countries could still face higher tariffs on 9 July isn't helping market sentiment. Canada's decision to scrap its digital services tax on US tech firms shows how countries are scrambling to avoid retaliation.

​The market is betting Trump might replace Fed Chair Powell with someone more dovish, fuelling rate cut expectations. But that's a dangerous game when fiscal policy is already running hot.

​Policy uncertainty creates volatility, and volatility creates trading opportunities for those prepared to manage the risks.

​This week's data could reshape the narrative

​Several key releases will determine whether current market momentum continues. US non-farm payrolls (NFPs) and ISM surveys for manufacturing and services top the list, with the potential to shift Fed policy expectations.

​Multiple Fed officials speak this week, providing crucial insights into the central bank's thinking. Any dovish hints could extend the dollar's decline and boost risk assets further.

​Asian data continues to send mixed signals about regional resilience. The sustainability of Japan's manufacturing recovery remains questionable given weak domestic demand.

​European policymakers face a delicate balancing act between domestic needs and global pressures. Their responses will help determine regional market direction.