Global shares rally as trade talks continue

​​​Moody’s downgrade fails to register Asian markets lead gains amid US-Canada trade optimism

​Asian shares posted solid gains as renewed US-Canada trade talks provided a much-needed boost to market sentiment. The breakthrough came after Canada agreed to scrap its controversial digital services tax, clearing a significant hurdle in negotiations.

​The new deadline for trade discussions has been set for 21 July, with broader trade talks potentially concluding by Labor Day. This timeline has given investors renewed confidence that a comprehensive deal can be reached without major disruptions.

​Japan's Nikkei 225 led regional gains with a 1% advance, while South Korea's KOSPI added 0.7%. The positive momentum reflected growing optimism that trade tensions between major economies might be easing.

​Wall Street futures climb on tech stock strength

​US equity futures posted strong gains, driven primarily by renewed strength in megacap technology stocks. The tech sector's resilience has been a key factor supporting broader market optimism despite ongoing economic uncertainties.

​Futures markets are pricing in continued strength for the S&P 500 and Nasdaq 100, both of which have gained around 5% year-to-date. Record highs achieved recently have demonstrated the market's ability to look beyond near-term challenges.

​European markets set for modest gains

​European stock futures posted moderate gains, supported by easing geopolitical tensions in the Middle East and falling energy prices. The combination of reduced risk factors has helped improve sentiment across the region.

​Brent crude oil prices continued their decline, falling further after last week's sharp 12% drop. Lower energy costs are generally positive for European economies, which remain heavily dependent on energy imports.

​However, gains remain modest as investors await more concrete economic data. The region continues to face challenges from slower growth and persistent inflation concerns that could limit upside potential.

​Dollar weakness pressures currency markets

​The US dollar has weakened to multi-year lows against major currencies, pressured by a combination of trade uncertainty and fiscal concerns.

​Rising expectations for Federal Reserve (Fed) rate cuts have contributed to the dollar's decline. Markets are now pricing in approximately 65 basis points of cuts for 2025, reflecting growing confidence that inflation pressures are easing.

​Trade uncertainty continues to weigh on the greenback as investors worry about the potential impact of tariff policies. The upcoming 9 July deadline for higher levies on multiple countries remains a key risk factor.

​Fiscal worries about the proposed tax-cut and spending bill have also contributed to dollar weakness. The bill could add $3.3 trillion to US debt over the next decade, raising concerns about foreign demand for US Treasuries and long-term fiscal sustainability.

​Key economic data and events ahead

​The week ahead brings several crucial data releases that could significantly impact market direction. Thursday's US jobs report will be particularly important, coming ahead of the Independence Day holiday when markets will be closed.

​Economists expect the jobs report to show a slowdown in hiring and unemployment rising to 4.3%-4.4%. Such figures could increase chances of a July rate cut, which would be significant for both equity and bond markets.

​Fed Chair Jerome Powell is scheduled to speak at the ECB forum this week. Markets will be listening carefully for any clues about future monetary policy direction, particularly regarding the timing and magnitude of potential rate cuts.

​Market outlook

​Trade negotiations remain fluid, and any setbacks could quickly reverse recent gains. The 9 July tariff deadline represents a particular risk that could destabilise markets if not resolved satisfactorily.

​Economic data releases, particularly the jobs report, could significantly impact expectations for monetary policy. Unexpected results could lead to sharp moves in both equity and bond markets that catch investors off guard.

​The upcoming earnings season will test whether current market valuations are justified. Companies will need to demonstrate resilience in the face of economic headwinds to maintain investor confidence and support further gains.