Global Stocks Hit Record Highs Amid Trade Optimism and Weakening Dollar

Tech Leads Market Gains as Canada Pauses Digital Tax to Restart Trade Talks

Global equities surged to intraday record highs on Monday, buoyed by optimism surrounding U.S. trade negotiations and a strategic pause by Canada on its controversial digital services tax targeting American tech firms. The S&P 500 and Nasdaq Composite both closed at all-time highs, with strong participation from the technology sector.

Adding to bullish sentiment, the U.S. dollar posted its worst H1 performance in over 50 years, increasing the attractiveness of risk assets globally.

Trade Diplomacy: Canada, U.S. Reset Talks

Canadian Prime Minister Mark Carney and U.S. President Donald Trump have agreed to extend trade negotiations until July 21, with the aim of sealing a comprehensive bilateral agreement. Trump had earlier set a July 9 deadline for reciprocal tariffs, but sources suggest most international deals could close before Labor Day (September 1).

Notably:

• Canada withdrew its digital services tax just hours before enforcement, signaling goodwill.

• U.S. Treasury Secretary Scott Bessent warned that absent progress, the administration could revert to April 2 tariff levels, a more aggressive stance.

Market Performance Snapshot

Monday's rally was largely driven by renewed investor confidence in trade policy stability, with window dressing effects adding to momentum as Q2 closed.

Major Index Moves (July 1 close):

• Dow Jones: +275.50 pts (+0.63%) → 44,094.77

• S&P 500: +31.88 pts (+0.52%) → 6,204.95

• Nasdaq Composite: +96.28 pts (+0.48%) → 20,369.73

Technology led with a 1% gain, while consumer discretionary lagged among S&P 500 sectors.

Dollar Down, Labor Data in Focus

The U.S. dollar index fell sharply, making it the worst-performing H1 since the 1970s, under pressure from soft economic data and market expectations of rate cuts.

Investors are now turning to a flurry of labor market data, culminating in Thursday's nonfarm payrolls report, which could shape near-term Fed policy.

Use the Economics Calendar API to track:

• Nonfarm payroll figures

• Unemployment rate

• Average hourly earnings
  All in real-time for smarter macro analysis.

Fed Outlook: Divided But Dovish

Federal Reserve Chair Jerome Powell has reiterated a wait-and-see stance, arguing that more time is needed to assess the inflationary impact of Trump's evolving trade policy.

Key Fed voices:

• Atlanta Fed President Raphael Bostic still expects one rate cut in 2025.

• Chicago Fed's Austan Goolsbee warned of a rare stagflation scenario where unemployment and inflation could worsen simultaneously.

To model potential Fed responses based on inflation risk, explore the Personal Consumption Expenditures (PCE) dataset, the Fed's preferred inflation gauge.

Conclusion

Markets have entered H2 2025 on a euphoric note, supported by a weakening dollar, constructive trade diplomacy, and dovish Federal Reserve expectations. But with critical labor market and inflation data looming, this optimism could be tested quickly. Investors should brace for heightened volatility and watch central bank commentary closely as global dynamics evolve.

Tip: Stay macro-aware by integrating FMP's real-time Economics Calendar and Labor Market Metrics into your strategy. This helps decode central bank behavior before the markets price it in.