S&P 500 and Nasdaq hit first record high closes in months

General market commentary

Global equities have continued their upward trajectory in recent weeks, with both the S&P 500 and Nasdaq Composite reaching new record highs, supported by easing geopolitical tensions, robust corporate earnings, and increasing expectations for rate cuts by the Federal Reserve. Investors were largely undeterred by a temporary flare-up in Middle East conflict, which de-escalated quickly, and crude oil prices responded with their sharpest weekly decline in two years. Lower energy prices have helped ease inflation concerns, which, alongside softening consumer data and a dovish Fed outlook, have buoyed investor sentiment. The rally has been particularly strong in technology and growth sectors, where renewed enthusiasm around AI and solid Q1 earnings have spurred a wave of buying.

Trade developments remain a key focus for markets. President Trump’s announcement to end trade talks with Canada over its digital services tax introduced a degree of uncertainty, but the broader tone around global trade has been constructive. The U.S. and China confirmed an agreement to facilitate rare-earth exports, and several new trade deals are reportedly nearing completion. Meanwhile, inflation data came in slightly above expectations, but core PCE remains well contained. Markets now expect two or three rate cuts this year, reinforcing optimism. Looking ahead, any trade-related volatility may offer opportunities for investors to reposition portfolios, with a focus on quality U.S. equities and intermediate-duration bonds, while maintaining selective exposure to non-U.S. markets.

Latest market and economic update

Asian markets mostly rose on Monday, poised for solid monthly gains amid optimism over trade deals with the U.S. Japan's Nikkei led gains, hitting a one-year high. South Korea’s KOSPI surged over 14% for June, while China and Australia posted modest advances. Hong Kong dipped slightly, and factory data showed mixed impact from ongoing U.S. tariffs.

US equity futures were higher this morning as Wall Street looked to end June on a high note, with the S&P 500 and Nasdaq hitting record highs. Monthly gains stood at 4.42% for the S&P, 6.07% for the Nasdaq, and 3.67% for the Dow. Optimism over trade progress and easing tariffs continues to support market momentum.

European equities closed sharply higher Friday, with the STOXX 50 up 1.5% and STOXX 600 gaining 1.1%, lifted by softer US tariff signals and a US-China trade deal. Industrials and autos led gains; Siemens surged 6.5%, Schneider 3.6%, while BMW, Mercedes-Benz, and Stellantis all rose over 4.5%, as inflation data kept ECB rate-cut hopes intact.

The US dollar index hovered near 97.2 on Monday, its lowest since February 2022, pressured by a dovish Fed outlook, fiscal concerns, and trade uncertainty. Markets await U.S. jobs data, which could support rate-cut expectations. The euro strengthened further, with EUR/USD at 1.1718, reflecting dollar weakness amid easing geopolitical tensions and lower safe-haven demand.

Oil prices declined early this morning, with Brent at $67.20 and WTI at $64.77, as easing Israel-Iran tensions reduced supply concerns. Despite recent losses, crude remains over 5% higher for June. The ceasefire allayed fears over the Strait of Hormuz, while attention turned to a potential OPEC+ output increase ahead of its 6 July meeting.

China’s manufacturing PMI rose slightly to 49.7 in June, signalling a third month of contraction but showing marginal improvement amid easing US-China trade tensions. Weak US demand remained a key drag. Meanwhile, non-manufacturing PMI beat forecasts at 50.5, lifting the composite PMI to 50.7, supported by stronger services demand and government stimulus.

Canada has withdrawn its digital services tax on U.S. tech firms to revive trade talks with the U.S., following President Trump’s recent halt to negotiations. The tax, set at 3% on revenue above $20 million, was retroactive to 2022. Prime Minister Carney and Trump plan to resume talks aiming for a deal by 21 July 2025.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

President Trump announced he has a group of wealthy buyers ready to purchase TikTok, with an announcement expected in two weeks. Chinese President Xi Jinping is likely to approve the sale. Potential buyers include Oracle’s Larry Ellison, Microsoft, and Blackstone. The U.S. extended the TikTok sale deadline to mid-September amid easing U.S.-China tensions.

Meta Platforms is seeking to raise $29 billion from private capital firms to build AI data centres in the US, including $3 billion in equity and $26 billion in debt. The company aims to expand its AI infrastructure amid fierce competition, with investments overseen by Morgan Stanley and potential involvement from Apollo, KKR, and others.

U.S. bank shares rose on Friday after the Federal Reserve’s stress test showed 22 major US banks remain well-capitalised to withstand a severe recession, with only a 1.8 percentage point drop in capital ratios. Goldman Sachs led gains, rising 3.1%. Despite projected $550 billion losses, banks demonstrated resilience amid challenging economic scenarios.

Tesla CEO Elon Musk announced the company’s first fully autonomous Model Y delivery from factory to customer home, completed a day early. The delivery included highway driving and marks a significant milestone for Tesla’s self-driving technology. Musk praised the AI teams for their software and chip design contributions enabling this achievement.

Piper Sandler named Meta Platforms its “top large-cap pick,” raising the price target to $808, citing AI-driven ad tools boosting conversion rates and supporting mid-teens revenue growth. The brokerage highlighted strong ad performance, sustainable higher prices, and potential from Threads and WhatsApp, with a May investor day expected to reveal more on Meta’s AI strategy.

Canaccord Genuity downgraded Uber to “hold” with a reduced $84 target, citing risks from autonomous vehicles (AV) disrupting ride-hailing. Tesla’s cheaper robotaxis pose a threat, though Uber’s hybrid approach and logistics strength offer resilience. Long-term success depends on AV ecosystem diversity, with potential revenue varying widely based on robotaxi adoption and costs.

Guggenheim raised Disney’s price target to $140, citing stronger sports ad revenue, theme park resilience, and cost-cutting progress. Despite some film underperformance, streaming and direct-to-consumer earnings remain strong. Improved NBA Finals viewership and Hulu control support growth, with a 23.8x 2025 earnings multiple reflecting confidence in digital and parks growth.

Redburn upgraded Boeing to Buy, raising its price target to $275 from $180, citing progress in financials, culture, and production. A ramp-up in 737 and 787 deliveries could add $1.7bn in post-tax profits by 2029, boosting free cash flow beyond $14bn. Improved fundamentals signal a positive market reassessment of the shares.

HSBC Global Research upgraded Estée Lauder to “buy,” raising its target price to $99, citing improved earnings visibility, restructuring, and stabilising markets. Earnings per share are expected to double by 2027, driven by cost cuts and efficiencies. Risks include Chinese demand weakness and inflation, but market share gains and a better channel mix support the outlook.

Upcoming data and events

This week’s focus will be on US trade talks ahead of the July 9 tariff deadline and the ECB Central Bank Forum, featuring Fed Chair Powell’s outlook. Key data includes the US jobs report showing labour market softening, ISM PMIs, US trade figures, China’s PMIs, Eurozone inflation, German orders, Japan’s Tankan survey, and Australia’s trade stats.

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