S&P and Nasdaq cap best quarter in over a year

General market commentary

Equity markets began the week on a positive note, with the S&P 500 and Nasdaq achieving fresh record closing highs to round off a strong first half of the year. Gains were led by the technology and financial sectors, buoyed by easing trade tensions as Canada withdrew its planned digital services tax. This move helped to defuse a recent flare-up in U.S.-Canada trade relations, supporting overall investor sentiment. Meanwhile, shares of major U.S. banks rallied after passing the Federal Reserve's stress tests, unlocking the potential for share buybacks and dividend increases. M&A activity also provided a boost, with Juniper Networks and Hewlett Packard Enterprise surging following regulatory approval of their deal, and Oracle shares advancing on long-term growth guidance tied to cloud services.

In fixed income markets, bond yields edged lower, with the benchmark 10-year US Treasury yield slipping to 4.24 per cent amid expectations for three rate cuts this year, more than the Federal Reserve's own guidance. Economic data remains mixed, with China's manufacturing PMI still in contraction territory and Europe's equity markets broadly weaker despite German inflation easing to target. Traders now await the release of US manufacturing PMI figures for June, with forecasts suggesting continued contraction. Nonetheless, services activity has held up, and the broader US economy continues to display resilience, underpinning labour market strength and consumer demand. This dynamic, alongside controlled inflation and policy support, could keep both equity markets and bond yields relatively rangebound in the near term.

Latest market and economic update

Most Asian markets rose on Tuesday, led by South Korea’s Kospi, boosted by trade optimism ahead of President Trump’s July 9 tariff deadline. China’s indices inched up, supported by stronger manufacturing data. Japan’s Nikkei fell 1% after Trump criticised trade talks and threatened tariffs, while other regional markets showed modest gains amid cautious sentiment.

US equity futures held steady overnight, with investors cautious ahead of key trade developments and economic data. Futures on the S&P 500, Nasdaq, and Dow showed minimal movement as markets digested easing trade tensions and awaited further signals on potential Federal Reserve rate cuts. Treasury yields edged lower, reflecting continued investor uncertainty.

European shares closed mostly lower on Monday, with the STOXX 50 and STOXX 600 both down 0.4%, as investors weighed US tariff risks and mixed inflation data. L'Oréal outperformed, rising 2.3%, while Siemens and Schneider Electric declined 1%. For June, the STOXX 50 slipped 0.9% and the STOXX 600 fell 1.2%, reflecting broader market caution.

The euro climbed to 1.1790 against the US dollar, its highest in nearly four years, as concerns over the US fiscal outlook and trade tensions pressured the greenback. Growing expectations for deeper Federal Reserve rate cuts and dovish signals from policymakers added to the dollar’s weakness, with markets now focused on Thursday’s key US jobs report

Oil prices fell to a three-week low amid easing supply concerns and expectations of an OPEC+ production hike in August. Brent crude dropped below $67 a barrel as a ceasefire between Israel and Iran held. Meanwhile, US trade tensions and tariff threats ahead of the July 9 deadline raised fears of weaker global demand, weighing on markets.

The EU is open to a trade deal with the US involving a universal 10% tariff on many exports but seeks lower rates on key sectors such as pharmaceuticals and aircraft. The proposal also addresses non-tariff barriers and exemptions from existing US tariffs. With a 9 July deadline looming, the EU aims to avoid sharp tariff hikes to 50% across industries.

China’s Caixin Manufacturing PMI rose unexpectedly to 50.4 in June, signalling growth driven by improved trade conditions and increased new orders. This contrasts with official data showing contraction. Despite sluggish external demand and falling export orders due to US tariffs, the recent US-China trade deal appears to have offered some relief to smaller, private manufacturers.

Elon Musk sharply criticised the proposed spending bill on social media platform X, condemning its “insane spending” and a record $5 trillion increase in the debt ceiling. He called the legislation a sign of a “one-party country – the PORKY PIG PARTY” and urged creation of a new party that truly prioritises the people. President Trump is pushing for the bill’s passage before July 4.

Equities on the move

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

Apple is considering using AI technology from Anthropic or OpenAI to enhance Siri, rather than relying solely on its own models. The company is testing third-party large language models but has not made a final decision. AI improvements to Siri have been delayed until 2026, with leadership changes aiming to accelerate development.

Robinhood launched commission-free tokens in the EU, enabling trading of over 200 US shares, including Nvidia, Apple, and Microsoft, with plans to add tokens for private firms like OpenAI and SpaceX. Trading runs five days a week. The company aims to expand to thousands of tokens and 24/7 trading, while also introducing crypto futures and staking products for EU and US users.

Oracle CEO Safra Catz highlighted strong fiscal 2026 beginnings, with MultiCloud database revenue growing over 100%. The company secured multiple major cloud service deals, including one set to generate over $30 billion annually from 2028. Oracle is expanding its cloud infrastructure to compete with Amazon, Microsoft, and Google, focusing on hybrid and multi-cloud strategies.

Stablecoin firm Circle is applying for a U.S. national trust bank charter, enabling it to custody its own reserves and digital assets for institutional clients. The move follows its $18 billion IPO and aims to boost trust and compliance. This comes amid growing regulatory clarity, with stablecoins poised for mainstream adoption and mixed analyst views on Circle’s valuation.

MoffettNathanson warns of significant uncertainty ahead of Apple’s fiscal Q3 earnings, maintaining a Sell rating and $139 target. Concerns include tariff impacts, China discounting, AI doubts, and regulatory fallout. Revenue may slow due to lower selling prices, and uncertainty surrounds Services revenue. The firm highlights downside risks amid Apple’s unclear AI direction.

Stifel upgraded Oracle to Buy, raising the price target to $250, citing sustainable cloud growth driven by a 41% rise in future contracted revenue. Oracle plans a 20% capital spend increase and to double multicloud data centres. Cloud revenue is expected to grow around 38% annually, with total revenue rising 16-20% through 2027.

Jefferies upgraded Disney to Buy, raising its price target to $144, citing renewed earnings growth supported by margin expansion in direct-to-consumer, stronger parks and cruise performance, and a promising content slate. Cruise ship launches and rising Disney+ traffic also boost outlook, with adjusted earnings expected to grow 11% in FY27.

Goldman Sachs initiated coverage of Leonardo DRS with a Buy rating, citing its strong US defence position, diversified products, and margin growth potential. Benefiting from fixed-price contracts and key programmes like the Columbia-class submarine, its commercial approach aligns with DoD procurement shifts, supporting faster, more profitable growth.

Jefferies cut price targets for Alibaba, Meituan, and JD.com but kept Buy ratings, citing strong positioning despite rising food delivery investments. Alibaba’s target fell to $153, Meituan’s to HK$165, and JD.com’s to $60 due to higher spending. Entertainment platforms like Kuaishou and Bilibili were favoured, while Trip.com leads in online travel with limited competition from JD.com.

Upcoming data and events

Today’s market focus is on Federal Reserve Chair Powell’s speech, U.S. Manufacturing PMI, ISM Manufacturing PMI, and JOLTs Job Openings. Earnings from Constellation Brands, MSC Industrial Direct, and Sodexo are also due, with results likely to impact market sentiment and trading activity.

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