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What’s happening: US stocks closed higher on Friday recovering from the steep decline after the Trump administration slapped tariffs on several countries.
What happened: Even as talks with Canada were halted, progress in the US-China trade negotiations sent the S&P 500 to an all-time closing high.
Strong economic reports from the US also increased speculations of interest rate cuts by the Federal Reserve.
Why it matters: US President Donald Trump said he was halting trade talks with Canada over its digital services tax, which represents “a direct and blatant attack on our country.”
Later in the day, Trump announced the signing of a trade deal between the US and China, also signalling a “very big” upcoming agreement with India. The US is also reportedly close to deals with Mexico and Vietnam, and talks with Japan are ongoing.
On the geopolitical front, the ceasefire agreement between Israel and Iran is still holding, providing further support to overall market sentiment.
The PCE (Personal Consumption Expenditures) report from the Commerce Department released Friday showed a surprise decline in personal income and spending in May. Personal consumption expenditures declined by 0.1% to $21.441 trillion in May, versus market expectations of a 0.1% gain, while personal income contracted 0.4% to $25.698 trillion, compared to market estimates of a 0.3% increase.
Another report from the University of Michigan showed an improvement in consumer sentiment for June, although the reading remained around 18% below the December 2024 level.
These reports triggered speculations of the Fed announcing a rate cut in September, while keeping rates unchanged in July.
On the earnings front, Nike’s shares climbed more than 15% following stronger-than-expected quarterly results.
The Dow Jones index jumped 432.43 points, or 1.00%, to close at 43,819.27 on Friday, while the S&P 500 added 0.52% to reach 6,173.07. The Nasdaq 100 index gained 0.39% to settle at 22,534.20.
The 30-stock Dow index remained 2.7% below its record settlement high hit on December 4.
Among the major sectors, consumer discretionary was the top gainer on Friday, while energy and healthcare stocks bucked the overall market trend, closing lower.
What to watch: Investors will continue monitoring trade negotiations between the US and other major nations.
Data on Chicago PMI (1745 UAE Time) and Dallas Fed Manufacturing Index (1830 UAE Time) will be released today. The Chicago Business Barometer, which declined to 40.5 in May from 44.6 in the previous month, is expected to rise to 43 in June. Analysts expect the Dallas Fed’s general business activity index for Texas manufacturing to improve to -10 in June, from a reading of -15.3 in May.
Context: The JPY/USD forex pair rose this morning amid weakness in the US dollar.
Details: Overall market sentiment remained upbeat at the start of the week due to easing tariff concerns and geopolitical risks. However, investors remained concerned about the trade discord between Japan and the US, with little signs of progress in talks around US tariff on Japan’s car imports.
On the economic data front, Japan’s industrial production rose by 0.5% in May. Although the figure came in short of market estimates of a 3.5% gain, it represented a recovery from the 1.1% decline in the previous month.
Weakness in the US dollar lent support to the JPY/USD pair this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.2% to 97.20.
The JPY/USD forex pair gained around 0.3% to 144.28 this morning. Japan’s Nikkei 225 had jumped 1.64% to close at 40,809.82 on Friday.
What to watch: Investors await the release of economic data on Tankan large manufacturers index (0350 UAE Time), Tankan large non-manufacturing index (0350 UAE Time) and Tankan small manufacturers index (0350 UAE Time) from Japan on Tuesday.
The Bank of Japan’s Tankan index of sentiment among large manufacturers, which declined to 12 in the first quarter from 14 in the previous quarter, is expected to fall further to 10 in the second quarter. Analysts expect non-manufacturing PMI in Japan to decline to 34 points in the second quarter from 35 points in the first quarter, while small business sentiment is projected to decline to a reading of -1 in the second quarter versus 2 points in the previous quarter.
Other Markets: European indices closed higher on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.72%, 1.62%, 1.78% and 1.14%, respectively.
The Ukrainian air force said that on Sunday Russia conducted its biggest airstrike on the country since the start of the war, firing 537 aerial weapons. The news sent the RUB/USD pair higher in forex trading this morning.
New Zealand’s ANZ Business Outlook Index rose to 46.3 in June, from 36.6 in the previous month. The region’s business mood improving for the first time since February lent support to the NZD/USD forex pair.
China’s NBS Composite PMI Output Index climbed to 50.7 in June, from 50.4 in the previous month. The region’s composite PMI surging to the highest level since March sent the CNY/USD pair higher in forex trading this morning.
South Korea’s retail sales remained flat for May, after falling 1.0% in March and 0.9% in April, which lent support to the KRW/USD forex pair.
Australia’s private sector credit fell 0.5% in May. This being better than market estimates of a 0.7% decline sent the AUD/USD pair slightly higher this morning.
Eurozone’s loans to companies (1200 UAE Time), loans to households (1200 UAE Time) and M3 money supply (1200 UAE Time), Spain’s current account (1200 UAE Time), UK’s mortgage approvals (1230 UAE Time), mortgage lending (1230 UAE Time), M4 money supply (1230 UAE Time), net lending to individuals (1230 UAE Time) and BoE consumer credit (1230 UAE Time), Italy’s inflation rate (1300 UAE Time), India’s industrial production (1430 UAE Time), manufacturing production (1430 UAE Time) and government budget value (1430 UAE Time), Brazil’s gross debt to GDP (1530 UAE Time) and nominal budget balance (1530 UAE Time), Germany’s inflation rate (1600 UAE Time), South Africa’s balance of trade (1600 UAE Time), France’s 12-month BTF auction (1700 UAE Time), 3-month BTF auction (1700 UAE Time) and 6-month BTF auction (1700 UAE Time), US 3-month Bill auction (1930 UAE Time), 6-month Bill auction (1930 UAE Time), quarterly grain stocks – corn (2000 UAE Time), quarterly grain stocks – soy (2000 UAE Time) and quarterly grain stocks – wheat (2000 UAE Time), as well as Argentina’s economic activity (2300 UAE Time).
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