Canada Ditches Digital Services Tax Boosting Trade Hopes

Canada scrapped its digital services tax to restart talks with the US, and Washington hinted that multiple trade deals could now be finalised by the 1 September deadline. The US dollar has experienced its sharpest midyear drop since 1973 as renewed optimism around US trade deals boosted the euro and other major currencies. Wall Street futures are higher and European stock futures firmed Monday morning, while oil prices eased further as the ceasefire in the Middle East held.

Equities

The FTSE 100 rose 0.7% on Friday, supported by gains in major consumer and retail stocks. JD Sports climbed 7.6% after Nike’s upbeat earnings outlook helped lift sentiment across the sportswear sector. Unilever shares gained 1% following a report in the Financial Times that it is set to acquire men’s personal care brand Dr Squatch from Summit Partners for $1.5 billion.

The FTSE 250 added 1.1%, reaching its highest close since February 2022. Precious metals and mining shares dragged on the broader index, with the FTSE 350 Mining index falling 4.4% as gold prices retreated after a ceasefire agreement between Iran and Israel. Fresnillo and Endeavour Mining both dropped more than 4%, while Hochschild Mining slipped 2.6%.

In the US, the S&P 500 and Nasdaq each rose 0.52% to close at record highs, driven by trade-related optimism and signs of upcoming interest rate cuts. The Dow Jones gained 1.00%, though it remains 2.7% below its previous peak.

Nike led gains among large-cap US stocks, jumping 15.2% after forecasting a smaller-than-expected decline in first-quarter revenue. The company’s update boosted global sentiment in the retail and consumer discretionary space.

Chipmakers were also in focus. Micron delivered an upbeat forecast that supported investor confidence in AI-related technology stocks. Nvidia added 1.8% and edged closer to a $4 trillion market value, reinforcing its status as the world’s most valuable listed company. The broader tech sector helped push the Nasdaq into bull market territory, having gained more than 20% since its post-April 8 trough.

Meanwhile, President Trump cancelled trade negotiations with Canada over its digital tax on US tech firms (since cancelled), trimming some of the day’s gains. However, a separate agreement between the US and China to accelerate rare earth shipments ahead of a key July deadline lifted trade sentiment. Treasury Secretary Scott Bessent confirmed that trade deals with 18 US trading partners could be finalised by the start of September. Consumer discretionary stocks led gains in the S&P 500, while energy shares lagged.

Forex & Commodities

The US dollar slipped further on Monday, trading close to multi-year lows against several major currencies. It dropped 0.5% against the yen to 143.90. The euro rose to near Friday’s peak of $1.1754, its highest since September 2021. Sterling edged up as well, approaching its strongest level since October 2021. The dollar also fell slightly against the Swiss franc after touching its lowest level since January 2015 last week.

These moves followed rising market expectations for US interest rate cuts. Futures markets now price in a 91.5% chance of a rate cut by September. Comments from Federal Reserve Chair Jerome Powell last week were seen as dovish, while President Trump called for lower interest rates and suggested replacing Powell before his term ends in 2026. Attention now turns to Friday’s US payrolls report.

Gold rebounded on Monday, supported by dollar weakness. Spot prices rose 0.5% to $3,290 per ounce. Silver gained 0.5% to $36.16. Platinum rose 2% to $1,366.63 and palladium climbed 1.6% to $1,151.36.

Oil prices eased. Brent crude for September delivery fell 18 cents to $66.60 a barrel, while US WTI dropped 32 cents to $65.20. Markets are preparing for a fifth consecutive monthly output increase from OPEC+, with another 411,000 barrels per day likely to be added in August. Elsewhere, China’s manufacturing data showed contraction for a third month. In the US, active oil rigs fell by six to 432, the lowest since October 2021.