Trade optimism lifts sentiment, Nvidia rally dominates, dollar weakens further

Global financial markets are ending the week on a positive note as trade progress between the US and China, easing inflation signals, and blockbuster corporate performances support risk appetite. However, currency weakness and lingering policy uncertainties continue to influence market positioning. Below is a detailed breakdown of today’s market dynamics:

Equity markets: Trade progress and tech momentum drive gains

Global equities extended gains after US officials confirmed a framework agreement with China to resume trade in sensitive goods, ahead of the July 9 tariff deadline. Simultaneously, negotiations with other major trade partners, including G7 nations, show signs of progress.

• S&P 500 futures rose 0.2%, building on last week’s strength.
• Nasdaq 100 futures climbed 0.3%, with tech stocks remaining in focus.
• Stoxx Europe 600 gained 0.9%, supported by broad sector strength.
• MSCI Asia Pacific advanced 0.4%, led by Japanese equities and regional tech stocks.

The tech sector remains the standout, with Nvidia at the center of attention. The company’s shares have rallied 64% from their April lows, lifting its market capitalization to $3.78 trillion, surpassing Microsoft to reclaim the title of the world’s most valuable firm. Analysts project further gains driven by surging demand for AI infrastructure, with some price targets implying a future $6 trillion valuation.

Corporate highlights:

• Sportswear stocks like Adidas, Puma, and JD Sports rose after Nike reported signs of easing sales declines.
• Nvidia remains the key driver of AI investment momentum, with major US tech firms projected to invest nearly $350 billion in computing infrastructure over the next fiscal year.

Currency markets: Dollar weakness deepens amid policy and political shifts

The US dollar continues its decline, reflecting a combination of monetary policy expectations and political uncertainty:

• Bloomberg Dollar Spot Index fell 0.4%, marking a fourth consecutive session of losses.
• Euro climbed to $1.1714, and Sterling rose to $1.3741.
• Japanese yen traded steady at 144.34 per dollar, while the offshore yuan was little changed at 7.1683.

Dollar weakness follows growing speculation that President Trump may replace Fed Chair Jerome Powell by September or October. The market perceives this potential shift as increasing the likelihood of aggressive rate cuts, with traders pricing in 62 basis points of easing by year-end, up from 50 basis points last week.

Additional drivers:

• Seasonal trends also weigh on the dollar, with July historically the weakest month for the currency.
• Broader emerging market and commodity-linked currencies benefited from improving sentiment and declining dollar strength.

Fixed income: Yields edge higher amid trade developments

Bond markets remain sensitive to evolving macro themes:

• 10-year US Treasury yields rose three basis points to 4.27%.
• German Bund yields climbed to 2.58%.
• UK Gilts advanced to 4.49%.

Investors are navigating between Fed policy speculation, trade headlines, and signs of stabilizing inflation, particularly in Europe where data shows price growth inching up without alarming policymakers.

Commodities: Mixed signals across energy and metals

Commodity markets showed mixed performance:

• Brent crude gained 0.7% to $68.20 per barrel, recovering from last week’s sharp losses following the Israel-Iran ceasefire.
• Gold retreated 1.3% to $3,283 per ounce as haven demand eased.
• Copper prices spiked, driven by supply concerns and looming US tariffs, with the key one-day price spread hitting a four-year high.
• Platinum reached its highest level since April 2022, underpinned by tightening supply and renewed industrial demand.

Cryptocurrency markets: Bitcoin cools, Ethereum holds firm

• Bitcoin fell 0.9% to $106,883, pausing after recent gains.
• Ethereum rose 0.1% to $2,449, showing relative resilience.

Digital assets remain influenced by dollar movements, risk sentiment, and broader market liquidity.

Macro risks and policy watch

Key themes dominating investor focus:

• Trade agreements with China and G7 nations ahead of tariff deadlines are crucial for market sentiment.
• Nvidia’s dominance in AI markets underscores tech-sector leadership but highlights concentration risk.
• Fed leadership uncertainty adds a layer of political risk, especially with Trump signaling policy intervention.
• Commodities and currency volatility remain tied to geopolitical developments and evolving rate expectations.

Strategic takeaways for investors

• Maintain exposure to tech and AI-driven growth, while managing valuation risks.
• Hedge currency exposures as dollar weakness persists.
• Monitor policy shifts, especially Fed communication and trade negotiations.
• Stay cautious on commodities, balancing supply-driven price risks with global demand outlooks.

Markets are showing cautious optimism, but underlying fragility suggests heightened volatility and rapid shifts in sentiment remain likely.

Prepared by Nour Hammoury, Chief Market Strategist at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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