US Markets Rise on Trade Deal Optimism

U.S. stocks advanced throughout Monday’s trading session, extending substantial gains from the previous week. The continued upward momentum drove the Nasdaq and S&P 500 to new record closing highs. The rally has been driven by multiple factors, including optimism about trade deals, strong corporate earnings, expectations for lower interest rates, and reduced geopolitical tensions. Market sentiment received an additional boost from Canada’s decision to rescind its digital services tax on American technology companies, which was scheduled to take effect on Monday. This development followed President Trump’s warning Friday that the United States would end trade negotiations with Canada over the digital services tax. Reports of progress on U.S. trade agreements with Canada and the European Union lifted Wall Street sentiment, even as the July 9 deadline approaches for the resumption of President Trump’s reciprocal tariffs.

With markets increasingly optimistic about a potential Federal Reserve interest rate cut, Thursday’s employment report has become the focal point of the week. Investors will scrutinise the data for signs of a cooling labour market, which could strengthen the case for earlier monetary easing. The Fed’s preferred inflation gauge, core personal consumption expenditures (PCE), rose 0.2% in May, slightly exceeding consensus expectations of 0.1%. On an annual basis, core PCE increased to 2.7% from 2.6%. Meanwhile, Asian equities edged higher, and the dollar remained near multi-year lows on Tuesday, as markets awaited congressional voting on President Trump’s comprehensive tax and spending legislation.

Nifty’s short-term trend remains positive, as it is still positioned above its nearest moving average support, the 5-day EMA. The Nifty has partially filled the gap range of 25,640-25,740 that was formed on October 3rd, 2024. Any move and close above 25,740 would negate this gap resistance and could potentially extend the Nifty’s upward rally towards the 26,000 mark. Immediate support for the Nifty comes in at 25400. Indian markets are expected to open slightly higher today, driven by positive global cues.

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Source: HDFC Securities Prime Research