Trade Negotiation Hopes...Asian Stock Markets and U.S. Stock Futures Rise

Expectations for U.S.-Canada Trade Talks Resuming and Progress in China-EU Negotiations

U.S. Dollar Falls to Its Lowest in Three Years Amid Trump Tax Cut Bill

Asian stock markets and U.S. stock futures rose on news of the resumption of trade talks between the United States and Canada. The U.S. dollar dropped to its lowest level in three years as a result of the tax cut bill. ·

On the 30th (local time), news that U.S.-Canada trade talks, which had faced a suspension crisis, resumed in Canada and that negotiations with China and the EU were progressing led U.S. stock futures to rise in the futures market, surpassing last week’s highs.

The S&P 500 Index rose by 0.4%, the Nasdaq 100 Index climbed 0.5%, and Dow Jones futures also gained 0.6%.

In Asian trading, the KOSPI of Korea increased by 0.52% to 3,071.70 points, while the Nikkei 225 of Japan advanced by 0.84%. The Shanghai Composite Index in mainland China was up 0.5%, whereas the Hang Seng Index fell by 0.8%.

In Europe, the broad STOXX Europe 600 Index declined by 0.2%, with national markets showing a flat trend.

The U.S. dollar resumed its decline following the major tax cut bill in America, falling by 0.2% against major currencies and nearing its lowest level in three years. The Japanese yen rose by 0.4% to 144.08 per dollar, while the euro appreciated by 0.1% to reach 1.1731 dollars.

As President Trump's July 9 trade negotiation deadline approached, U.S. government officials noted progress in talks with major partner countries such as China and the EU.

Negotiations on the Trump tax cut bill continue as the Republican Party works to persuade opposition for final passage. The bipartisan Congressional Budget Office (CBO) estimated that this bill would increase the U.S. fiscal deficit by about $3.3 trillion over the next 10 years, putting pressure on the dollar.

According to Bloomberg, the Bloomberg Dollar Spot Index has declined by about 9% so far this year, marking the largest first-half drop since its inception in 2005.

Lloyd Chan, a strategist at Mitsubishi UFJ Financial Group, stated in a report, “The U.S. dollar continues on a cyclical downtrend, with persistent uncertainty over America’s fiscal and trade policies.” One major factor putting further pressure on the dollar could be the potential surge in fiscal debt as a result of Trump’s large-scale bill.

James Riley, Chief Market Economist at Capital Economics, pointed out that, since the U.S. switched to a free-floating exchange rate system in 1973, the dollar’s decline so far this year has been the largest. He added, “Currently, unhedged European and Asian portfolios are following this trend, which could further strengthen downside risks.”

Meanwhile, in Asian markets, the Taiwan dollar plunged by over 2% against the U.S. dollar, weakening to as much as 28.895 per dollar. This late-session plunge, similar to last Friday’s pattern, fueled speculation that Taiwan’s central bank may have intervened to curb its currency’s strength.

In commodities markets, as risk appetite broadly recovered, gold prices fell. Gold stood at $3,284 per ounce.

International oil prices also remained weak amid concerns over increased production by OPEC+. Brent Crude fell by 14 cents to trade at $67.63 per barrel, while West Texas Intermediate (WTI) dropped 28 cents to $65.24 per barrel.

Last week, U.S. stocks hit record highs on the back of easing geopolitical tensions in the Middle East and optimism over the U.S. economy. Low inflation is also raising expectations for a Federal Reserve rate cut this year, though policymakers remain cautious.

Investors are expected to focus on upcoming economic indicators, including the U.S. Department of Labor’s monthly employment report to be released this Thursday, to assess the U.S. economy and interest rate outlook.

Jungah Kim, Contributing Reporter kja@hankyung.com