Canada, under pressure, rescinded its controversial digital services tax over the weekend, extending the runway for a potential deal by late July. Earlier in the weekend, Donald Trump had broken off negotiations because of this tax. At the same time, Indian and Japanese negotiators extended their stays in the US to bring the talks to a successful conclusion. Investors seem determined to squeeze optimism out of uncertainty, bidding up everything from tech mega caps to defense stocks in Europe.

But beneath the record numbers lies a stubborn disconnect between market enthusiasm and political reality. President Trump’s penchant for brinkmanship has rattled allies and adversaries alike, yet investors, conditioned by years of Fed intervention and seemingly bulletproof corporate earnings, continue to press risk assets higher. Indeed, as Nasdaq futures gained 0.5% and the S&P 500 rose 0.4%, global investment strategists warned that equity valuations haven’t looked this rich since the dot-com era.

It’s easy to cheer record highs. But markets ignore the slow-burning fuse of Washington dysfunction at their peril. Trump’s tax and spending bill, mired in the Senate, would add $3.3 trillion to the deficit over the next decade according to the Congressional Budget Office. Elon Musk has added another layer to Donald Trump's grand tax bill. The Tesla boss believes the bill is retrograde, harmful to employment, and contrary to the interests of the United States. The prospect of that much new debt may test foreign demand for U.S. Treasuries, which in turn could push borrowing costs higher for American consumers and businesses alike.

Economists and investors alike expect June payrolls data this week to show tepid job gains and a creeping rise in the unemployment rate. That would leave the Federal Reserve with an awkward choice: wait to see if tariffs feed inflation or cut rates sooner to shore up growth. This data will be released exceptionally on Thursday as Wall Street will be closed for the Fourth of July.

For now, markets seem content to assume a soft landing. Treasury yields continue to slip, helping keep borrowing costs contained, and tech titans like Nvidia, Alphabet and Amazon soak up investor cash with a Teflon resilience. Even Europe, roiled by its own inflation challenges and dependent on steady U.S. demand, has managed to turn around early-session losses to post quarterly gains.

Yet beneath this buoyancy lies a deeper fragility. The NATO defense spending surge may cheer European defense contractors, but it also signals an escalation in geopolitical tensions that could spill into trade, tariffs, and ultimately growth. Meanwhile, Canada’s climbdown on the digital tax hints at the kind of leverage Washington continues to exert over smaller trading partners, even as America’s own fiscal house teeters under the weight of deficits and political gridlock.

Today marks the end of the first semester, which gives us the chance too look back at performance so far. here's how the asset classes have been performing in the past 6 months:

  • Gold is winning hands down, despite a recent dip: +25%.
  • Bitcoin is rebounding after a slump. It's in second place with +16%.
  • Emerging market equities are following suit after a recent acceleration: +14.2%.
  • European equities have performed well, despite stalling recently: +6.9%.
  • US equities woke up in the second quarter: +5%.
  • Investment grade bonds: +6.8%.
  • High yield bonds: +6.7%.
  • Listed real estate: +4.4%.
  • US Treasury bills: +3.5%.
  • Commodities bring up the rear (as a group, because the performance of individual commodities varies widely): -0.7%.

In other news, Donald Trump has taken another swipe at the Fed chairman. “I would love to see him resign, he's done a terrible job,” the US president said, before calling Jerome Powell "stupid." Meanwhile, the US and the G7 have reached an agreement to exclude US companies from certain global tax rules that imposed a minimum tax rate.

In Asia-pacific, Tokyo (+0.7%), Seoul (+0.5%) and Sydney (+0.5%) ended in the green. India, Taiwan and China, on the other hand, were down slightly. Europe is slightly bearish, with the Stoxx Europe 600 down 0.09%

Today's economic highlights:

On today's agenda: industrial production in Germany; composite, manufacturing, and non-manufacturing PMIs in China; GDP in the United Kingdom; the KOF leading indicator in Switzerland; unemployment change and the harmonized EU CPI in Germany; in the United States, the MNI Chicago PMI. See the full calendar here.

  • Dollar index: 97,315
  • Gold: $3,286
  • Crude Oil (BRENT): $66.66 (WTI) $65.31
  • United States 10 years: 4.25%
  • BITCOIN: $107,650

In corporate news:

  • OpenAI is turning to Google's AI chips to power its products at the expense of Nvidia, according to several sources.
  • Meta is seeking to raise $29 billion from private equity firms to fund AI-dedicated data centers, according to the Financial Times.
  • CoreWeave is in talks to buy Core Scientific, according to several sources.
  • KKR is leading the race to buy Argos credit card owner Newday for £1.7 billion, according to Sky News.
  • GE Vernova is considering selling its Proficy software division, according to Bloomberg.
  • Musk claims that, to his knowledge, Tesla's new Model Y is the first fully autonomous car with no one on board and no remote control on a public road.
  • Trump tells Fox News that he has a group of wealthy individuals to buy TikTok.
  • Abrdn CEO and trustees have resigned, impacting leadership stability.
  • James Hardie shareholders approve acquisition of AZEK.
  • Canada shelved its planned 3 % digital-services tax - aimed at Amazon, Meta, Alphabet and Apple - to keep trade talks with Washington on track before a July 21 deadline.
  • The U.K. Competition & Markets Authority began a Phase 1 review of Boeing’s proposed $4.7 billion acquisition of Spirit AeroSystems over competition concerns.
  • Carnival launched a €1 billion senior-notes offering due 2031 to repay portions of its first-priority term-loan facilities maturing in 2027–28.
  • KKR will sell its 46.39 % stake in J.B. Chemicals & Pharmaceuticals to Torrent Pharmaceuticals (valuation ≈ $3 billion), after which the two firms will merge.
  • Hewlett Packard Enterprise and Juniper Networks agreed to divest HPE’s “Instant On” WLAN unit and license Juniper’s Mist AI code to resolve U.S. antitrust objections to their $14 billion merger.
  • Tesla activated its first V4 super-chargers in China (Shanghai, Chongqing, Gansu, Zhejiang) and will gradually open them to other EV brands.

Analyst Recommendations:

  • Nvidia: Baptista Research upgrades to outperform from buy with a price target raised from USD 173.30 to USD 190.90.
  • Oracle Corporation: Stifel upgrades to buy from hold with a price target raised from USD 180 to USD 250.
  • Tesla, Inc.: Baptista Research downgrades to hold from outperform with a price target raised from USD 298.50 to USD 370.
  • Walt Disney Company (The): Jefferies upgrades to buy from hold with a price target raised from USD 100 to USD 144.
  • Whirlpool Corporation: Longbow Research upgrades to buy from neutral with a target price of USD 145.
  • Doordash, Inc.: Oppenheimer maintains its outperform rating and raises the target price from USD 220 to USD 280.
  • Pegasystems Inc.: Loop Capital Markets maintains its buy recommendation and reduces the target price from 105 to USD 60.
  • Rocket Lab Corporation: Goldman Sachs maintains its neutral recommendation with a price target raised from 16 to USD 26.
  • The Goldman Sachs Group, Inc.: RBC Capital maintains its sector perform recommendation and raises the target price from USD 560 to USD 700.