Trade Deal Boosts Sentiment, Sending Stocks to Record Levels

July 3, 2025

minute read

Stocks reached a new all-time high, reflecting increased investor confidence after President Donald Trump announced a trade agreement with Vietnam. Meanwhile, Asian equity futures showed minimal movement, indicating a cautious yet steady market tone across the region.

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The MSCI global stock index hit a fresh peak as the S&P 500 gained 0.5% Wednesday, setting a new record. The Nasdaq 100 outpaced broader markets with a 0.7% advance, fueled by strong performance in the technology sector.

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News of the U.S.-Vietnam trade deal particularly lifted shares of apparel companies like Nike Inc., as optimism grew that the accord would help stabilize supply chains threatened by earlier trade tensions. Tesla Inc. also climbed 5% despite reporting a sales decline, which investors viewed as less severe than feared.

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On the bond front, U.S. Treasury prices dropped, influenced in part by sharp selling in U.K. government bonds. British yields jumped after renewed concerns over the country’s fiscal outlook, following speculation about Chancellor of the Exchequer Rachel Reeves’ future.

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Similar worries surfaced in the U.S. after the Senate approved Trump’s extensive tax and spending package, raising questions about the long-term impact on government finances.

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These cross-asset movements reflected a mix of cautious optimism and underlying uncertainties. Investors were bracing for Thursday’s closely watched U.S. jobs report, which is expected to clarify the Federal Reserve’s path forward on interest rates. The U.S. 10-year Treasury yield rose four basis points, while its U.K. counterpart spiked 16 basis points. In commodities, gold edged up, oil surged nearly 3%, and the dollar remained relatively stable.

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“Investors are already starting to price in at least some form of the One Big Beautiful Bill,” said Zachary Griffiths, head of investment-grade and macro strategy at CreditSights, during a interview. He added that rising fiscal concerns are not just a U.S. issue, but a global one — with the U.K. serving as a prime example.

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Ahead of the Fourth of July holiday, the government’s monthly nonfarm payroll data is scheduled to be released Thursday — a day earlier than usual. Economists predict the economy added 106,000 jobs in June, which would be the smallest gain in four months. On Wednesday, ADP data revealed that private-sector employment in the U.S. fell for the first time in over two years, adding to evidence of a possible slowdown in the labor market.

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Despite these signals, Federal Reserve Chair Jerome Powell has continued to stress that the overall job market remains strong. Fed officials have not moved to lower interest rates this year, choosing instead to wait and assess how tariffs may affect inflation.

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Chris Zaccarelli, chief investment officer at Northlight Asset Management, explained that the Fed’s patience has been possible because employment has held up. But if that strength fades, the central bank could be forced to cut rates sooner than expected. “If the labor market weakens meaningfully, that could push the Fed to act earlier than they’d prefer,” he said.

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In Asia, upcoming economic releases include S&P Global services purchasing manager indexes (PMIs) for Japan, trade data for Australia, and June’s Caixin composite and services PMIs for China. Meanwhile, U.S. markets are scheduled to close early Thursday in observance of the Independence Day holiday on Friday.

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Following the ADP report, market participants increased their bets that the Fed will deliver at least two rate cuts in 2025, with the first one potentially arriving in September. A disappointing government jobs report could further support that expectation.

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“The ADP report raised the chances that Thursday’s payrolls figure could surprise to the downside,” said Jeff Roach, chief economist at LPL Financial. He expects a weaker-than-forecast number, which could push the Fed toward making three rate cuts this year.

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Although equities have rebounded in recent months, Zaccarelli urges caution. He pointed to elevated market valuations, a cooling economy, and the likelihood that the U.S. may already be near full employment. While sentiment has been positive, RBC Capital Markets strategists led by Lori Calvasina warned that the rally might be overextended.

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“U.S. equities haven’t reached extreme levels of froth yet, but they’re headed in that direction,” they wrote. If inflation pressures return or economic disruptions from tariffs escalate — and the Fed doesn’t ease policy — the markets could face a negative surprise.

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Market Recap (as of 7:16 a.m. Tokyo time):

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