📈 U.S. Markets Rally to Record Highs Amid Trade Optimism and Stable Inflation

By Tim Montague-Jones | Australian Stock Report

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Wall Street Surges Despite Trade Tensions with Canada

U.S. markets closed out last week on a high, with investor sentiment buoyed by progress in U.S.-China trade negotiations and reassuring inflation data. The S&P 500 rose 0.5% to a record 6,169.84, while the Dow Jones Industrial Average gained 432 points (1%). The Nasdaq also posted a 0.5% increase.

This upbeat finish came despite a brief intraday selloff after former President Trump abruptly ended trade discussions with Canada over its digital services tax. The sudden move reignited concerns about protectionism, but optimism quickly returned, supported by signs of a truce in rare earth mineral disputes with China and speculation of an extended tariff freeze.

Adding to the positive tone, U.S. inflation data showed only a 0.1% month-on-month increase in the core Personal Consumption Expenditures (PCE) index, and a year-on-year rise of 2.3%. While core PCE edged up to 2.7%, the market appeared comfortable with this uptick. However, a 0.5% contraction in Q1 GDP served as a reminder that underlying risks remain.

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Nike Jumps on Strong Q4 and U.S. Manufacturing Shift

Nike was among the standout performers, with its shares surging following robust fourth-quarter results. The sportswear giant also announced a significant shift of manufacturing operations from China to the U.S., a strategic move aimed at mitigating tariff risk and boosting domestic resilience.

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🇦🇺 ASX 200 Edges Lower as Sector Rotation Continues

Back home, the ASX 200 slipped 0.43%, dragged lower by losses in Financials, Utilities, and Healthcare. However, the Materials and Info Tech sectors provided some relief, supported by a mixed performance in commodities.

Aluminium, Zinc, and Nickel ended the day in positive territory, while Copper declined. Iron ore remained flat at US$94.48 per tonne, and Brent crude dropped 0.5% to US$67.42 a barrel, while gold climbed 0.5% to US$3,340.20 an ounce.

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DroneShield Lands $9.7 Million Deal in Latin America

In stock-specific news, DroneShield (ASX: DRO) announced a significant $9.7 million contract comprising three standalone agreements for its counterdrone technologies.

The contract, signed with a Latin American reseller, is expected to be fulfilled entirely within 2025, with payment anticipated in Q3 and Q4. This deal highlights continued global demand for defence and surveillance technology amid rising geopolitical uncertainty.

RBA Urged to Ditch 2.5% Inflation Target Midpoint

Brian Redican, chief economist at TCorp, has questioned the Reserve Bank of Australia’s (RBA) focus on achieving the 2.5% midpoint of its 2–3% inflation band. He argues the benchmark is unrealistic and places unnecessary pressure on policymakers.

Redican contends that factors such as oil prices and global trade policies—particularly those tied to Trump-era tariffs—have a greater influence on inflation than minor adjustments to interest rates.

This commentary could reignite debate over the RBA’s policy framework, especially as rate cut expectations build following a slowdown in domestic inflation.

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U.S. Bond Market Braces for June Jobs Report

Bond investors are eyeing this Thursday’s U.S. employment report for signs of continued softening in the labour market. The data will be critical in determining the Federal Reserve’s near-term interest rate direction.

Treasuries are on track for their strongest monthly gain since February, with yields at two-month lows. Traders are now pricing in a 0.25% rate cut at the September Fed meeting, with some speculation building for an earlier move depending on this week’s jobs data.

Markets will close on Friday in observance of Independence Day, intensifying the focus on Thursday’s figures.

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Outlook: Cautious Optimism Amid Policy Shifts

Global equities appear to be navigating the complex interplay of inflation trends, trade developments, and central bank policy with cautious optimism.

While Wall Street’s rally underscores investor confidence, signs of economic softening and policy uncertainty remain. Australian investors should stay alert to shifts in commodity prices, U.S. employment data, and evolving trade relations, all of which have the potential to sway both local and global markets in the weeks ahead.