Global financial markets experienced modest declines on Thursday as investors digested the passage of a sweeping U.S. tax-and-spending bill backed by President Donald Trump, while growing uncertainty over an upcoming international trade agreement deadline further dampened sentiment.
The U.S. dollar weakened against major currencies, while global equities pulled back, particularly in sectors sensitive to fiscal policy and trade exposure. Analysts say investors are recalibrating expectations in light of the bill’s long-term economic impact and awaiting further clarity on a potentially market-moving trade deal due next week.
Market Snapshot
- Dow Jones Industrial Average: -0.4%
- S&P 500: -0.5%
- Nasdaq Composite: -0.3%
- MSCI World Index: -0.6%
- U.S. Dollar Index (DXY): -0.45%
- Gold: +0.9%
- 10-Year Treasury Yield: down 6 basis points to 3.78%
Key Drivers Behind the Market Moves
1. Trump’s Spending Bill Passes Senate
The legislation — dubbed by the White House as the “Big Beautiful Bill” — includes substantial increases in infrastructure spending, tax reductions for middle-income earners, and expanded defense outlays. While seen as stimulative in the near term, the bill also raises concerns about ballooning deficits and inflationary pressures over the medium term.
Investors are now weighing how the fiscal boost might impact Federal Reserve policy, especially with inflation lingering above target in core segments of the economy. Expectations of higher future borrowing by the U.S. government also pushed down Treasury prices, driving yields lower.
2. Trade Deal Deadline Approaches
Markets are also on edge ahead of a July 10th deadline for a multilateral trade pact between the United States, the European Union, and select Asia-Pacific partners. The negotiations are reportedly stalled on key provisions related to digital services taxation and industrial subsidies.
The uncertainty has cast a shadow over global trade-sensitive stocks, particularly in the automotive, semiconductor, and shipping sectors, which had previously rallied on optimism about a breakthrough.
Investor Sentiment: Cautious Optimism or Correction Ahead?
“There’s no doubt markets have been running hot. The passage of Trump’s bill introduces fiscal stimulus, but it also raises the stakes for Fed policy and trade relations,” said Valerie Tan, Global Markets Strategist at Morgan West.
She added that while equities remain near record highs, “this may be a healthy pullback as investors digest new variables on both domestic spending and global trade.”
Sector Impact
- Defense and Aerospace stocks saw mild gains on the back of increased military funding.
- Financials and Tech dipped on expectations of tighter monetary conditions and trade uncertainties.
- Utilities and Gold attracted safe-haven flows.
What to Watch Next
- Fed commentary will be closely followed for signals on how policymakers interpret the fiscal impact of Trump’s bill.
- Trade negotiations in London and Brussels over the next five days could drive volatility in equities and currencies.
- Q2 corporate earnings season, starting next week, will provide further guidance on how companies are navigating policy shifts and global demand trends.
Conclusion
Markets are adjusting to a complex mix of fiscal expansion, monetary uncertainty, and international trade tensions. With policy decisions in Washington and Brussels converging over the next two weeks, investors are likely to remain defensive and highly responsive to headlines that shape the economic outlook for H2 2025.
