Dow futures indicate an upward trajectory, as Canada’s decision to eliminate a digital services tax enhances market sentiment. Meanwhile, the Republican-controlled U.S. Senate initiates discussions regarding a comprehensive tax cuts and spending bill; however, certain GOP holdouts persist, even as the Fourth of July deadline for passing the package approaches significantly. In other developments, Chinese manufacturing activity experiences a contraction in May, albeit at a pace less severe than expected.

Dow futures exhibited an upward trend on Monday, as market participants reacted positively to Canada’s decision to eliminate a digital services tax targeting American technology firms, while also expressing optimism that the White House might successfully negotiate various trade agreements in the near future. As of 03:30 ET (07:30 GMT), the Dow futures contract experienced an increase of 250 points, representing a 0.6% rise. Meanwhile, S&P 500 futures saw a gain of 23 points, equivalent to 0.4%, and Nasdaq 100 futures rose by 109 points, or 0.5%. The primary indices concluded the trading session on Friday with gains, as the benchmark S&P 500 and the technology-focused Nasdaq Composite achieved record closing highs. The Nasdaq has officially entered bull market territory, which is typically characterized by a 20% increase from a recent low.

A report on personal consumption expenditures indicated that consumer spending experienced an unexpected decline in May, while the inflation rate remains persistently above the Federal Reserve’s 2% target. The data reinforced expectations for possible interest rate cuts from the central bank. Financial markets currently reflect an approximate 74% likelihood that the Fed will implement a rate cut as early as September, while a lesser probability remains for a reduction at the upcoming meeting in July.

Canada has opted to withdraw its digital services tax on technology firms just hours prior to its implementation, as Ottawa seeks to rejuvenate halted trade discussions with the Trump administration. The proposed tax would apply to 3% of the digital services revenue that a technology firm generates from Canadian clients exceeding $20 million within a calendar year. It would have applied retroactively to 2022 as well. U.S. President Donald Trump cited the tax as a rationale for ending trade negotiations with Canada last week, labeling it “egregious” and warning of the imposition of a new tariff rate on Canadian goods as a countermeasure. However, a statement from Canada’s finance ministry indicated that the collection of the tax, scheduled for Monday, will be suspended. Canada’s finance minister indicated that legislation aimed at eliminating the tax will be introduced. In the wake of the announcement, Prime Minister Mark Carney and U.S. President Donald Trump are set to engage in discussions aimed at finalizing a trade agreement by July 21, as indicated by Canada’s finance ministry.

Republicans in the U.S. Senate have initiated a vote to commence discussions regarding their substantial, Trump-supported tax-and-spending proposal, despite encountering resistance from certain factions within the GOP and firm opposition from Democrats. The measures, as indicated by a nonpartisan forecaster, could contribute approximately $3.3 trillion to the nation’s escalating $36.2 trillion debt over the next decade. They are anticipated to gain approval from the upper chamber of the U.S. Congress, possibly as soon as Monday. The proposed legislation encompasses several initiatives, including the extension of tax cuts originally implemented by Trump in 2017, reductions in various taxes, and an increase in funding for defense and border security. Senators are expected to engage in extensive debate prior to initiating a voting session concerning amendments to the legislation, a process that may subsequently lead to a vote on the complete passage of the bill. The legislation must subsequently receive approval from the House of Representatives. Congressional lawmakers are striving to ensure that the package is prepared for signing by the self-imposed deadline of July 4.

In June, China’s manufacturing sector experienced a contraction, though the decline was somewhat less severe than anticipated, as domestic producers faced challenges from weak international demand in the context of elevated U.S. trade tariffs. The manufacturing purchasing managers’ index registered at 49.7 in June, according to data released by the National Bureau of Statistics on Monday. The print exceeded expectations of 49.6, showing an improvement from the previous month’s figure of 49.5. A reading below 50 signifies contraction, as China’s manufacturing sector experiences a decline for the third consecutive month. Nevertheless, the PMI experienced a slight increase from the previous month, indicating a modest improvement in conditions for domestic manufacturers following the agreement between the U.S. and China to reduce their respective trade tariffs in May. Washington and Beijing have taken measures to reach an agreement on maintaining the May deal, in addition to creating a framework for a trade agreement in June. Enhanced trade relations between the two nations may yield advantages for Chinese manufacturers, enabling them to increase sales in U.S. markets as tariffs decline.

Crude prices experienced a slight decline on Monday, influenced by a reduction in geopolitical tensions in the Middle East and the anticipation of an additional output increase from OPEC+ in August. At 03:35 ET, Brent futures experienced a decline of 0.2%, settling at $66.66 per barrel, while U.S. West Texas Intermediate crude futures decreased by 0.4%, reaching $65.26 per barrel. Both benchmarks experienced their most significant weekly drop since March 2023 last week; however, they are poised to conclude June with a second successive monthly increase exceeding 5%. The Organization of the Petroleum Exporting Countries and its allies, collectively referred to as OPEC+, is scheduled to convene on July 6. It is anticipated that the group will reach a consensus to implement yet another monthly increase in output levels, marking the fifth such adjustment since the commencement of the unwinding of production cuts in April.