Canada caves, will others be forced to follow?
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What market moves set the tone for today’s trading session?
Well, it was starting to look a bit ugly between the U.S. and Canada with trade negotiations stalled until Canada relented and ditched their digital services tax. Will Europe have to do the same? Meanwhile, mixed CPI numbers for Europe, slightly stronger than expected PMIs for China, and U.S. ISMs today, along with the jolts numbers, plus some New Zealand data to cheer over as well. It's Tuesday. It's the 1st of July, 2025. A whole new quarter starts right now. It's the morning call from NAB. Good morning. Good morning. So U.S. equities are all up today with some record highs. So the Dow finished up 0.6%, 0.5% for the S&P, which did hit that new high, 0.5% for the Nasdaq as well. IT and financials and real estate are the big winners in U.S.
equities. Shares are down in Europe, though. The Euro stocks 50 and the FTSE 100 both closed down 0.4%, 0.5% off the DAX. Back on the slide, it's down 0.5% today to 96.9% on the DXY. The Aussie is up 0.8%. The Euro up 0.5%. The pound is flat. The Canadian dollar is up 0.5% as well. Ten-year Treasury yields are down five basis points to 4.23%. For ten-year yields everywhere else, well, down three basis points for Canada, two basis points for the UK, up one for Germany, up two in France. And Aussie ten-years were up three basis points yesterday. to 4.16%, and a couple of basis points higher than that now on futures. And oil is down 0.8% lower for WTI, down below 65 a barrel. Brent is down 0.25% to around 67.60.
So a week of trade news, I suspect.
Why did Canada decide to abandon its digital services tax?
Nabs Ray Attrell is with me. Let's start on that anyway, with the White House saying that Canada has caved... on their digital services tax. So trade talks can resume based on that. I mean, it obviously doesn't bode well for Europe, though, does it? Because will they have to cave on a digital services tax as well if they want to avoid the worst of the tariffs? Yeah, morning, Phil. I think
you're right that trade is front and centre this week. alongside that, we've obviously got the fate of the one big beautiful bill, which is currently being debated in the Senate. We might actually get a vote on that during the Australian day today. And then obviously, as we discussed yesterday, it's a truncated US week with payrolls on Friday that does have Significant bearing, I think, on sentiment towards the potential timing of a Fed rate cut. So it really is a big and truncated week. But yes, so on the trade, you know, early Monday morning, our time, we had news that... Canada has rescinded the digital service tax, which was due to come into effect today, July the 1st, and which was the reason that President Trump had basically pulled out of or pulled the US out of Canada trade talks on Friday.
So the fact that Canada has caved, well, Good news insofar as it may break an impasse as far as the US-Canada trade deal is concerned. But it obviously shines the spotlight, as you suggest, on whether or not this digital service tax that is so hated both by the US administration and also the Silicon Valley, effectively, and the The tech bros or whatever you want to call it that obviously have so much influence on U.S. policy thinking is going to be a sticking point as far as an EU-U.S. trade deal is concerned. Now, on that, we've had news that the EU has said that it is willing to accept sanctions. This 10 percent baseline tariff would presumably without retaliatory actions from the EU against the US.
But it's also looking for various carve outs with respect to things like autos and steel and aluminium. And I think it sounds like it's looking for some sort of deal akin to the UK where they've had these quotas on a certain amount of oil. of goods coming from the EU into the US would presumably be tariff-free or not be subject to the same sectoral tariffs that are currently being proposed. But
do they get that if they carry on having a digital services tax? Similarly for the UK, is that relationship going to remain quite so harmonious if they start? No,
absolutely, absolutely. I think it's exactly the right question to ask. And my bet would be that the problem with this is that the digital service tax is not an EU-wide affair, and it's the EU, the EU Commission, effectively, that is negotiating with the US.
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Chapters
5 chapters
1
What market moves set the tone for today’s trading session?
0:01–1:33
2
Why did Canada decide to abandon its digital services tax?
1:33–7:08
3
Will Europe be forced to roll back its digital services taxes to avoid U.S. tariffs?
7:08–11:43
4
How might Australia’s own digital services tax affect its trade relationship with the United States?
11:43–14:36
5
What is the impact of today’s bond‑yield outlook on government borrowing plans?
14:36–15:41