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Futures rise amid trade escalation from Trump toward India

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U.S. stock futures are trading higher at the start of the week, supported by improved market sentiment following gains in the previous session. This comes despite ongoing concerns over a slowing U.S. economy, particularly after the latest jobs report fell short of expectations. Markets are currently drawing support from strong corporate earnings, along with growing expectations that the Federal Reserve will cut interest rates in September. According to the CME FedWatch tool, the probability of a rate cut has risen to over 90%, compared to around 63% just a week ago.

President Donald Trump has reignited trade tensions by announcing plans to impose steep tariffs on India potentially up to 100% in response to its continued purchases of Russian oil. Trump also criticized India’s participation in the BRICS group, claiming it undermines U.S. strategic interests. Despite these threats, official sources confirm that India intends to maintain its Russian oil imports, citing economic needs and longstanding ties with Moscow.

In the U.S., investors are awaiting the ISM non-manufacturing PMI for July, expected to show a slight improvement to 51.5, indicating continued expansion in the services sector, which makes up more than two-thirds of the U.S. economy. Meanwhile, in China, S&P Global’s services PMI beat expectations, rising to 52.6 in July from 50.6 in June. The stronger reading reflects robust domestic and external demand, supported by consumer focused stimulus measures from Beijing. So far, the impact of U.S. tariffs on the Chinese services sector remains limited.

The U.S. dollar stabilized after a sharp decline driven by weak labor market data. This recovery reflects investor positioning ahead of a potential rate cutting cycle from the Federal Reserve, which Goldman Sachs predicts could include three consecutive cuts starting in September. San Francisco Fed President Mary Daly also pointed to weakening labor conditions and subdued tariff-related inflation, supporting the case for further easing.

The euro slipped against the dollar after weaker than expected French services data, while the Indian rupee plunged to a record low under pressure from U.S. political rhetoric. Other major currencies showed limited movement the dollar edged higher against both the yen and the Chinese yuan on the back of stronger services data, while the British pound remained range bound in the absence of new drivers.

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