Dollar set for its worst first-half performance since 1973

Global stocks hit an intraday record on Monday on hopes US trade negotiations with key partners would continue to progress, while the dollar declined and was set for its worst first-half performance in more than five decades.

Canada halted its digital services tax targeting US technology firms just hours before it was due to take effect, in an effort to advance stalled trade negotiations with Washington.

Canadian Prime Minister Mark Carney and US President Donald Trump will resume trade negotiations in an attempt to agree on a deal by July 21, in an extension from Trump's original July 9 deadline for "reciprocal" tariffs.

The July 9 deadline still holds for other countries, although officials have suggested most deals could be done by the September 1 Labor Day holiday.

On Monday, US Treasury Secretary Scott Bessent advised that the US could move back to the tariff levels on April 2, when Trump announced a wide array of steep duties against countries around the globe, and that the decision for any extension to negotiations would be up to Trump.

On Wall Street, US stocks rose modestly with the S&P 500 and Nasdaq closing at record levels for a second straight session, led by a gain of about 1 per cent in technology, while consumer discretionary was the worst performing of the 11 major S&P sectors.

"Animal spirits seem to have taken hold here," said Roy Behren, co-president of Westchester Capital Management in New York. "It is also quite common for the last couple of days of a quarter to see strength because of the window dressing."

The Dow Jones Industrial Average rose 275.50 points, or 0.63 per cent, to 44,094.77, the S&P 500 rose 31.88 points, or 0.52 per cent, to 6,204.95 and the Nasdaq Composite rose 96.28 points, or 0.48 per cent, to 20,369.73.

Investors will eye a flurry of labor market data in the holiday-shortened trading week, culminating in Thursday's government payrolls report. The report is scheduled for release a day early, while the US stock market will have a shortened session on Thursday and be closed on Friday due to the Independence Day holiday on July 4.

Some Fed officials, including Chair Jerome Powell, have said the strength of the labor market gives the central bank the leeway to hold off on cutting interest rates until they can get a better sense of the impact Trump's tariffs will have on inflation.

Federal Reserve Bank of Atlanta President Raphael Bostic said Monday that the economy has yet to face the full impact of Trump’s trade tariffs and said he still sees one cut from the Fed this year, while Chicago Federal Reserve Bank President Austan Goolsbee said he sees no sign of stagflation but there is the possibility of both unemployment and inflation getting worse simultaneously.

Investors were also monitoring the progress of a huge US tax-cutting and spending bill slowly making its way through the Senate, which Republicans will try to pass on Monday.

The Congressional Budget Office estimated the bill would add $3.3 trillion to the nation's debt over a decade, testing foreign appetite for US Treasuries.

MSCI's gauge of stocks across the globe gained 3.88 points, or 0.42 per cent, to 918.67 and was on track for its third straight session of gains after hitting an intraday record of 919.47.

The pan-European STOXX 600 index closed down 0.42 per cent, but secured its second straight quarterly advance despite dropping more than 1 per cent in June.

The dollar index , which measures the greenback against a basket of currencies, fell 0.41 per cent to 96.80, with the euro up 0.55 per cent at $1.1783.

The greenback has struggled throughout the year, partly due to growing expectations the Fed may become more aggressive in cutting interest rates next year when Powell is replaced as Chair. The dollar is down 10.5 per cent for the first half, which would mark its biggest drop over the first six months of the year since 1973, when the US shifted to a free-floating exchange rate.

Against the Japanese yen, the dollar weakened 0.47 per cent to 143.97 while sterling edged up 0.08 per cent to $1.3725.

The yield on benchmark US 10-year notes fell 4.9 basis points to 4.234 per cent.

US crude settled down 0.63 per cent to $65.11 a barrel and Brent settled at $67.61 per barrel, down 0.24 per cent on the day.