US equity futures are slightly higher with small caps outperforming into the payrolls report. As of 8:10am ET, S&P 500 futures are up 0.2% while Nasdaq 100 contracts were up 0.1%. The tax/budget bill appears likely to pass later this morning after a dramatic overnight session, so keep an eye on yields though any impact may be delayed until next week given the holiday. Payrolls are the key event of a trading day which finishes at 1 pm. Consensus has the print at 106K, while the whisper number is 96K and the Bloomberg Economics’ Nowcast model forecasts job gains of 119k, higher than consensus while Goldman expects a downbeat 85K number. Scenarios laid out by JPMorgan see the S&P as most likely to rise after the data, though a reading of less than 85k would lead to a 2% to 3% drop for the index. A poor number ( especially after the negative ADP jobs reading) would strengthen the case for a July rate cut and would add to pressure on Fed Chair Powell, who has repeatedly declined to say whether he will step down when his term as chair expires in May. European stocks are also little changed; Siemens is higher after saying the US has dropped its restrictions on software, used to design semis, exports to China, CDNS/SNPS are both up more than 6%. The Dollar is mixed but trading in tight ranges across G10: sterling is recovering this morning in tandem with GILT's after the UK Prime Minister Starmer confirmed Chancellor Reeves has his backing yesterday, alleviate further fiscal uncertainty. US bond yields are lower reflecting heighten downside risk to NFP today; the 10Y at 4.26%. Commodities are higher led by ags, base/precious, and oil. Besides the jobs report, we also get the ISM services index for June, the weekly initial jobless claims, as well as the trade balance and factory orders for May
In premarket trading, Magnificent Seven stocks are mixed (Tesla, Meta +0.6%, Amazon +0.2%, Microsoft -0.03%, Alphabet -0.03%, Nvidia -0.06%, Apple -0.5%).
Markets will be laser focused on the latest US employment numbers this morning including NFP and the unemployment rate, keeping in mind we have a shortened NY trading session today going into a long weekend. Consensus expects nonfarm payrolls to rise +106k today and that unemployment rate will round up to 4.3% (full preview here). US stock trading is set to close at 1 p.m. New York time for the July 4 holiday, with bond dealing wrapping up an hour later.
Thursday’s cross-asset moves underscored cautious optimism as traders contend with areas of uncertainty ahead of the employment report that will help identify the path ahead for Federal Reserve interest rates. A weak report may boost Fed doves and support stocks near record highs, while stronger data could complicate the outlook.
“Markets might be getting ahead of themselves if we see a negative number,” said Susana Cruz, a strategist at Panmure Liberum. “Powell has been clear that any decision on rate cuts will depend on the data. But it is too early to assess that data, particularly inflation.”
Investors are also closely tracking the US fiscal situation, as House Republican leaders worked urgently to secure enough support for Trump’s massive tax and spending package, with the process moving toward a final vote. Concerns about mounting US deficits may weigh stronger on bond investors’ minds than the jobs report, said Frederique Carrier, head of investment strategy for RBC Wealth Management in the British Isles and Asia.
“It’s a structural deficit at a time of full employment,” Carrier said. “It doesn’t mean that a disaster is imminent, but it does mean that it’s something that the market at one point will deal with. There is definitely a lot of complacency.”
In Europe the Stoxx 50 is little changed. FTSE 100 outperforms peers, adding 0.5%, while FTSE MIB lags, dropping 0.3%. Consumer products, telecoms and travel are the worst performing sectors. Following yesterday's "Truss-like" crash, Gilts rebounded, outperforming peers, after PM Starmer said Reeves will stay on as chancellor “for many years to come.” The UK 30-year yield drops 11 bps, close to erasing Wednesday’s surge. The pound is also the only G-10 currency that’s up versus the dollar this session. Here are the biggest movers Thursday:
Earlier in the session, A key Asian equity benchmark advanced, boosted by a rally in South Korean stocks and technology names in the region. The MSCI Asia Pacific Index rose as much as 0.4%, with Samsung Electronics, BHP Group and TSMC among the biggest contributors. South Korea’s Kospi Index closed at a near four-year high after its parliament passed an amendment to Commercial Act which aims to protect the rights of minority shareholders. Stock benchmarks also rose in Taiwan, India and Japan. Asian shares have traded sideways this week after rallying to a four-year high, as investors await the outcome of talks for various nations ahead of Donald Trump’s July 9 tariff deadline. An index of Chinese stocks listed in Hong Kong led decliners around the region. China’s services activity slipped more than forecast in June to reach a nine-month low, a worry for the economy as higher US tariffs threaten exports. Vietnam’s key equity gauge edged lower Thursday despite the announcement of a deal with the US overnight.
In FX, USD is trading mixed and within tight ranges across the G10 complex this morning ahead of NFP where we see clearer asymmetry for the Dollar in a weaker report today. GBP is leading gains across G10, trading +20bps higher, retracing some of yesterday’s losses on headlines confirming Rachel Reeves "will stay in her role for many years". GBP vol is now coming off across the curve, but led by the front end with 1m now trading at 8.1vols, down from the highs of 8.75vols yesterday. JPY (-15bps vs USD) is underperforming this morning despite the move lower in US yields and headlines that BOJ member Takata confirmed that the bank is still looking to raise interest rates. Looking ahead towards the 8:30am NFP print, the market has priced in a 55bp gap in EUR, 50bp gap in AUD, and 60bp gap in JPY. Our trading desk see a clear market asymmetry to an NFP release sub 100k and any unemployment rate at or above a rounded 4.3%. In this scenario, we could see the market price increased odds of a Fed cut and send the Dollar to fresh lows. On the other hand, our research team notes that a stronger report should counter some of the recent Dollar weakness we’ve seen, although believe Dollar positioning is close to neutral levels, and in terms of the tariff narrative, think a stronger set of data could more easily be dismissed as a timing mismatch on the impact from tariffs
In rates, USTs are bull flattening this morning vs yesterday's 3pm level, supported by bid & recovery in UK Gilts in early London trade. PMI data and supply from Spain and France had little market impact as focus shifts on OBBB going through the house and US NFP later this morning. Overnight was busy with UK rates retracing 10bps in the long end and parting yesterday's sell off, flows on the desk were biased towards steepeners in USD rates and buying in front end spreads from RM. As mentioned above, following yesterday's "Truss-like" crash, Gilts rebounded and are outperforming peers, after PM Starmer said Reeves will stay on as chancellor “for many years to come.” The UK 30-year yield drops 11 bps, close to erasing Wednesday’s surge.
In commodities, WTI trades within Wednesday’s range, falling 0.8% near $66.90. Spot gold falls roughly $7 to trade near $3,350/oz. Spot silver gains 1.2% near $37.
Looking at today's calendar, we get the June jobs report at 8:30am New York time, where the median estimate for nonfarm payrolls increase is 106k; Bloomberg’s crowd-sourced whisper number is 97k.US economic data slate also includes weekly jobless claims and May trade balance (8:30am), June final S&P Global US services PMI (9:45am), June ISM services index and May factory orders (10am). Fed speaker slate includes Bostic at 11am, speaking on monetary policy in Frankfurt
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APAC stocks failed to sustain the mostly constructive handover from Wall St counterparts with sentiment in the region cautious as participants braced for the key US jobs data and digested Chinese Caixin Services and Composite PMIs. ASX 200 marginally declined amid weakness in telecoms, financials and the consumer sectors, while trade data showed a monthly contraction in Australian exports. Nikkei 225 lacked conviction in the absence of tier-1 data from Japan and following mixed rhetoric from BoJ's Takata, while US-Japan trade uncertainty lingered and trade negotiator Akazawa recently reiterated that an agreement which would hurt Japan's national interests for the sake of timing should not be made. Hang Seng and Shanghai Comp were ultimately mixed following Chinese PMI data in which Caixin Services PMI missed expectations but Caixin Composite PMI accelerated and returned to expansionary territory.
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European bourses began the session with gains into a packed afternoon agenda; however, as session has progressed this strength has waned a touch and the picture is now more mixed. Euro Stoxx 50 -0.2%; FTSE 100 +0.3% outperforms after the pressure seen on Wednesday. Sectors primarily in the green at first, though as above the picture has turned to more of a mixed one. Retail outperforms led by the initial readthrough of US-Vietnam updates, though the higher-than-expected tariff levy has caused this to fade. Real Estate also strong given UK yields.
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DB's Jim Reid concludes the overnight wrap
It’s been an eventful 24 hours in markets, with a bunch of competing narratives across different asset classes. On the bright side, the S&P 500 (+0.47%) hit a new record after the US reached a trade deal with Vietnam, which raised hopes they were about to announce multiple deals before the reciprocal tariff deadline on July 9. But in the latest twist of 2025, the UK became the centre of market attention again as investors zeroed in on their public finances again. So 10yr gilt yields (+15.8bps) saw their biggest daily jump since the Liberation Day turmoil in April, alongside a cross-asset slump that dragged down UK equities and the pound sterling as well.
In terms of those UK developments, the market nerves had already begun the previous day, as the government made a significant U-turn over cuts to welfare spending, which raised doubts about fiscal discipline. That was coming at a sensitive time, because they’d just made another U-turn last month over winter fuel payments.
That selloff gathered pace yesterday thanks to growing question marks around whether Chancellor of the Exchequer Rachel Reeves would remain in post. For markets, the logic is that Reeves has been a big defender of the fiscal rules, and there’ve been growing calls for these rules to be eased and for borrowing to go up. So the concern in bond markets is that a new Chancellor might trigger a fresh wave of borrowing that pushes rates up further. Earlier, Prime Minister Starmer refused to confirm whether Chancellor Reeves would stay in post, but much later he said to the BBC that she would remain chancellor "for many years to come" which seems to take away some of the short term pressure.
Looking forward, the immediate issue is that the government left a very narrow margin in March against their fiscal rules they set themselves. And since then, that margin has disappeared thanks to factors like the spending U-turns and the tariff announcements after Liberation Day. So unless we got a big burst of growth before the Budget, then the government would need to announce further tax rises or spending cuts if they still want to meet the fiscal rules. So this leaves them in a tricky position. On tax, they’ve ruled out raising several large taxes like income tax and VAT, and the tax rises already announced generated unpopularity. On spending, they’ve come under intense pressure in response to the spending reductions so far, which have resulted in U-turns. And if they eased the fiscal rules, the fear would be a fresh market selloff like yesterday. So it’s not obvious which way they turn. Our UK economist thinks tax hikes will bear the brunt of the heavy lifting on any fiscal consolidation, but given the controversy they generated back in the Autumn budget, it’s clearly a difficult situation.
This backdrop led to a heavy selloff among UK assets yesterday. Gilts were at the epicentre, with the 10yr yield (+15.8bps) up to 4.61%. That selloff was particularly clear at the long-end of the curve, and the 30yr yield (+19.1bps) saw an even bigger rise to 5.42%. Interestingly, the pound sterling slumped as well, which isn’t what normally happens when longer-term interest rates are rising, as that should make the currency more attractive, other things equal. So that was reminiscent of the market patterns seen after Liz Truss, and the pound fell -0.80% against the US Dollar, making it the worst-performing G10 currency yesterday. That spread to UK equities too, with the FTSE 100 (-0.12%) being the only major European index to lose ground. And notably, the FTSE 250, which is a more domestically-focused index, fell by -1.34%, which was its biggest daily decline since the Liberation Day turmoil in early April.
Whilst the UK was dominating attention, it wasn’t all bad news yesterday, and the S&P 500 (+0.47%) climbed to a new record as hopes mounted about potential trade deals. The main catalyst was Trump’s announcement of a deal with Vietnam, which he said would see them pay a 20% tariff on goods exported to the US, whilst the US would pay a zero tariff on their own exports. So that raised hopes about further announcements before the July 9 reciprocal tariff deadline next week. And some of the more trade-sensitive sectors did particularly well, with the Philadelphia Semiconductor index up +1.88% on the day and the S&P 500 Autos subsector was up +4.64%.
Looking forward, attention will remain on the US today, as the jobs report for June is coming out later on. This month it’s on a Thursday because of the Independence Day holiday tomorrow, and our US economists at DB expect nonfarm payrolls to come in at +100k. That’s a bit slower than recent months, with the 3-month average currently at +135k, but they point to higher initial jobless claims in the survey week, and a pattern of subdued summer payroll gains over the last couple of years. In turn, they think the unemployment rate will rise to 4.3%, although the risk is that it could round down.
Ahead of that reading, there was some nervousness about the US labour market yesterday, as the ADP’s report of private payrolls contracted by -33k in June (vs. +98k expected). That was the first negative print since March 2023, and it’s the 3rd month in a row that the ADP print has slowed, so it added to fears that the economy might be starting to show the signs of a slowdown after Liberation Day. Indeed, futures moved to price in marginally more rate cuts this year, with the amount expected by the December meeting up +0.5bps on the day to 65bps. But long-end Treasuries were more influenced by the global bond selloff and fiscal fears, with a decent steepening that took the 10yr yield (+3.5bps) up to 4.277%. They've rallied back around -1.2bps overnight.
While the White House continued to make progress on trade deals, President Trump’s tax bill seemed to hit a snag. House Republicans delayed a vote on Wednesday as some of the more fiscally conservative members took issue with the amount of spending the Senate’s amendments added to the bill. Speaker Johnson can only lose three votes on a bill that only passed 215-214 last month. President Trump’s self-imposed July 4th deadline would be in trouble if the House were to make significant changes that could cause the bill to be sent back to the Senate.
Elsewhere in Europe, the mood was a lot more positive outside the UK. In part, that came about thanks to optimism about the Vietnam trade deal, raising hopes that something might also be agreed between the EU and the US. So most indices put in a decent performance, including the DAX (+0.49%) and the CAC 40 (+0.99%), although the Europe-wide STOXX 600 (+0.18%) was dragged down by the UK’s weakness. Meanwhile for bond markets, the UK selloff didn’t help elsewhere, with yields on 10yr OATs (+7.0bps) and BTPs (+6.5bps) both rising. And for 10yr bunds there was a change in the specific bond used with a new 10yr auction, but the generic 10yr yield was up +9.0bps.
In Asia, markets are mixed. The Hang Seng is -0.96%, around its largest drop in two weeks, while the S&P/ASX 200 is also slightly lower at -0.13%. Meanwhile, the Nikkei is flat but the KOSPI (+0.95%) and the CSI (+0.47%) are up alongside US equity futures which are up around a tenth of a percent.
Early morning data indicated that the Chinese services sector expanded less than anticipated in June, as weak domestic and overseas demand significantly impacted new business activity. The Caixin services PMI fell to a 9-month low of 50.6 in June, below the expected 50.9 and down from the 51.1 recorded the previous month. This disappointing services PMI contrasts with the relatively positive manufacturing data released earlier in the week. Although official PMIs indicated a slowdown in manufacturing, the Caixin PMI data released yesterday suggested a rapid return to growth in the manufacturing sector.
In other news, Australia’s trade surplus sharply decreased to A$2.24 billion in May, compared to A$5.0 billion, marking its lowest level since November 2019, as weak global demand has adversely affected exports. This decline was primarily driven by a -2.7% month-on-month decrease in exports.
To the day ahead now, and US data releases include the jobs report for June, the ISM services index for June, the weekly initial jobless claims, as well as the trade balance and factory orders for May. Otherwise we’ll get the final services and composite PMIs for June in the US and Europe. From central banks, we’ll hear from the Fed’s Bostic, and the ECB will publish the account of their June meeting