US equity futures slumped on Friday after the latest threat on tariffs from the Trump administration sparked selling across global markets on a day the US cash market is closed for the July 4th holiday. S&P 500 futures fell 0.6% after the index melted up all week, and closed at a fresh all-time high, with payrolls data affirming the economy’s resilience. Trump dialed up trade tensions after Thursday’s close, warning partners he may start setting levies of as much as 70% unilaterally as soon as today ahead of a July 9 deadline for negotiations.
Trump told reporters that about “10 or 12” letters would go out Friday, with additional letters coming “over the next few days.”
“We’re probably going to be sending some letters out, starting probably tomorrow, maybe 10 a day to various countries saying what they’re going to pay to do business with the US,” Trump told reporters on Thursday as he left Washington for an event in Iowa.
“By the ninth they’ll be fully covered,” Trump added, referring to a July 9 deadline he initially set for countries to reach deals with the US to avoid higher import duties he has threatened. “They’ll range in value from maybe 60 or 70% tariffs to 10 and 20% tariffs,” he added.
While global markets have staged a furious rebound since April’s tariff-related volatility, some investors remain cautious as uncertainties surrounding the trade war and its potential impact on the US economy and corporate earnings persist.
“There’s a little bit of doubt of creeping in, especially after the bump up this week,” said Neil Wilson, investor strategist at Saxo UK. “Today’s a good day to take a little bit of risk off. But I don’t think there’s a fundamental shift, it’s all on the margins at the moment.”
In signs of diplomatic and trade tensions escalating between China and the European Union, Beijing said it intends to cancel part of a two-day summit with EU leaders planned for later this month. China also imposed anti-dumping duties on European brandy for five years, while exempting major cognac makers that meet a price commitment. Remy Cointreau SA briefly slipped before trading higher. Pernod Ricard SA pared losses.
The S&P 500’s surge has put it on the verge of triggering a sell signal, according to BofA's Michael Hartnett. The CIO advised that investors consider trimming their holdings once the index climbs beyond 6,300, a level just 0.3% above where it closed on Thursday. He also reiterated that bubble risks are mounting into the summer, especially following the House’s approval of a $3.4 trillion fiscal package featuring tax cuts.
“Overbought markets can stay overbought as greed is harder to conquer than fear,” Hartnett wrote in a note.
Europe’s Stoxx 600 dropped 0.7%, wiping out a small weekly gain. Mining and consumer products shares led declines, while telecommunications and food and beverages equities are the biggest outperformers. Here are the biggest movers Friday:
Earlier in the session, Asian stocks also fell after US jobs growth data erased bets for an interest-rate cut in July and trade tensions resurfaced as President Donald Trump’s tariff deadline nears. The MSCI Asia Pacific Index declined as much as 0.4%, dragged by AIA Group and TSMC. South Korea’s Kospi slid 2%, leading losses in the region. Benchmarks in Hong Kong, Taiwan and Thailand also drop. Investors are cautious as the July 9 deadline for trade negotiations approaches. Trump said his administration will begin sending out letters setting unilateral tariff rates to trading partners on Friday. The duties will “range in value from maybe 60 or 70% tariffs to 10 and 20% tariffs,” he said.
The US Treasury cash market is closed for the July 4 holiday and while European bond markets firmed on Friday, UK gilts made little headway after a selloff on Wednesday that was driven by fiscal concerns. The yield on 10-year UK government debt was little changed at 4.53%, compared with 4.45% at the close on Tuesday.
In commodities, oil dropped in the lead-up to an OPEC+ meeting that’s set to deliver another oversized production hike, threatening to swell a glut forecast for later this year. Gold rose 0.3% as investors sought havens.
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APAC stocks traded mixed with gains limited despite the better-than-expected jobs data stateside which unwound some Fed rate cut bets, while the House also passed President Trump's sweeping tax cut and spending bill. Nonetheless, trade uncertainty lingered ahead of the July 9th tariff deadline and with President Trump noting that they will begin sending out letters today, although Treasury Secretary Bessent said to expect a flurry of trade deals ahead of the deadline. ASX 200 was rangebound as strength in tech and consumer discretionary was offset by losses across the commodity and resources sectors. Nikkei 225 traded indecisively amid recent currency moves and as strong Household Spending data supported the case for the BoJ to resume normalisation. Hang Seng and Shanghai Comp were mixed with the Hong Kong benchmark pressured, while the mainland is resilient as China plans subsidies for young children to boost the national birthrate, while the US lifted the license suspension for GE Aerospace on sales of jet engines to China's COMAC.
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Europe’s Stoxx 600 dropped 0.7%, wiping out a small weekly gain. Mining and consumer products shares led declines, while telecommunications and food and beverages equities are the biggest outperformers
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DB's Jim Reid concludes the overnight wrap
Happy Independence Day to all our US readers. I hope the last 249 years has all been worth it. It’s also a landmark day for other reasons, as my favourite band in my formative years today reform after 16 years. Oasis were the soundtrack to my coming of age at university and beyond. I’ve probably also annoyed thousands of people over the years strumming covers of their songs in small groups or on stage.
I’m yet to get tickets to any of their gigs but I’m always on the lookout. I’ve only seen them twice. Once in December 1993 at Warwick University student union before they’d released an album. And then at Knebworth three years later as part of the largest ever outdoor gig at the time in the UK. The sound quality was appalling. I was over halfway back, and the repeater speakers had a huge delay which clashed with the sound from the stage. Oh, and it took 4 hours to get on a train home, which was about the same length of time as the queue for the toilets. That may have put me off big gigs for life so if you have a box for any of their shows, I'll be your man!
Markets closed for the holiday in a supersonic mood yesterday afternoon, as a decent US jobs report boosted investor optimism, pushing back against recent speculation of a slowing US economy. Then after the lunchtime US close, the $3.4tn net fiscal stimulus package passed the House. In the end the 218-214 vote was relatively comfortable considering all the tight votes in recent weeks. The bill will likely be signed by the President at 5pm today in Washington. Note that the $5tn debt ceiling increase included in the bill, probably takes that off the table for around 2.5 years given the current run rate of deficits. Without the increase we’d probably have run up against the existing debt ceiling around mid-August. So one less thing to worry about in the near term, even if the bigger picture on debt just got more worrying.
With the tax bill passed, attention is understandably turning to the next key date, which is the 90-day reciprocal tariff deadline on July 9. Overnight we’ve had some significant headlines on that, as Trump has said he’s going to start sending out letters to countries from today, telling them what rates they’re going to be. Moreover, he said that by the July 9 deadline, “they’ll be fully covered and they’ll range in value from maybe 60 or 70% tariffs to 10 and 20% tariffs”. He also said that they “will start to pay on August 1”. So definitely one to keep an eye on, as the difference in that range would have significant economic implications for the various countries. Trump also had a phone call with Putin yesterday, although he said he “did not make any progress with him at all”.
That backdrop has seen US equity futures lose ground this morning, with those on the S&P 500 falling -0.26%. However, that all comes after a notable rally in yesterday’s half-day of trading, with the S&P 500 (+0.83%) surging to a fresh record, whilst US HY credit spreads reached their tightest point since February as well, at 268bps. This strength was echoed globally, and European assets also rallied as fears eased about the UK’s fiscal situation, with gilts recovering a decent chunk of the previous day’s losses. So even with all the uncertainty about the reciprocal tariff deadline on July 9, the ongoing robustness in the hard data has seen markets power forward to new highs.
That jobs report was the main catalyst for yesterday’s moves, with nonfarm payrolls up by +147k in June (vs. +106k expected). In addition, there were modest upward revisions to the April and May prints, whilst the unemployment rate unexpectedly fell to 4.1% (vs. 4.3% expected). So collectively, that added to the sense that the labour market hadn’t seen an obvious deterioration after Liberation Day, and it pushed back against the negative ADP print on Wednesday, which raised speculation that the Fed might cut as soon as this month’s meeting.
Given the resilience in the jobs report, investors immediately dialled back their expectations for rate cuts anytime soon. In fact, right before the jobs report came out, futures were still pricing a 25% chance of a rate cut at this month’s meeting, but that then plummeted to just 5% by the close. Likewise for the rest of the year, the amount of rate cuts expected by the December meeting came down -13.6bps on the day to 51.3bps. So that led to a significant selloff for Treasuries, with the 2yr yield jumping +9.5bps on the day to 3.88%, whilst the 10yr yield rose +6.9bps to 4.35%.
That sentiment was backed up by other US data yesterday. For instance, the weekly initial jobless claims dipped back to 233k in the week ending June 28 (vs. 241k expected). So again, that countered a rise that we’d seen in recent weeks, pushing back against fears of a sharper deterioration. Likewise, the ISM services index moved back up to 50.8 (vs. 50.6 expected), with new orders also rebounding back into expansionary territory at 51.3. So the US data was pretty good across the board, and it wasn’t just the jobs report helping that narrative.
That backdrop meant equities put in a strong performance, with the S&P 500 up +0.83% before today’s Independence Day holiday. That was led by the more cyclical sectors, with tech stocks posting further gains that saw the Magnificent 7 up +0.91%. Indeed, the latest gain for the Mag 7 pushed it up to its highest close since January, and left it just -3.47% beneath its all-time high back in December. Small-cap stocks also put in a decent session, with the Russell 2000 (+1.02%) posting a 6th consecutive advance to close at its highest since February.
Over in Europe, the main focus had been on the UK at the open, given the market turbulence there the previous day. However, after Prime Minister Starmer publicly backed Chancellor Reeves, UK assets pared back some of their losses, because investors were reassured that the fiscal rules would remain in place. So yields on 10yr gilts came down -7.1bps, unwinding a good chunk of the +15.8bps move the previous day. Likewise, UK equities also put in a strong day, with the FTSE 100 up +0.55%, whilst the more domestically-focused FTSE 250 surged +1.17%. The pound sterling stabilised as well, strengthening +0.14% against the US Dollar.
That strength was echoed across the continent, and optimism was further boosted after the final services and composite PMIs came in stronger than the initial flash estimates. For instance, the final Euro Area composite PMI for June was at 50.6 (vs. flash 50.2), and the UK composite also came in at 52.0 (vs. flash 50.7). So that resilience helped to ease fears that the US tariffs were leading to a slowdown in Europe as well, and European equities advanced, with the STOXX 600 up +0.47%. Sovereign bond yields also rallied, with those on 10yr bunds (-4.3bps), OATs (-4.8bps) and BTPs (-6.5bps) all falling back.
Overnight in Asia, the major equity indices have struggled for momentum after the S&P 500’s record high yesterday. South Korea has seen the biggest losses, with the KOSPI down -1.52%, but Japan’s Nikkei is also down -0.11%, and the Hang Seng is down -0.62%. To be fair, there have been some gains, with the CSI 300 (+0.41%) and the Shanghai Comp (+0.41%) both advancing. We also had some data on household spending in Japan, which was up +4.7% year-on-year in May, the fastest growth since August 2022.
To the day ahead now, and US markets will be closed for the Independence Day holiday. Elsewhere, data releases include Euro Area PPI, German factory orders, French industrial production and Italian retail sales for May, as well as the June construction PMIs from Germany and the UK. Otherwise from central banks, we’ll hear from the ECB’s Elderson and Villeroy, along with the BoE’s Taylor.