US jobs report ahead of short trading session

EU mid-market update: US jobs report ahead of short trading session; Final House OBBB vote about to start; Vietnam trade deal marks 2nd success for US but there are many unresolved talks left before deadline in 2 days.

Notes/observations

- US secures a second formal trade deal ahead of July 9th deadline, this time with Vietnam. Trump said it includes total access to the Vietnam market with zero tariffs, but Vietnam to pay 20% tariff into the US and 40% for trans-shipments. [For comparison, the original Liberation Day reciprocal tariff imposed on Vietnam was 46%]. Vietnam also to buy 50 Boeing jets. Vietnam Dong declined to a record low while Vietnamese stocks climb to highest in three years. Vietnam negotiators noted that details are still being ironed out. China expresses discontent.

- US House is on the cusp of passing the One Big Beautiful Bill; Final vote expected just after 5:30ET; House procedural rule vote passed 219-213.

- Ahead of US Nonfarm payrolls (analysts’ estimates range 60-140K), Tier1 analysts view the US labor market as moderating rather than deteriorating, but warn that immigration restrictions and DOGE-related federal layoffs are likely to constrain payrolls in the coming months. Seasonal summer slowdowns in education, health, and leisure & hospitality (exacerbated by an early Memorial Day), together with weak college-graduate hiring and soft air travel and accommodation spending, mean the unemployment rate will be crucial for disentangling supply-side shocks from demand-driven effects.

- Talks in focus are India, Japan and South Korea but only India looks to be optimistic in getting deal over the line, while Japan and South Korea have been stalled or remain very difficult.

- UK assets are volatile, particularly gilts and sterling, which both sharply sold off on drama in parliament yesterday as speculation about Chancellor Reeves’ position and fiscal concerns from welfare reform U-turns. Sentiment was not helped as Chancellor appeared to get emotional during questions. However, this morning saw a reversal, with 10-year gilt yield down ~10bps to 4.53% and Cable (GBP/USD) back >1.366.

- Asia closed mixed with Hang Seng underperforming -0.6%. EU indices +0.4% to 0.0%. US futures +0.1%. Gold -0.1%, DXY +0.1%; Commodity: Brent -0.8%, WTI -0.8%; Crypto: BTC +1.6%, ETH +5.7%.

Asia

- China Jun Caixin PMI Services: 50.6 v 50.9e v 51.1 prior (29th month of expansion).

- Australia Jun Final PMI Services: 51.8 v 51.3 prelim (confirmed 17th month of expansion).

- Japan Jun Final PMI Services: 51.7t v 51.5 prelim (confirmed 8th month of expansion).

- New Zealand Jun ANZ Commodity Price M/M: -2.3% v +1.9% prior.

- Australia May Trade Balance (A$): 2.2B v 5.0Be; Exports M/M: -2.7% v -1.7% prior; Imports M/M: 3.8% v 1.6% prior.

- South Korea Jun Foreign Reserves: $410.2B v $404.6B prior.

- Japan BOJ’s Takata noted that price stability target was close to being achieved, (but) careful monitoring was still required due to high uncertainty. Could not say the length of pause period for rates in advance.

Europe

- European Commission Pres Von der Leyen to face European Parliament confidence vote next Thurs (July 10th).

- PM Starmer stated that Reeves would be UK's Chancellor for 'Years to come, and would be the Chancellor at the next election.

- ECB officials 'question' whether Euro has strengthened too much.

Americas

- Trump’s tax bill stalled in House as July 4th deadline approached. All eyes on the potential passage of the Trump Admin’s One Big Beautiful Bill (tax bill) through the US House. Currently stuck with 5 'Nays' during a procedural vote when the Republicans can only afford to have 3 given the united Democratic opposition. Speaker Johnson said he would keep the vote open 'for as long as it took'. Pres Trump regularly expressing his displeasure with the hold-outs via social media posts. (**Note: Any changes to appease rebels would require Senate reapproval, risking delays beyond Trump’s July 4 deadline).

Trade

- Vietnam became the second country to nail down a trade deal with the US [** Note: The Vietnam deal could make other nations nervous with their own negotiations ahead of July 9th, as the Trump Admin seemed to be okay with increasing the existing 90-day moratorium rate beyond the blanket 10% (ex-China)].

- Japan Trade Negotiator Akazawa noted that Japan and US were continuing vigorous trade talks; Staff level trade talks were held on June 30th (**Note: US Sec of State Rubio cancelled trip to Japan and South Korea [trip to Malaysia for ASEAN still uncertain].

- South Korea Pres Lee said US tariff negotiations looking 'very difficult'.

- Trump administration removed export license requirements for chip design software sales to China part of the US-China trade deal.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.13% at 541.94, FTSE +0.40% at 8,810.18, DAX +0.11% at 23,808.47, CAC-40 +0.04% at 7,741.47, IBEX-35 -0.02% at 14,034.70, FTSE MIB -0.42% at 39,617.00, SMI -0.03% at 11,981.28, S&P 500 Futures +0.03%].

Market focal points/key themes: European indices opened mixed with an upward bias, but failed to gain direction through the early part of the session; UK homebuilders rising as UK yields drop after yesterday bond market sell-off. Shares in Watches of Switzerland trade sharply lower in London after earnings and comments that luxury watch market remains supply-constrained with demand outstripping supply. Siemens trades 2% higher in Frankfurt after it resumed chip design software sales to China as US rescinds curbs for company.

Equities

- Consumer discretionary: Watches of Switzerland [WOSG.UK] -6.0% (earnings).

- Energy: Nordex [NDX1.DE] +3.5% (receives 135MW in orders) - Financials: ABN Amro [ABN.NL] +1.0% (analyst upgrade), Great Portland [GPE.UK] +1.0% (business update).

- Healthcare: Novartis [NOVN.CH] -1.0% (GCAptAIN study did not me, et its primary endpoint of sustained remission at Week 52 in adults with newly diagnosed or relapsing GCA).

- Industrials: Siemens [SIE.DE] +2.0% (Siemens resumes chip design software sales to China as US rescinds curbs for company - financial press), Stellantis [STLA.FR] +1.0% (receives €2.6B EU CO2 fine and may have to cut production to cover cost), Taylor Wimpey [TW.UK] +1.5 (UK yields lower after yesterday's bond market sell-off).

- Technology: BE Semiconductor [BESI.NL] -1.0% (analyst downgrade).

Speakers

- UK PM Starmer reiterated stance that govt was committed to fiscal rules and economic stability.

- Bank of England (BOE) Decision Maker Panel (DMP) Jun Survey raised the 1-year ahead CPI from 3.0% to 3.3% (3.0%e) while maintaining the 3-year ahead CPI at 2.8%.

- Bank of England Bank Quarterly Liabilites/Credit Conditions Surveys noted that the availability of secured and unsecured household credit rose in Q2 and is expected to rise again in Q3. Lenders reported higher funding volumes in Q2, with both retail and wholesale sources increasing; similar growth expected in Q3.

- Czech Central Bank Gov Michl stated that was leaving all options open for next rate meetings; Reiterated rates are likely to be stable for some time.

- Indonesia Econ Min Hartarto stated that to sign a MoU with US on trade on July 7th. To sign goods purchase, invest deal with US worth $34B.

- Philippines Central Bank (BSP) Gov Remolona stated that saw room for two more rate cuts.

- Vietnam reportedly still working on details of trade deal with US.

Currencies/fixed income

- Focus on US Non-Farm Payrolls later in the session following the negative ADP jobs data yesterday. USD remained on soft footing.

- UK Gilt yields reverse a large chunk of Wed’s rise after UK PM stated that the govt was committed to fiscal rules and economic stability. The 10-year yield lower by 12 bps to 4.51%.

- USD/JPY at 143.83 as Japan BOJ’s Takata could not say the length of pause period for rates in advance.

- 10-year German Bund yield at 2.63% and 10-year Gilt yield at 4.51%. 10-year Treasury yield: 4.25%.

Economic data

- (RU) Russia Jun Services PMI: 49.2 v 52.2 prior (1st contraction in 12 months); Composite PMI: 48.5 v 51.4 prior.

- (SE) Sweden Jun PMI Services: 54.6 v 50.9 prior (2nd month of expansion); PMI Composite: 51.5 v 50.4 prior.

- (CH) Swiss Jun CPI M/M: 0.2% v 0.0%e; Y/Y: +0.1% v -0.1%e.

- (CH) Swiss Jun CPI EU Harmonized M/M: +0.2% v -0.2% prior; Y/Y: +0.2% v -0.2% prior; CPI Core Y/Y: 0.6% v 0.6%e.

- (TR) Turkey Jun CPI M/M: 1.4% v 1.5%e; Y/Y: 35.1% v 35.3%e; CPI Core Index Y/Y: 35.6% v 35.3%e.

- (TR) Turkey Jun PPI M/M: 2.5% v 2.5% prior; Y/Y: 24.5% v 23.1% prior.

- (ES) Spain Jun Services PMI: 51.9 v 51.0e; Composite PMI: 52.1 v 51.2e.

- (ZA) South Africa Jun PMI (whole economy): 50.1 v 50.8 prior.

- (IT) Italy Jun Services PMI: 52.1 v 52.5e (7th month of expansion); Composite PMI: 51.1 v 51.6e.

- (FR) France Jun Final Services PMI: 49.6v 48.7 prelim (confirmed 11th month of contraction); Composite PMI: 49.2 v 48.5 prelim.

- (DE) Germany Jun Final Services PMI: 49.7 v 49.4 prelim (confirmed 3rd month of contraction); Composite PMI: 50.4 v 50.4 prelim.

- (EU) Euro Zone Jun Final Services PMI: 50.5 v 50.0 prelim (confirmed 1st expansion in 3 months); Composite PMI: 50.6 v 50.2 prelim.

- (UK) Jun Final Services PMI: 52.8 v 51.3 prelim (confirms 2nd month of expansion; Composite PMI: 52.0 v 50.7 prelim.

- (UK) Jun Official Reserves Changes: +$1.2B v -$0.4B prior.

- (CY) Cyprus Jun CPI M/M: -0.3% v +0.2% prior; Y/Y: -0.4% v -0.2% prior.

- (NO) Norway Jun House Price Index M/M: 0.3% v 0.2% prior; Y/Y: 5.1% v 5.2% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €6.05B vs. €5.0-6.0B indicated range in 2028, 2035 and 2041 SPGB bonds.

- Sold €2.16B in 2.4% May 2028 SPGB bonds; Avg Yield: 2.159% v 2.118% prior; bid-to-cover: 1.91x v x1.94x prior.

- Sold €2.13B in 3.15% Apr 2035 SPGB bonds; Avg Yield: 3.163% v 3.349% prior; bid-to-cover: 1.90x v 1.90x prior.

- Sold €1.76B in 3.50% Jan 2041 SPGB bonds; Avg Yield: 3.671%; bid-to-cover: 1.68x (syndicated on Feb 25th 2025).

- (ES) Spain Debt Agency (Tesoro) sold €735M vs. €250-750M indicated range in 1.15% Nov 2036 inflation-linked bonds (SPGBei); Real Yield: 1.478% v 1.230% prior; bid-to-cover: 2.14x v 2.22x prior.

- (FR) France Debt Agency (AFT) sold total €11.952B vs. €10.0-12.0B indicated range in 2035, 2042 and 2056 Bonds.

- Sold €7.674B in 3.20% May 2035 Oat; Avg Yield: 3.27% v 3.17% prior; Bid-to-cover: 2.32x v 2.83x prior.

- Sold €2.355B in 3.6% May 2042 Oat; Avg Yield: 3.72%; Bid-to-cover: 2.77x (syndicated on Jan 21st 2025).

- Sold €1.923B in 3.75% May 2056 Oat; Avg Yield: 4.05% v 3.95% prior; Bid-to-cover: 2.91x v 2.29x prior.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 07:00 (ZA) South Africa May Electricity Production Y/Y: No est v 0.0% prior; Electricity Consumption Y/Y: No est v -2.8% prior.

- 08:00 (MX) Mexico Apr Gross Fixed Investment M/M: -0.5%e v +0.3% prior; Y/Y: -9.0%e v -0.2% prior; Private Consumption Y/Y: -3.6%e v +1.2% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Jun Change in Nonfarm Payrolls: +110Ke v +139K prior; Private Payrolls: +102Ke v +140K prior; Manufacturing Payrolls: -3Ke v -8K prior.

- 08:30 (US) Jun Unemployment Rate: 4.3%e v 4.2% prior; Underemployment Rate: No est v 7.8% prior; Labor Force Participation Rate: No est v 62.4% prior.

- 08:30 (US) Jun Average Hourly Earnings M/M: 0.3%e v 0.4% prior; Y/Y: 3.8%e v 3.9% prior; Average Weekly Hours All Employees: 34.3e v 34.3 prior.

- 08:30 (US) Initial Jobless Claims: 241Ke v 236K prior; Continuing Claims: 1.96Me v 1.974M prior.

- 08:30 (US) May Trade Balance: -$71.1Be v -$61.6B prior.

- 08:30 (CA) Canada May Int'l Merchandise Trade (CAD): -6.0Be v -7.1B prior.

- 08:30 (CL) Chile Central Bank (BCCh) Jun Minutes.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 27th: No est v $687.2B prior.

- 09:00 (BR) Brazil Jun Services PMI: No est v 49.6 prior; Composite PMI: No est v 49.1 prior.

- 09:00 (PL) Poland Central Bank Gov Glapinski to hold the post rate decision press conference.

- 09:45 (US) Jun Final S&P Services PMI: 53.1e v 53.1 prelim; Composite PMI: No est v 52.8 prelim.

- 10:00 (US) May Factory Orders: +8.1%e v -3.7% prior; Factory Orders (ex-transportation): +0.2%e v -0.5% prior.

- 10:00 (US) May Final Durable Goods Orders: 16.4%e v 16.4% prelim; Durables (ex-transportation): 0.5%e v 0.5% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v 1.7% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v 0.5% prelim.

- 10:00 (US) Jun ISM Services Index: 50.7e v 49.9 prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- 18:00 (CO) Colombia Central Bank Jun Minutes.

- 19:00 (KR) South Korea May Current Account Balance: No est v $5.7B prior; Balance of Goods (BOP): No est v $9.0B prior.

- 19:30 (JP) Japan May Household Spending Y/Y: +1.2%e v -0.1% prior.

- 20:30 (HK) Hong Kong Jun PMI (whole economy): No est v 49.0 prior.

- 21:00 (PH) Philippines Jun CPI M/M: +0.2%e v -0.1% prior; Y/Y: 1.5%e v 1.3% prior.

- 21:30 (AU) Australia May Household Spending M/M: 0.5%e v 0.1% prior; Y/Y: 3.5%e v 3.7% prior.

- 23:30 (JP) Japan to sell 3-Month Bills.