Today's Update 07-02-2025
Key Points and Metrics
Key Points and Metrics:
Economic Data Releases:
US ADP Employment Change
Time: 8:15 AM ET, July 2
Actual: \-33,000
Forecast: 98,000
Previous: 37,000 (Revised to 29,000)
Market Reaction: US Dollar, index futures, and bond yields weakened.
US Challenger Layoffs
Time: 7:30 AM ET, July 2
Actual: 47,999
Previous: 93,816
US MBA Mortgage Applications
Time: 7:00 AM ET, July 2
Actual: +2.7%
Previous: +1.1%
US MBA 30-Year Mortgage Rate
Time: 7:00 AM ET, July 2
Actual: 6.79%
Previous: 6.88%
Eurozone Unemployment Rate
Time: 5:00 AM ET, July 2
Actual: 6.3%
Forecast: 6.2%
Previous: 6.2%
German 10-Year Bund Yield Auction
Time: 5:32 AM ET, July 2
Yield: 2.63%
Previous: 2.54%
Bid-to-Cover Ratio: 1.6 (Previous: 2.7)
Market Headlines:
UK Political Development:
Event: UK's Prime Minister Starmer refuses to back Chancellor Reeves amid welfare fallout (Source: Financial Times).
Market Reaction: British Pound (GBP/USD) weakened.
ECB Officials' Comments:
ECB's Rehn:
Exchange rate is not a policy target.
Risks to inflation are two-sided.
Concerned about inflation being below target for an extended time.
ECB's Wunsch:
Not uncomfortable with market's interest rate expectations.
Iran's Nuclear Program:
Statement: Iran’s Nuclear Chief asserts that Israeli and US strikes would not derail Iran's nuclear progress.
U.S. Trade and Tariffs:
Trump's Comments on Truth Social:
Trillions of dollars are being invested into the USA.
Tariff revenues are filling up the Treasury.
Upcoming Events:
Thursday, July 3:
US Nonfarm Payrolls Report
10:15 AM ET:
ECB President Lagarde Speaks
10:30 AM ET:
EIA Crude Oil Inventories Report
Upcoming Earnings Estimates (July 15):
BlackRock (BLK)
Time: 6:00 AM ET
EPS Estimate: $10.68
Revenue Estimate: $5.38 Billion
JPMorgan Chase (JPM)
Time: 6:55 AM ET
EPS Estimate: $4.43
Revenue Estimate: $44.1 Billion
Wells Fargo (WFC)
Time: 7:00 AM ET
EPS Estimate: $1.40
Revenue Estimate: $20.78 Billion
Citigroup (C)
Time: 7:00 AM ET
EPS Estimate: $1.65
Revenue Estimate: $20.77 Billion
Market Overview:
Equity Futures: Futures held steady as investors await the upcoming jobs report and monitor trade negotiations ahead of the July 9 tariff deadline.
Market Rotation:
Shift observed from tech megacaps to smaller-cap stocks.
The Russell 2000 outperformed the Nasdaq 100.
Treasury Yields:
Short-dated Treasury yields rose, reflecting adjusted expectations for future Federal Reserve actions.
10-year yield increased by four basis points to 4.28%.
Additional Noteworthy Information:
ECB's Centeno:
Expressed concern over potential inflation undershooting targets.
Emphasized caution and the importance of monitoring incoming data.
Japan–US Trade Talks:
Japan's Chief Trade Negotiator Akazawa:
Affirmed ongoing and vigorous trade negotiations with the US.
Stressed that agreements should not compromise national interests.
Energy Sector Update:
Iran: President Pezeshkian enacted a law suspending cooperation with the UN nuclear watchdog.
Currency Strength (As of 3:02 AM ET, July 2):
Strongest to Weakest: USD, CAD, CHF, GBP, AUD, EUR, NZD, JPY
Central Bank Commentary
ECB's Rehn: Concerned about inflation staying below 2% target for extended period
BoE's Taylor: Sees need for 5 rate cuts in 2025, neutral rate at 2.75-3%
Fed Chair Powell: Would have cut rates more if not for tariff expansion
Energy & Commodities
WTI Crude: $65.45/barrel (+0.52%)
Brent: $67.11/barrel (+0.55%)
EIA inventory data pending (10:30 ET)
Upcoming Catalysts
June NFP Report (Thursday) - Critical for Fed policy direction
ECB President Lagarde speaks (10:15 ET)
Trump at Americas250 Event (20:30 ET)
Final Thoughts
The ADP employment miss of -33k versus expectations of +98k is sending shockwaves through rate expectations, with traders now betting more aggressively on Fed cuts. This labor market softening, combined with Trump's unwavering stance on the July 9th tariff deadline, creates a perfect storm of uncertainty.
The currency markets are telling the real story here - the dollar's weakness to three-year lows reflects growing concerns about economic momentum just as trade tensions reach fever pitch. Meanwhile, the rotation from mega-cap tech into small caps suggests investors are positioning for a different economic regime.
What's particularly striking is the divergence between political rhetoric and market reality. While Trump doubles down on tariffs and suggests Japan could face 30-35% levies, markets seem oddly sanguine, perhaps betting on his historical pattern of backing down from extreme positions.
The Thursday NFP report will be absolutely critical. If we see another weak print following today's ADP disappointment, the Fed's hand may be forced toward more aggressive easing, regardless of tariff-induced inflation concerns. Watch for any signs that the labor market is cracking faster than policymakers anticipated - that could be the catalyst for a significant market repricing across all asset classes.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always do your own research and consider your financial situation before making investment decisions.
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Harry
very succinct and informative post