Bonds rebound, equities gain ahead of US payroll data

by Andre Janse van Vuuren and Sagarika Jaisinghani

Bonds rebounded and shares advanced modestly ahead of Thursday’s nonfarm payrolls report, which is expected to show a slowdown in US hiring against the backdrop of President Donald Trump’s trade war.

US Treasuries rose after heavy selling on Wednesday, when concerns about the UK’s fiscal position dragged global bond markets lower. The yield on 10-year US government debt declined two basis points to 4.25%. The rate on similarly dated gilts fell nine basis points after UK Prime Minister Keir Starmer insisted that Chancellor of the Exchequer Rachel Reeves will continue in her role.

Futures for the S&P 500 rose less than 0.1% on the back of another record high for the benchmark, with US stock trading set to close at 1 p.m. New York time ahead of Independence Day. European and Asian stocks advanced. The dollar was little changed, while the pound rebounded 0.3% after suffering Wednesday’s worst performance among major currencies.

The 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 interest rates. 

Thursday’s employment figures are expected to show slower hiring and the highest unemployment rate since 2021. A weak report may boost Federal Reserve 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 and the detail of Trump’s bill 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.”

Corporate Highlights:

• BlackRock Inc. is considering a sale of its stake in the leasing rights to Saudi Aramco’s natural-gas pipeline network back to the energy giant, Bloomberg News has reported.
• Banca Monte dei Paschi di Siena SpA is set to take its hostile takeover offer for Mediobanca SpA to shareholders later this month, after the bid to create Italy’s third-largest bank received regulatory approval.
• Novartis AG’s drug Cosentyx failed in a late-stage study of patients suffering from inflammation in their blood vessels, a blow to the Swiss company’s efforts to find new uses for the blockbuster medicine.
• The US Commerce Department informed the world’s three leading chip design software providers — Synopsys Inc., Cadence Design Systems Inc. and Germany’s Siemens AG — that recent requirements to seek government licenses for business in China are no longer in place.

 Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.2% as of 9:59 a.m. London time
• S&P 500 futures were unchanged
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index rose 0.3%
• The MSCI Emerging Markets Index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1798
• The Japanese yen fell 0.1% to 143.86 per dollar
• The offshore yuan was little changed at 7.1580 per dollar
• The British pound rose 0.2% to $1.3666

Cryptocurrencies

• Bitcoin rose 0.2% to $109,434.7
• Ether was little changed at $2,590.86

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.26%
• Germany’s 10-year yield declined three basis points to 2.63%
• Britain’s 10-year yield declined nine basis points to 4.52%

Commodities

• Brent crude fell 0.7% to $68.62 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

Copyright Bloomberg News