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.”
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This story was produced with the assistance of Bloomberg Automation.
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