ADP in focus ahead of Friday's jobs report

In focus today

In the US, focus will be on ADP's July private sector employment report, as this will provide markets with an early sense of what to expect from the upcoming Jobs Report on Friday. ADP's weekly estimates have pointed towards cooling employment growth from June. The ISM Services index for July will also be released, with the earlier flash PMI pointing to an uptick in business activity. The Fed's Cook (voter, neutral) will be on the wires in the evening, while Daly (non-voter) is scheduled to deliver keynote remarks overnight into Thursday.

In the euro area, we receive the final services and composite PMIs for July. Both surprised to the upside in the flash release, with the services PMI at 51.6 (prior: 49.4) and the composite PMI at 51.9 (prior: 50.0). June PPI figures will also be released, following a 0.2% m/m increase in May and a rise in the annual rate to 5.9%, the strongest reading since March 2023.

Economic and market news

What happened overnight

In the US-Iran war, oil prices extended declines after Axios reported that the US was closing in on a 60-day interim deal to reopen the Strait of Hormuz without tolls. Trump said more clarity was expected within 48 hours.

In the US, Kansas City Fed's Schmid (non-voter, hawk) argued that monetary policy is not yet restrictive given strong demand and investment, signalling that further tightening may be needed. Meanwhile, Philly Fed's Paulson (voter, dove) pushed back against rapid rate hikes, saying policy is likely already mildly restrictive and that it 'was not a close call to keep rates steady (in July)'.

In Japan, minutes from the June meeting showed that the Bank of Japan (BoJ) was increasingly focused on broadening inflation risks, as firms planned price hikes across a wide range of goods. BoJ board members noted that higher fuel costs, a weak yen and a tight labour market could add further pressure on consumer prices.

What happened yesterday

In commodities, Brent crude fell below USD 80/bbl. from USD 86/bbl. The sharp drop was triggered by news that US and Iran may be nearing a deal to reopen the Strait of Hormuz again. In addition, Bloomberg survey data showed that Gulf countries managed to increase oil production in July.

In the US, June JOLTS job openings declined a bit more than expected to 7.36m (cons: 7.40m) from 7.54m in May. On the other hand, both hiring and voluntary quits rose, while involuntary layoffs remained unchanged. The ratio of job openings to unemployed job seekers was little changed at 1.04 from 1.03 in May.

In Denmark, FX reserves showed that Danmarks Nationalbank (DN) refrained from intervening in July, despite EUR/DKK remaining elevated. DN intervened for DKK0.7bn in June, which was the first FX intervention in more than three years, but upward pressure on EUR/DKK eased enough for DN to stay sidelined in July.

Equities: Equity markets delivered what can best be described as an atypical, but classic 2026 risk on session yesterday rather than a traditional risk on day. The key driver was not an upgrade to growth expectations but a further removal of downside fears. The two dominant swing factors were reduced concerns over the Iran conflict and fading fears around the AI bubble. As risk premia continued to compress against a backdrop where the underlying macro and earnings picture remains exceptionally strong, equities extended their rally. Importantly, 2026 style risk on does not imply indiscriminate buying across sectors. Three sectors finished lower yesterday, led by Energy, while global Technology gained more than 3%. Another wave of all-time highs pushed global equities close to a 15% year to date return. The S&P 500 posted its strongest session since April and its first record close since June 2. Positive momentum continues this morning with gains across Asian markets alongside firmer US and European futures.

FI and FX: The US is nearing a 60-day interim deal to reopen the Strait of Hormuz and an announcement could come today, Axios reported overnight. US Treasury Secretary Scott Bessent said yesterday that an agreement between the US and Iran could come "today or tomorrow", which sent Brent crude below USD 80/bbl. and caused yields to extend Monday's decline, while EUR/USD was little changed above 1.15. Despite a still elevated EUR/DKK during July, Danmarks Nationalbank refrained from intervening in the FX market in July. NOK was hit by the drop in oil prices and EUR/SEK continues to trade close to the 11.00 threshold, remaining in the hands of the overall risk-sentiment. Today, focus will be on possible SOH deal announcement, July private sector employment data from the US ADP and the US ISM Services index also for July.