ADP payrolls ahead

European markets are on the rise in early trade today, with traders taking a relatively positive tone despite the tech-led weakness seen in the US yesterday. Notably, the strength of the Dow highlighted a broadening of the recent bullish gains, with capital flowing out of Mag7 in favour of the pro-cyclical stocks that dominate the Dow. With the senate passing Trump’s so-called big, beautiful bill by the narrowest of margins, there is a hope that the House will similarly succeed in passing it on for Trump’s approval by his 4 July self-imposed deadline. The prospect of a pro-growth package has provided a boost for stocks whose profitability will be boosted by tax cuts and the prospect of an economic shot in the arm for the US economy. In mainland Europe there will undoubtedly be a focus on trade talks as we go forward, with the largely flat performance of European indices in June highlighting the concerns over a potential sharp rise in tariffs next week. Nonetheless, the recent tones from the EU highlight the potential for a deal that would see the 10% tariff rate remain in place, with the Europeans hoping to achieve concessions for some key industries.

Today sees the release of the latest ADP payrolls figure, with markets weighing up the state of the US economy against the backdrop of largely stable inflation (for now). Trump’s efforts to pressure Powell into early rate cuts have thus far fallen on deaf ears, and by now it is likely that the Fed Chair will favour maintaining his reputation rather than bowing to the President’s pressure given the likelihood that he loses his position next May. With the Fed outlining expectations that we could see price pressures grow over the coming months, the dual mandate of controlling both unemployment and inflation does highlight the importance of jobs data this week. Thus far the ADP has told a very different story to the headline payrolls and thus another weak reading could yet be taken with a pinch of salt by markets unless followed by a similarly dour NFP figure tomorrow. While yesterday’s jump in the job openings figure helped provide a boost, the ISM manufacturing survey provided a worrying stagflation combination of higher price pressures and weaker employment.

Yesterday saw Trump outline a plan for a 60-day ceasefire in Gaza, with the President pushing for Israel to take meaningful steps to finally draw a line under the conflict. While Israel and Gaza holds little influence over the supply of oil, the ability to bring solutions to both the Iran and Gaza issue would be a potential driver of weakness for energy prices given the relative stability it could bring. The downside seen in both natural gas and crude oil provide downward pressure on global inflation, and Trump will be keen to show that he can both keep prices under wraps and bring conflicts to a peaceful resolution.