All eyes on US payrolls and any Yen intervention before extended weekend

Notes/observations

- Risk-off overnight, driven by a fresh reassessment of AI capex that hammered semiconductors across Asia. SOX -6%, Kospi down nearly -8%, Nikkei -2%; European tape is currently in a holding pattern into today's jobs data and Friday's US closure. Worth noting that Meta bucked the selloff trend on plans to resell excess AI compute, while headlines on US government equity stakes in AI firms - including OpenAI reportedly offering the administration a 5% stake - keep circulating.

- US June non-farm payrolls land today, pulled forward from the usual Friday because of the July 4th market holiday. Consensus looks for +113k, a clear slowdown from May's 172k, with unemployment seen holding at 4.3%. Forecast range is unusually wide: 150K at the top end and 75K at low end, citing seasonal hiring paybacks. Some analysts flag a possible ~40k lift from World Cup hiring plus a positive historical bias in the first June print, whereas others warn May's leisure & hospitality surge could reverse. On wages, most expect average hourly earnings at +0.2–0.3% MoM, though calendar quirks may artificially soften the initial June read.
- On central banks, Sintra reinforced a coordinated retreat from forward guidance: Warsh ("chart a new course," wanting a "good family fight" at the July FOMC), Lagarde ("given up on forward guidance") and Bailey all leaning the same way, with no near-term policy hints.

- OpenAI CEO Sam Altman has proposed handing the Trump administration a 5% equity stake in the company - potentially as part of a broader arrangement involving other leading US AI firms - reportedly to ease regulatory and political pressures while sharing AI's economic upside with the public. The idea draws inspiration from Alaska's Permanent Fund, with the government stake's returns potentially funding dividends or public benefits for American households, aligning with Trump's view that taxpayers should directly benefit from AI advances. Discussions, which include talks with President Trump and key officials like Howard Lutnick and Scott Bessent, still remain fluid.

- China's AI ecosystem is forging sovereign capability under export constraints through an unprecedented alliance between Meituan's LongCat Lab and Huawei's CloudMatrix infrastructure. A food-delivery super-app has produced LongCat-2.0—a 1.6T-parameter MoE model with 1M native context, LSA sparse attention, 5-gram N-gram embeddings (135B parameters), MOPD expert fusion, and zero-computation experts—fully trained on 50K Ascend 910C chips across 35T+ tokens, achieving frontier agentic coding performance (59.5 SWE-Bench Pro, 70.8% Terminal-Bench) while mastering stability (70%+ fault reduction, 1.5x MFU) on domestic silicon. Huawei's 384-NPU supernode, with UB-Mesh peer-to-peer fabric replacing NVLink-like interconnects, global DRAM pooling that mitigates scarce HBM constraints, and disaggregated inference, delivers superior system-scale memory and bandwidth to Nvidia equivalents at the cost of higher power. This surge occurs amid mounting Western concerns over Chinese open-source models like Zhipu’s GLM 5.2, which demonstrate recurrent self-improvement (RSI) capabilities that could accelerate iterative gains beyond Western safety guardrails.

- July 4th holiday. With New York closed Friday for Independence Day, expect liquidity to thin into the long weekend and limited follow-through on any payrolls move. Several threads tie directly to the break: Japan's MOF is reportedly ditching telegraphed FX intervention in favour of surprise timing aimed at punishing yen shorts - a real risk into a thin Friday. US–Iran talks in Doha, which have helped cap oil for a third straight day, are set to pause for Khamenei's funeral processions (4–9th July), leaving an expiring truce window unresolved over the holiday.

- Asia closed lower with KOSPI underperforming -7.9%. EU indices +0.3-0.9%. US futures -0.3% to +0.1%. Gold +1.0%, DXY -0.4%; Commodity: Brent -1.0%, WTI -1.1%; Crypto: BTC +2.4%, ETH +2.5%.

Asia

- New Zealand May Building Permits M/M: -4.0% v 11.1% prior.

- South Korea Jun CPI M/M: 0.1% v 0.1%e; Y/Y: 3.2% v 3.2%e; CPI (ex-food/energy) Y/Y: 2.5% v 2.6%e.

- Australia May Trade Balance (A$): -3.0B v +2.2Be; Exports M/M: -6.9% v +7.2% prior; Imports M/M: 2.6 v 0.2% prior.

- Japan sold 10-Year JGB Bonds; Avg Yield: 2.7920% v 2.649% prior; bid-to-cover: 3.13x v 3.53x prior; yields rise.

- Japan said to sift away from telegraphing intervention risks in advance, focusing on hitting speculators. Timing of intervention is not about yen levels, but aims to prevent excessive yen falls.

Global conflict/tensions

- US - Iran talks in Doha said to be making progress.

Trade

- USTR Greer stated that US did not agree to the USMCA in its current form but would continue to engage with Mexico and Canada to address USMCA's shortcoming and our trade deficits with these countries; Agreement remained in force pending a resolution of these issues or until the agreement terminated.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 +0.48% at 642.40, FTSE +0.46% at 10,526.55, DAX +0.34% at 25,155.12, CAC-40 +0.60% at 8,387.43, IBEX-35 +0.82% at 19,566.51, FTSE MIB +0.88% at 52,058.50, SMI +0.81% at 14,228.70, S&P 500 Futures -0.10%].

Market focal points/key themes: European indices opened mixed but turned positive through the early part of the session; among sectors leading the way higher are consumer discretionary and health care; lagging sectors include technology and industrials; focus on US NFP coming out later in the day; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Sodexo [SW.FR] +9.5% (sales), PPHE Hotel Group [PPH.UK] -9.5% (no longer in sale talks), Baltic Classifieds [BCG.UK] -8.0% (earnings), Currys [CURY.UK] -3.5% (earnings; buyback).

- Healthcare: Abivax [ABVX.FR] +5.0% (offering pricing)- Technology: ASML [ASML.NL] -2.5% (sell-off in Asian tech names).

-Materials: Bayer [BAYN.DE] +5.5% (analyst upgrade).

Speakers

- German Chancellor Merz noted that pension overhaul to be completed by end of year; Germany’s coalition had agreed on roughly €10B per year of income-tax relief.

- Japan govt panelist economist Toshihiro Nagahama noted that BOJ should continue to raise rates at moderate pace. BOJ should raise rates at pace of about once every six months, which would be pace that won't hurt domestic investment.

- Japan's MOF: No comment on recent sudden yen move.

- Iran's Unified Command of Armed Forces reiterated that it would respond to US intervention in Strait of Hormuz. All vessels were obliged to take maritime route designated by Iran for safe passage; any disobedience would endanger their security.

Currencies/fixed income

- Focus on US jobs report and its potential rate path implications. Recent market focus has been on whether labor-market cooling was enough to keep Fed rate-cut expectations intact. USD has been underpinned by rising expectations of Fed rate hikes this year. Markets currently seeing approx. 50% of a hike at the Sept meeting.

- US - Iran talks in Doha are making progress and optimistic sentiment keeping oil process below pre-war levels thus dampening inflation concerns for the time being. Oil back below pre-war levels.

- Dealers have noted that it saw the upcoming US holiday as a potential window for intervention. The Yen currency did strengthen in early Europe to test back below the 161.00 level against the USD.
EUR/USD ar 1.1420 by mid-session and GBP/USD at 1.3360.

- 10-year German Bund yield last at 2.91%, France 10-year Oat at 3.73% and 10-year Gilt yield at 4.80% 10-year Treasury yield: 4.49%; 10-year JGB: 2.77%.

Economic data

- (CH) Swiss Jun CPI M/M: 0.0% v 0.1%e; Y/Y: 0.0% v 0.5%e.

- (CH) Swiss Jun CPI EU Harmonized M/M: 0.1% v 0.1% prior; Y/Y: 0.7% v 0.9% prior; CPI Core Y/Y: 0.3% v 0.4%e.

- (FR) France May YTD Budget Balance: -€93.3B v -€69.6B prior.

- (ES) Spain Jun Net Unemployment Change: -28.7K v -36.3K prior; Net Employment Change M/M: +92.5K v +63.7K prior.

- (IT) Italy May Unemployment Rate: 5/0% v 5.1%e.

- (HK) Hong Kong May Retail Sales Value Y/Y: 7.9% v 6.7%e; Retail Sales Volume Y/Y: 4.8% v 4.3%e.

- (EU) Euro Zone May Unemployment Rate: 6.2% v 6.3%e.

- (BE) Belgium May Unemployment Rate: 6.3% v 6.2% prior.

- (CY) Cyprus Jun CPI M/M: +0.3% v -0.1% prior; Y/Y: 3.1% v 2.6% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.958B vs. €5.0-6.0B indicated range in 2031, 2034 and 2036 SPGB bonds.

- (ES) Spain Debt Agency (Tesoro) sold €695M vs. €250-750M indicated range in 1.15% May 2036 inflation-linked bonds (SPGBei).

- (FR) France Debt Agency (AFT) sold total €14.0B vs. €12.5-14.0B indicated range in 2036, 2041 and 2046 Bonds.

- (UK) DMO sold £3.25B in 4.625% Mar 2037 Green Gilts.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bill.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 (IE) Ireland Q1 Final GDP Q/Q: No est v -12.1% prelim; Y/Y: No est v -17.1% prelim.

- 06:00 (IE) Ireland Q1 Current Account Balance: No est v €17.4B prior.

- 06:00 (NL) ECB’s Elderson (Netherlands).

- 07:00 (ZA) South Africa May Electricity Production Y/Y: No est v -9.0% prior; Electricity Consumption Y/Y: No est v -5.0% prior.

- 08:00 (MX) Mexico Jun Vehicle Domestic Sales: No est v 127.1K prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Jun Change in Nonfarm Payrolls: +113Ke v +172K prior; Private Payrolls: +107Ke v +120K prior; Manufacturing Payrolls: +3Ke v +7K prior.

- 08:30 (US) Jun Average Hourly Earnings M/M: 0.3%e v 0.3% prior; Y/Y: 3.5%e v 3.4% prior; Average Weekly Hours All Employees: 34.3e v 34.3 prior.

- 08:30 (US) Jun Unemployment Rate: 4.3%e v 4.3% prior; Underemployment Rate: No est v 8.1% prior; Labor Force Participation Rate: 61.8%e v 61.8% prior.

- 08:30 (US) Initial Jobless Claims: 218Ke v 215K prior; Continuing Claims: 1.82Me v 1.821M prior.

- 08:30 (CL) Chile Central Bank Traders Survey.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (SG) Singapore Jun Purchasing Managers Index (PMI): No est v 51.0 prior; Electronics Sector Index: No est v 51.9 prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 30th: No est v $743.8B prior.

- 09:30 (CA) Canada Jun Manufacturing PMI: No est v 52.9 prior.

- 10:00 (US) May Factory Orders: -2.0%e v +4.8% prior; Factory Orders (ex-transportation): 1.0%e v 1.3% prior.

- 10:00 (US) May Final Durable Goods Orders: -4.5%e v -4.5% prelim; Durables (ex-transportation): 1.3%e v 1.3% prelim; Capital Goods Orders (non-defense/ex-aircraft): 1.6%e v 1.6% prelim; Capital Goods Shipments (non-defense/ex-aircraft): 0.3%e v 0.3% prelim.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (DK) Denmark Jun Foreign Reserves (DKK): No est v 687.5B prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 11:45 (UK) BOE’s Mann.

- 12:00 (CA) Canada to sell 5 Year Bonds.

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- 13:55 (IT) ECB's Cipollone (Italy).

- 17:00 (KR) South Korea Jun Foreign Reserves: No est v $427.0B prior.

- 18:00 (NZ) New Zealand Jun ANZ Consumer Confidence: No est v 86.5 prior.

- 19:00 (AU) Australia Jun Final PMI Services: No est v 49.9 prelim; PMI Composite: No est v 49.8 prelim.

- 20:01 (IE) Ireland Jun PMI Services: No est v 50.8 prior; PMI Composite: No est v 52.5 prior.

- 20:30 (JP) Japan Jun Final PMI Services: No est v 54.9 prelim; PMI Composite: No est v 51.8 prelim.

- 20:30 (SG) Singapore Jun PMI (whole economy): No est v 56.7 prior.

- 21:45 (CN) China Jun RatingDog PMI Services: 53.0e v 54.4 prior; PMI Composite: No est v 54.0 prior.

- 22:05 (VN) Vietnam Q2 GDP Y/Y: 7.0%e v 7.8% prior.

- 22:05 (VN) Vietnam Jun CPI Y/Y: 5.5%e v 5.6% prior.

- 22:05 (VN) Vietnam Jun Trade Balance: $2.3Be v -$5.2B prior; Exports Y/Y: 20.0%e v 18.0% prior; Imports Y/Y: 35.0%e v 33.8% prior.

- 22:05 (VN) Vietnam Jun Industrial Production Y/Y: No est v 8.8% prior.

- 22:05 (VN) Vietnam Jun Retail Sales Y/Y: No est v 11.8% prior.

- 22:35 (CN) China to s 2-Year and 30-year in additional Bonds.

- 23:30 (JP) Japan to sell 3-Month Bills.