Asian shares tick up ahead of US payrolls test; Trump's tax bill in focus
Wall Street climbed overnight to close at new record highs after President Donald Trump announced that the U.S. has struck a trade deal with Vietnam, including a 20% tariff on exports to the U.S. That fuelled hopes that more deals will be forthcoming, with negotiations underway for a trade agreement with India.
The MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab advanced 0.2% to hover just below a near four-year top. Japan's Nikkei (.N225), opens new tab was flat.
China's blue chips (.CSI300), opens new tab edged up 0.2%, while Hong Kong's Hang Seng index (.HSI), opens new tab fell 0.6% after data showed China's services activity expanded at the slowest pace in nine months in June.
Both Nasdaq futures and S&P 500 futures were little changed in Asia
Investors were waiting for Trump's massive tax and spending bill to pass the House of Representatives for possible final approval. The bill is expected to add $3.3 trillion to the national debt, slash taxes and reduce social safety net programs.
The main risk event for markets will be the U.S. payrolls figures due later in the day. Analysts are forecasting a rise of 110,000 in June with the jobless rate ticking up to 4.3% but the stakes are high after a private sector payrolls report surprised with the first fall in over two years.
The resilience of the labour market is a major reason the majority of Federal Reserve members say they can afford to hold off on cutting rates until they can gauge the real impact of tariffs on inflation.
"These labour market indicators warn of the risk that the unemployment rate could spike to 4.4%, the highest since October 2021," said Tony Sycamore, analyst at IG.
"This would quickly increase the probability of a July Fed rate cut to around 70%."
Futures imply just a 25% probability for a rate cut this month from the Fed, which has not eased policy at all this year, drawing the ire of Trump who reiterated his call on Wednesday for Chair Jerome Powell to resign.
The Treasuries market was tense before the data as a weak jobs report would send yields sharply lower. Ten-year Treasury bond yield slipped 2 basis points to 4.265% on Thursday, while two-year yields eased 2 bps to 3.77%.
The dollar is again under pressure, having caught some relief overnight. Concerns about the Fed's independence in the wake of Trump's criticism have driven the dollar to its lowest against its peers in over three years.
Trump, who said rates should be cut to 1% from the current Fed benchmark rate of 4.25% to 4.50%, has repeatedly railed against Powell for not lowering borrowing costs since his return to the White House in January.
The euro inched up 0.1% to $1.1807, just a whisker away from a nearly four-year top of $1.1829 hit on Tuesday, while sterling added 0.1%, recovering a steep 0.8% fall overnight, as fears about the future of its finance minister Rachel Reeves eased.
Investor anxiety over UK finances after the British government's reversal on welfare reforms caused gilt yields to jump overnight, up nearly 23 basis points at one point, the most since October 2022.
In commodities markets, oil prices were slightly lower after jumping 3% overnight as Iran suspended cooperation with the U.N. nuclear watchdog. U.S. crude futures slipped 0.4% to $67.20 a barrel while Brent was at $68.84 per barrel, also 0.4% lower on the day.
Gold prices eased 0.4% to $3,342 an ounce.
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On Tuesday, Trump turned his sights on none other than Elon Musk, the tech billionaire who, before a recent spectacular fallout, had been his closest ally in ramming through a radical agenda of upending and remaking the US government. But when the Tesla and SpaceX founder vowed to form a new party if Congress passed Trump's signature 'one big beautiful bill' into law, Trump swung into the retribution mode that is now familiar to his Democratic opponents. 'Without subsidies, Elon would probably have to close up shop and head back home to South Africa,' Trump posted on his Truth Social platform, menacing both the billions of dollars in federal subsidies received by Musk's companies, and – it seemed – his US citizenship, which the entrepreneur received in 2002 but which supporters like Steve Bannon have questioned. 'No more Rocket launches, Satellites, or Electric Car Production, and our Country would save a FORTUNE.' Trump twisted the knife further the following morning talking to reporters before boarding a flight to Florida. 'We might have to put Doge on Elon,' he said, referring to the unofficial 'department of government efficiency' that has gutted several government agencies and which Musk spearheaded before stepping back from his ad hoc role in late May. 'Doge is the monster that might have to go back and eat Elon. Wouldn't that be terrible.' Musk's many critics may have found sympathy hard to come by given his earlier job-slashing endeavors on Trump's behalf and the $275m he spent last year in helping to elect him. But the wider political implications are worrying, say US democracy campaigners. 'Trump is making clear that if he can do that to the world's richest man, he could certainly do it to you,' said Ian Bassin, co-founder and executive director of Protect Democracy. 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The threat to Mamdani echoed a threat Trump's border 'czar' Tom Homan made to arrest Gavin Newsom, the California governor, last month amid a row over Trump's deployment of national guard forces in Los Angeles to confront demonstrators protesting against Ice's arrests of immigrants. Omar Noureldin, senior vice-president with Common Cause, a pro-democracy watchdog, said the animus against Mamdani, who is Muslim, was partly fueled by Islamophobia and racism. 'Part of the rhetoric we've heard around Mamdani, whether from the president or other political leaders, goes toward his religion, his national origin, race, ethnicity,' he said. 'Mamdani has called himself a democratic socialist. There are others, including Bernie Sanders, who call themselves that, but folks aren't questioning whether or not Bernie Sanders should be a citizen.' Retribution promised to be a theme of Trump's second presidency even before he returned to the Oval Office in January. On the campaign trail last year, he branded some political opponents – including Adam Schiff, a California Democrat, and Nancy Pelosi, the former speaker of the House of Representatives – as 'the enemy within'. Since his inauguration in January, he has made petty acts of revenge against both Democrats and Republicans who have crossed him. Biden; Kamala Harris, the former vice-president and last year's defeated Democratic presidential nominee; and Hillary Clinton, Trump's 2016 opponent, have all had their security clearances revoked. Secret Service protection details have been removed from Mike Pompeo and John Bolton, who served in Trump's first administration, despite both being the subject of death threats from Iran because of the 2020 assassination of Qassem Suleimani, a senior Revolutionary Guards commander. Similar fates have befallen Anthony Fauci, the infectious diseases specialist who angered Trump over his handling of the coronavirus pandemic, as well as Biden's adult children, Hunter and Ashley. Trump has also targeted law firms whose lawyers previously acted against him, prompting some to strike deals that will see them perform pro bono services for the administration. For now, widely anticipated acts of retribution against figures like Gen Mark Milley, the former chair of the joint chiefs of staff of the armed forces – whom Trump previously suggested deserved to be executed for 'treason' and who expressed fears of being recalled to active duty and then court-martialed – have not materialised. 'I [and] people in my world expected that Trump would come up with investigations of any number of people, whether they were involved in the Russia investigation way back when, or the election investigation, or the January 6 insurrection, but by and large he hasn't done that,' said one veteran Washington insider, who requested anonymity, citing his proximity to people previously identified as potential Trump targets. 'There are all kinds of lists floating around … with names of people that might be under investigation, but you'll never know you're under investigation until police turn up on your doorstep – and these people are just getting on with their lives.' Yet pro-democracy campaigners say Trump's latest threats should be taken seriously – especially after several recent detentions of several elected Democratic officials at protests near immigration jails or courts. In the most notorious episode, Alex Padilla, a senator from California, was forced to the floor and handcuffed after trying to question Kristi Noem, the homeland security secretary, at a press conference. 'When the president of the United States, the most powerful person in the world, threatens to arrest you, that's as serious as it gets,' said Bassin, a former White House counsel in Barack Obama's administration. 'Whether the DoJ [Department of Justice] opens an investigation or seeks an indictment, either tomorrow, next year or never is beside the point. The threat itself is the attack on our freedoms, because it's designed to make us all fear that if any one of us opposes or even just criticises the president, we risk being prosecuted.' While some doubt the legal basis of Trump's threats to Musk, Mayorkas and Mamdani, Noureldin cautioned that they should be taken literally. 'Trump is verbose and grandiose, but I think he also backs up his promises with action,' he said. 'When the president of the United States says something, we have to take it as serious and literal. I wouldn't be surprised if at the justice department, there is a group of folks who are trying to figure out a way to [open prosecutions].' But the bigger danger was to the time-honored American notion of freedom, Bassin warned. 'One definition of freedom is that you are able to speak your mind, associate with who you want, lead the life that you choose to lead, and that so long as you conduct yourself in accordance with the law, the government will not retaliate against you or punish you for doing those things,' he said. 'When the president of the United States makes clear that actually that is not the case, that if you say things he doesn't like, you will be singled out, and the full force of the state could be brought down on your head, then you're no longer free. 'And if he's making clear that that's true for people who have the resources of Elon Musk or the political capital of a Mayorkas or a Mamdani, imagine what it means for people who lack those positions or resources.'
