July 04, 2025
Thursday’s NFP report revealed higher than expected jobs numbers for June, with 147k new positions compared to the theorised figure of 110k. Unemployment also fell below expectations with a drop to 4.1% compared to 4.2% previously. Not only that, but the figures for May and April were also revised to the upside, bumping up the combined total by an extra 16k jobs. The data are in stark contrast to the ADP employment change published the day prior, which suggested a loss of 33k jobs in June. The reasons for the huge discrepancy are not entirely clear.
US stocks were thrilled with the report. The Dow Jones rose around 0.8% following the publication, closing within 200 points of its record high established back in December 2024. The S&P 500 and Nasdaq Composite meanwhile are already in unchartered territory, with both indices notching their third record high close of the week. Crowning achievements came in thick and fast yesterday as Nvidia (NVDA) and Microsoft (MSFT) both hit record highs and the question being asked among investment circles is which company will hit a $4 trillion valuation first.
Renewed strength in the US labour market does not bode well for an interest rate cut any time soon. Interest rate traders slashed expectations for a rate cut during the next Federal Reserve meeting at the end of the month, although odds of an adjustment in September remain favourable. The shift in expectations provided some buoyancy to the Dollar yesterday, allowing the DXY to close back above 97. Gold meanwhile underwent a minor selloff to bring the precious metal down to $3,326 an ounce by Thursday’s close. Very little on the agenda this Friday, particularly with US markets closed for the day. Many traders have already turned their attentions to next week.
A refreshing dose of optimism swept through markets early this week. US stocks continued to flourish under the prospect of incoming trade deals and interest rate cuts, pushing the Dow Jones 400 points higher during yesterday's session. The index would only need to gain another 520 points to equal its record high close established back in December last year. Over in the S&P 500 and Nasdaq Composite, results were more of a mixed bag. The potential for a wider market rally is causing some investors to rotate out of the major tech stocks and back into stocks more reflective of the underlying economy. Indeed, the Russell 2000 index, which tracks smaller stocks, rose over 1% yesterday. The tech-heavy Nasdaq meanwhile lost 0.8% as Nvidia (NVDA), Meta Platforms (META) and most notably, Tesla (TSLA) all experienced a decent step down. The car maker's share price fell 5% yesterday following a disagreement between Musk and Trump concerning the recent spending bill.
Not much to report on the Dollar front. The DXY continued its descent into the abyss yesterday, briefly falling below 96.4 at one point and showing very little sign of life. A weaker Dollar helped gold push back up to $3,338 an ounce by Tuesday's close, while silver and platinum are once again being ignored by precious metals traders.
Crypto markets are relatively still this week, in contrast to several crypto company stocks. On Monday, Robinhood Markets (HOOD) announced that it had launched tokenised stock trading on its platform for all clients within the European Union. This sets the stage for 24/7 stock trading within the next few months, according to co-founder and CEO Vlad Tenev. Shares in the company shot up 13% on Monday and are up a staggering 140% since the start of the year. The race is on to deploy the same offerings in the US, and while the SEC has apparently showed willing, the pieces are not quite in place to roll out the same options for US clients as of yet. Things were not so rosy over at Coinbase (COIN) unfortunately, which experienced significant selling pressure after Ark Invest unloaded $95 million worth of shares as part of a portfolio rebalancing measure. Despite the selloff in recent days, Coinbase is still up 30% this year – a testament to the changing fortunes in the beleaguered industry.
US stocks ended the week on a high note last Friday, with both the S&P 500 and Nasdaq Composite notching new record highs after modest 0.5% climbs. The Dow Jones meanwhile enjoyed a 1% daily gain but remains a step below an all-time high of its own. Only one day of trading remains before markets close the books on Q2; suffice to say the first half of the year has been an interesting one. The violent sell-off in April saw drawdowns of over 20% across the board and wreaked havoc among financial markets, but ultimately the carnage caused no lasting damage, as indices in the US and around the world are once again in the green for the year.
The obvious question is where do markets go next? The latest PCE price report published last Friday indicated an unexpected rise in core US prices, while the headline inflation figure fell in line with expectations at 2.3%. The Fed would ideally like to see inflation a little lower before slashing rates on the Dollar, but a number of board members are starting to call for rate cut sooner rather than later. The other element of the Fed’s remit is of course the US labour market, which has proven resilient so far this year. That could all change on Thursday however with the release of the latest non-farm payrolls. The report comes a day early this month because of US Independence Day on Friday.
Nations around the world have now had a few months to renegotiate their trade deals with the US, and while some regions have been more fruitful than others, some markets are beginning to show signs of hope. The Nikkei 225 rose back over 40,000 points on Friday as a trade deal between Japan and the US came closer to fruition and the index pushed higher still this morning in the Asian session. Even the ice-cold relations between the US and China are beginning to thaw after months of challenging talks. The Fed had been reticent to move the needle on interest rates in part because of the uncertainty surrounding tariffs. As that uncertainty dissipates, the Dollar is likely to experience even greater pressure. The DXY has touched 97 on the last two trading sessions and is barely holding above it at the time of writing.
Not much on the economic calendar today with the exception of Chinese manufacturing and non-manufacturing PMIs. Tomorrow brings more of the same in the form of manufacturing PMI data from around the world, as well as the first glimpse into the US labour market with the latest JOLTs job openings. Wednesday delves a little deeper with the ADP employment change. On Thursday, manufacturing data gives way to services PMIs but as mentioned earlier, the main event of the week will be the latest NFP report. Current predictions are for 110k new jobs and an uptick to 4.3% unemployment. No significant earnings reports this week.
There is an ongoing shift in expectations with regards to the next Fed decision. Markets are starting to lean more heavily towards an interest rate cut, perhaps as early as next month. The Fed itself has begun to soften its tone on the matter, with a number of board members now sympathetic to the idea. US stocks are certainly optimistic. The Dow Jones rose 400 points yesterday but the bigger story lies with the S&P 500 and Nasdaq Composite. Both indices came comically close to breaking their record highs yesterday, but would eventually settle just beneath them. The S&P 500 closed a mere 3 points away from its all-time high, while the Nasdaq Comp was similarly only a handful of points away.
With the PCE price index set for publication later today, markets may get the justification they need to push both indices to new highs. The index is the Fed’s preferred inflation gauge and will be used to determine whether the central bank’s 2% target remains in sight. Inflationary pressures in the US have decreased consistently since the start of the year. Should the newest data print follow suit, the Fed will have all the justification it needs to consider a cut on the 29th of July.
On the Dollar front, the DXY appears to have taken the plunge. The index is now down to the low-97 mark while competing currencies continue to push higher against the Greenback. Despite the weakness in the Dollar, gold is once again struggling to maintain any positive momentum, falling below $3,300 an ounce this morning. Silver on the other hand appears to be consolidating its position around $36, with ample room to move in either direction. The main event however is currently unfolding in platinum, which broke above $1,400 an ounce yesterday, a threshold not seen since 2014.
The ceasefire between Israel and Iran appears to be holding. A quick glance at financial markets confirms that most traders believe the conflict is over for now. Crude oil prices have totally collapsed since Monday, meaning no one is expecting any supply disruptions in the region. Brent Crude futures are back down to $68 a barrel, $10 down from just a couple of days ago. Gold is once again struggling to justify its high price tag and is now down to $3,330 an ounce. US indices put in solid performances on Tuesday, with all three majors gaining over 1% and the S&P 500 and Nasdaq Composite climbing to within a short step to their respective record highs.
On the other side of the equation, the Dollar is taking an absolute beating. The DXY is currently floundering below 98 and looks tempted to plunge to new multi-year lows. The Euro edged above $1.16 yesterday while the Pound Sterling closed above $1.36 – both multi-year highs against the Greenback. Weakness in the Dollar followed comments from Fed Governor Michelle Bowman, who on Monday suggested that the central bank might be in a position to lower interest rates as early as July. The comments follow those of Governor Christopher Waller, who last week also claimed that the Fed could start cutting rates during the next meeting. Friday’s PCE price index may well be pivotal in this regard.
Besides crude oil, one of the more aggressive pivots sparked by the ceasefire in the Middle East occurred in cryptocurrencies. Bitcoin’s sojourn below $100,000 was short-lived indeed, rising back above $105k on Monday and pushing higher still yesterday and this morning. After rising to 66%, Bitcoin dominance has taken a hit over the past few sessions, allowing the broader crypto market to catch up.
So much for the two week wait. Financial markets are still trying to make heads or tails of the US strike carried out against Iranian nuclear facilities over the weekend. The reaction so far has been relatively muted, even in oil markets. Crude prices have risen a modest 2% in the wake of the attack, pushing Brent futures up to $78 a barrel and WTI above $75. The obvious question however is what happens next. Should the regime retaliate and cause disruptions in the Strait of Hormuz, there will be immediate consequences on crude oil delivery and pricing, but for now oil markets are betting that the situation will not escalate any further. The strait currently accounts for a quarter of all seaborn oil trade. Underscoring all of the above, there is still a fundamental market structure that is keeping a lid on prices. The fact remains that global inventories are high, oil producing nations are largely holding back on production and worldwide demand forecasts are nothing to write home about.
For all the commotion on the international stage, gold has had very little to say for itself. A high opening this morning was quickly abandoned and the precious metal is currently down to $3,370 an ounce at the time of writing. Silver and platinum are not seeing any particular inflows either. The Dollar on the other hand has taken up a stronger position this morning, pushing the DXY back above 99 and putting major currencies on the back foot. US stock market futures are predictably down, although only marginally. Cryptocurrencies have been hit the hardest, with Bitcoin briefly dipping below $100k last night and barely holding onto it this morning.
Developments in the Middle East will likely be the main driver over the next few sessions, in what is set to be a relatively light week in terms of economic data. Later today, manufacturing and services PMIs will provide the latest insights into the European and US economies. The mid-week has little to offer other than Jerome Powell’s latest testimony before the US Congress. The most notable event of the week will have to wait until Friday in the form of last month’s PCE price report. Until then, all eyes on Iran.
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