MNI US OPEN - Trump Threatens Japan With Tariffs of Up to 35%
EXECUTIVE SUMMARY
- MNI US PAYROLLS PREVIEW – SOFTER DEMAND MEETS SUPPLY CONSTRAINT
- TRUMP’S 35% TARIFF THREAT FEEDS JAPAN’S WORST-CASE SCENARIO FEAR
- TRUMP SAYS ISRAEL AGREED TO TERMS FOR 60-DAY GAZA CEASEFIRE
- EUROZONE UNEMPLOYMENT RATE TICKS UP TO 6.3%
Figure 1: Eurozone inflation momentum
NEWS
MNI US PAYROLLS PREVIEW: Softer Demand Meets Supply Constraint
The June payrolls report sees a rare Thursday release at 0830ET owing to Independence Day on Friday, as part of a particularly heavy docket that also includes ISM Services. There are few alternative June labor indicators to go off as the release also lands early in the month, with the most notable being a pronounced uplift in jobless claims. Broad Bloomberg consensus sees nonfarm payrolls rising a seasonally adjusted 110k in June after 139k in May, with private dealer analysts a little lower at 103k and the Bloomberg Whisper currently at 100k.
MNI EUROZONE INFLATION INSIGHT - JUNE 2025: Services Remains Elevated as Expected
Eurozone June flash headline HICP printed in line with expectations on Tuesday, at 2.0% Y/Y, slightly firmer than May’s 1.9%, while the core measure also confirmed consensus at an unchanged 2.3% Y/Y. The headline acceleration came as firmer energy inflation outweighed a marginal food/alcohol/tobacco slowdown. Particularly watched services HICP meanwhile was ever so slightly firmer than in May this time, providing a cleaner view on underlying pressures as easter and seasonality effects were not of major concern. The data for the category suggests some stickiness remains.
US/JAPAN (BBG): Trump’s 35% Tariff Threat Feeds Japan’s Worst-Case Scenario Fear
US President Donald Trump threatened Japan with tariffs of up to 35% as he ramped up tensions for a third straight day, fueling fears of a worst-case scenario among market players and raising doubts over Tokyo’s tactics in trade talks. Japan should be forced to “pay 30%, 35% or whatever the number is that we determine, because we also have a very big trade deficit with Japan,” Trump said, again flagging the possibility that across-the-board tariffs could go much higher than the 24% initially penciled in for July 9. “I’m not sure we’re going to make a deal. I doubt it with Japan, they’re very tough. You have to understand, they’re very spoiled.”
US/MIDEAST (BBG): Trump Says Israel Agreed to Terms For 60-Day Gaza Ceasefire
President Trump says Israel “agreed to the necessary conditions to finalize the 60 day ceasefire” in Gaza, adding that he hopes Hamas will accept it. Trump describes a “long and productive meeting” with Israelis today in a post on Truth Social. “I hope, for the good of the Middle East, that Hamas takes this Deal,” Trump says. Qataris and Egyptians will deliver the final proposal, per post.
US/UKRAINE (WSJ): U.S. Halts Key Weapons for Ukraine in New Sign of Weakening Support for Kyiv
The U.S. has stopped the delivery of air-defense interceptors and other weapons intended for Ukraine and is using them instead to beef up Pentagon stocks, a Trump administration official and two congressional aides said Tuesday. The U.S. move to withhold arms deliveries earmarked for Ukraine reflects the Trump administration’s slackening commitment to aiding Kyiv in its defense against Russia. Administration officials have stressed the need to focus more on the longer-term threats from China and, more immediately, military needs in the Middle East.
UK (Telegraph): Labour Hints at Autumn Tax Rises After Welfare Debacle
Pat McFadden said watering down the Government’s flagship welfare Bill will have “financial consequences” in an apparent hint at future tax rises. The Chancellor of the Duchy of Lancaster indicated that the fiscal fallout resulting from Sir Keir Starmer’s concessions to Labour rebels will be set out at the Budget later this year. The Prime Minister dropped a planned crackdown on the personal independence payment (Pip) just 90 minutes before MPs were due to vote on the legislation last night.
UK/EU (FT): EU Blocks Britain’s Attempts to Join Pan-European Trading Bloc
British government hopes of joining a pan-European trade area to reduce post-Brexit supply chain challenges for UK goods exporters are being blocked by Brussels, according to officials on both sides. The UK announced it was considering whether to join the Pan-Euro-Mediterranean (PEM) convention as part of its new trade strategy published last week, arguing it could help boost the UK’s flagging goods exports. However, the European Commission has made clear to the UK that it would not currently support such a move, according to four people familiar with discussions, in a move the officials acknowledged had “frustrated” London.
UK/GERMANY (MNI): UK & Germany to Sign Defence Pact in Coming Weeks: Politico
Politico reports that the UK and Germany will sign a wide-ranging defence pact in the coming weeks that will pledge mutual support in the case of a strategic threat to either. This will provide Germany with mutual assistance clauses with both European nuclear powers, and moves towards Chancellor Friedrich Merz's goal of bolstering deterrents to an attack on the European continent away from the US. The report says the treaty will build on the joint declaration from 2024 between UK PM Sir Keir Starmer and Merz's predecessor, Olaf Scholz.
ECB (MNI INTERVIEW): Strong Q2 Would Back 1 More Cut - ECB's Centeno
Bank of Portugal Governor Mario Centeno speaks to MNI at Sintra. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
RBA (MNI EXCLUSIVE): RBA Trade Concerns Abate, Focus on Domestic Market
MNI discusses the RBA's international outlook. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.
INDIA (BBG): RBI Panel Likely to Advise India Retains 4% Inflation Target
An internal committee of the Reserve Bank of India is in favor of retaining the current inflation target in an upcoming government review, according to people familiar with the matter, giving investors some reassurance about the continuity of monetary policy. The panel will likely recommend the RBI ask the government to keep the target at 4%, with a tolerance band of 2%-6%, the people said, asking not to be identified because the discussions are private. The panel is also in favor of retaining the consumer price index as the target, they said, instead of using a measure that excludes food, as some government officials have argued.
COMMODITIES (BBG): Copper Nears $10,000 as Traders Monitor Peru Curbs, Squeeze
Copper traded near the highest level in more than three months as investors weighed the fallout from a supply disruption in Peru and monitored a supply squeeze that’s affected the London Metal Exchange. The industrial metal was steady near $10,000 a ton on Wednesday after closing 0.7% higher in the previous session. Artisanal miners are staging blockades that are impacting the transport of copper from some operations in Peru, including those owned by MMG Ltd. and Hudbay Minerals Inc., as they push for a regulatory framework that caters specifically to small-scale mines.
DATA
EUROZONE DATA (MNI): Unemployment Rate Ticks Up to 6.3%
- EUROZONE MAY UNEMPLOYMENT RATE 6.3%
The Eurozone unemployment rate unexpectedly ticked up to 6.3% in May but remains close to the 6.2% cycle lows seen in April (consensus was for an unchanged print).
GERMANY DATA (MNI): VDMA "Slightly Optimistic" on Machinery Orders Following May Data
German real machinery orders increased 9% Y/Y in May according to VDMA data. Base effects underpinned the print as last May was a particularly weak month. On a broader YTD basis, machinery orders rose 3%, with a 4% rise in foreign orders and domestic orders unchanged. "This development confirms our slight optimism for the second half of the year. The order situation underpins our production forecast of a real decline of 2 percent for 2025. Global uncertainty remains high. This makes it all the more important for the EU to quickly reach an agreement with the US on ending the ongoing trade disputes and to prevent further escalation", VDMA comments.
FRANCE DATA (MNI): YTD Budget Deficit Tracks Below 2023/2024 Outturns
The French year-to-date budget deficit widened to E94bln in May, a step up from E69.3bln last month but comfortably below the E113.5bln seen in May 2024 and E107.2bln in May 2023. Although fiscal consolidation appears to be progressing from this perspective, last week the French government said it needs to find an extra E5bln of spending cuts to achieve its 5.4% deficit to GDP target. That's on top of the E40bln in savings required to meet its 4.6% 2026 target, with proposals set to be announced this month before a vote in the autumn.
SPAIN DATA (MNI): June Labour Market Data Steady, Political Risks Weighing on SPGBs
There were steady developments in Spanish registered labour market data for June. Unemployment claims fell by 48.9k, broadly in line with June 2024's -46.8k and 2023's -50.3k. On the employment side, growth of 40.4k was above June 2024's 34.2k and 2023's 18.1k, but below 2022 and 2021 changes. Looking ahead, the employment outlook in Spain remains fairly solid, with the EC's expected employment indicator at 109.2 in June (vs 107.1 in May, 108.4 in April).
ITALY DATA (MNI): A Surprise Step Higher in the U/E Rate off Lows
The Italian unemployment surprisingly stepped higher from low levels in May with further signs that younger cohorts have been under pressure in recent months. The unemployment rate saw a surprisingly large increase in May to 6.5% (cons 6.0) after an upward revised 6.1% in April (initially 5.9%). It leaves it at its highest since Jun 2024 after what are now seen to have been recent lows of 6.05% in Oct and Nov 2024 having last been lower in mid-2007.
AUSTRALIA DATA (MNI): Retail Momentum Softens Further in May, Despite Clothing Bounce
- AUSTRALIA MAY RETAIL SALES +0.2% M/M
Australian retail sales rose a modest 0.2% m/m in May, after a revised flat outcome in April (originally reported as a -0.1% dip). The market consensus for the May outcome was a +0.5% rise. Other data showed May building approvals up 3.2% m/m, which was slightly below the 4.0% forecast. The April fall was revised to -4.1% m/m. By sub category we had strong rebounds in both apparel retail sales and department store spending. Both categories were up close to 3%m/m, but this follows similar falls in April.
AUSTRALIA MAY BUILDING APPROVALS +3.2% M/M, +6.5% Y/Y (MNI)
FOREX: Europe Happy to Buy USD Off Lower Levels
- The greenback is on for a steadier start to the session, climbing off overnight lows as European markets are happy to buy the USD at lower levels. As a result, the USD Index is testing yesterday's highs to recoup ~0.5% off the pullback low. We continue to monitor the pierce of key long-term support at 96.55 - the trendline drawn from the May 2011 low - however, we note the oversold position does raise the possibility that either; a correction unfolds soon, or that the pace of the trend slows down, resulting in more volatile price action going forward.
- In contrast with Tuesday trade, JPY is the poorest performer in G10 as spot gravitates back toward the 50-dma. Nonetheless, the bear threat in USDJPY remains intact and Tuesday's sell-off reinforces this theme. The Jun 23 shooting star candle formation highlighted a reversal of the recent recovery and this signal remains in play.
- Meanwhile, GBP is softer off the new cycle high from Tuesday. GBP/USD has shown back below 1.37, with some selling pressure emanating from the failure of UK PM Starmer to press ahead with Welfare Reform in the House of Commons late yesterday. The UK Government continues to lose support among the voting public, and remains under pressure from their party MPs - extending a near-term phase of political uncertainty. EUR/GBP prints 0.8599 ahead of the NY crossover, the highest spot price since late April.
- ADP Employment Change data will be carefully watched later today. Market consensus looks for job gains of +98k over the month - and comes in the context of Powell's insistence that the FOMC are monitoring data very closely ahead of the July meeting, at which he refused to rule out policy action. The Whisper number for this Thursday's (brought forward by one day due to US market holidays on Friday) NFP headline has been trending lower, and now sits below consensus of 110k, meaning any positive surprise in ADP today could shift market perceptions.
- The ECB's Sintra policy conference continues. De Guindos, Cipollone and Lane are all set to speak, as well as BoE's Taylor - all before Lagarde makes the formal closing remarks of the conference at 1515BST/1015ET. The President has no public engagements set for Wednesday, but markets will be on watch for any further unscheduled comments on the incoming tariff regime. The President reaffirmed a 9th July deadline for a higher tariff set after April's delay - and said he is not considering any further rescheduling - placing more pressure on negotiating teams to reach a near-term settlement.
EGBS: Bund Futures Pressured by 10-year Supply and UST Spillover
The combination of this morning’s 10-year supply alongside negative spillovers from US Treasuries has weighed on Bund futures, now -35 ticks at 130.14 (albeit off lows of 130.08). Futures remain above Monday’s low (130.00) for now, but a bearish threat is present and a clear move below prior support at 130.12 would highlight this threat, undermine the recent bullish theme, and signal scope for an extension lower.
- Germany sold E6bln of the new 10-year 2.60% Aug-35 Bund this morning. Demand metrics were a bit softer than the last auction of the previous on-the-run line, but the reaction in Bund futures was contained.
- The German curve has bear steepened (note: 10-year yields are skewed higher owing to a BBG benchmark roll), with Schatz yields up 1bp and 30-year Bund yields up 3.5bps.
- 10-year EGB spreads to Bunds are biased a little wider, but remain within 1bp of yesterday’s closing levels. French PM Bayrou survived a no-confidence vote last night – as expected.
- This morning’s Eurozone data hasn’t been market moving. The Italian unemployment rate surprisingly jumped to 6.5% (vs an upwardly revised 6.1% prior), which also pushed the Eurozone-wide reading a tenth above consensus to 6.3%.
- Further commentary from the ECB’s Sintra forum will be eyed, particularly in relation to recent exchange rate moves. The MNI Policy Team released an interview with Bank of Portugal Governor Centeno this morning.
GILTS: Lower & Steeper, Finding a Base After Solid Demand at Auction
Gilts trade to fresh session lows before finding some support following solid demand and pricing metrics at this morning’s Mar-28 supply.
- Little of note on the news front since the London open, with the presence of this morning’s gilt and EGB supply, alongside fiscal concerns in both the UK & U.S., providing some pressure.
- Futures as low as 92.98, with yesterday’s opening gap higher closed.
- Bulls remain in technical control.
- Initial support at the 20-day EMA (92.78) untouched.
- Initial resistance located at yesterday’s high (93.76).
- Yields 2-4bp higher, curves biased steeper.
- Major curves pare a little of the Tuesday flattening that followed comments from BoE Governor Bailey, after he flagged the potential for a slowing of QT and suggested that related adjustments would be influenced by the recent steepening of the curve.
- SONIA futures lower and steeper given cues from the long end, last down 0.5-5.0 on the day.
- BoE-dated OIS through year-end is little changed, showing ~54bp of cuts through December.
- With only 4 meetings left in the year, further dovish cues, most likely via a further deterioration in the labour market, are probably required to generate a meaningful extension of the recent dovish move.
- Comments from BoE dovish dissenter Taylor due from 11:30 London (more to follow in due course).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
Aug-25 | 4.006 | -21.1 |
Sep-25 | 3.934 | -28.4 |
Nov-25 | 3.759 | -45.8 |
Dec-25 | 3.674 | -54.3 |
Feb-26 | 3.544 | -67.3 |
Mar-26 | 3.509 | -70.8 |
EQUITIES: Eurostoxx 50 Futures Holding Onto Bulk of Recent Gains
Trend signals in Eurostoxx 50 futures remain bearish, however, the recovery from the Jun 23 low appears to be a reversal and the contract is holding on to the bulk of its most recent gains. Price has traded through the 20- and 50-day EMAs. A clear break of both averages would strengthen a reversal theme. This would open 5486.00, the May 20 high and bull trigger. On the downside, a breach of 5194.00, the Jun 23 low, would reinstate a bearish theme. The trend condition in S&P E-Minis is unchanged, it remains bullish and the contract has continued to appreciate, this week. Short-term resistance and a bull trigger at 6128.75, the Jun 11 high, has recently been breached. The clear break confirms a resumption of the uptrend that started Apr 7. The 6200.00 handle has been cleared too, this opens 6277.50, the Feb 21 high and bull trigger. Key support is at the 50-day EMA - at 5975.80.
- Japan's NIKKEI closed lower by 223.85 pts or -0.56% at 39762.48 and the TOPIX ended 6.03 pts lower or -0.21% at 2826.04.
- Elsewhere, in China the SHANGHAI closed lower by 2.955 pts or -0.09% at 3454.792 and the HANG SENG ended 149.13 pts higher or +0.62% at 24221.41.
- Across Europe, Germany's DAX trades higher by 81.22 pts or +0.34% at 23753.03, FTSE 100 higher by 17.24 pts or +0.2% at 8802.79, CAC 40 up 66.28 pts or +0.87% at 7728.87 and Euro Stoxx 50 up 26.49 pts or +0.5% at 5308.92.
- Dow Jones mini up 57 pts or +0.13% at 44863, S&P 500 mini up 7.5 pts or +0.12% at 6256, NASDAQ mini up 22.75 pts or +0.1% at 22715.
Time: 10:00 BST
COMMODITIES: WTI Futures Maintaining a Relatively Softer Tone
WTI futures maintain a softer tone following the reversal from the Jun 23 high. Support to watch is at the 50-day EMA, at $64.64. It has been pierced, a clear break of it would signal scope for a deeper retracement. This would expose $58.87, the May 30 low. On the upside, initial resistance to watch is $71.20, the 50.0% retracement of the Jun 23 - 24 high-low range. Key resistance is at $78.40, the Jun 23 high. Gold traded lower last Friday resulting in a breach of the 50-day EMA, and a trendline drawn from the Dec 30 ‘24 low. A clear break of both support points would signal scope for a deeper correction - this would expose $3245.5, the May 29 low. The metal has recovered from Monday’s low and for now, this highlights a possible false trendline break. Stronger gains would refocus attention $3451.3, Jun 16 high. The bear trigger is $3248.7, the Jun 30 low.
- WTI Crude up $0.23 or +0.35% at $65.63
- Natural Gas down $0.03 or -0.79% at $3.388
- Gold spot down $4.02 or -0.12% at $3334.12
- Copper up $1.8 or +0.35% at $511.75
- Silver up $0.13 or +0.37% at $36.1475
- Platinum up $0.88 or +0.06% at $1360.76
Time: 10:00 BST
| Date | GMT/Local | Impact | Country | Event |
| 02/07/2025 | 1030/1230 |  EU | ECB Lane Chairs Sintra Panel | |
| 02/07/2025 | 1030/1130 |  GB | BOE Taylor On Panel At Sintra Conference | |
| 02/07/2025 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 02/07/2025 | 1215/0815 | *** | US | ADP Employment Report |
| 02/07/2025 | 1415/1615 | EU | ECB Lagarde Gives Closing Sintra Remarks | |
| 02/07/2025 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 03/07/2025 | 2300/0900 | * |  AU | S&P Global Final Australia Services PMI |
| 03/07/2025 | 2300/0900 | ** | AU | S&P Global Final Australia Composite PMI |
| 03/07/2025 | 0030/0930 | ** |  JP | S&P Global Final Japan Services PMI |
| 03/07/2025 | 0030/0930 | ** | JP | S&P Global Final Japan Composite PMI |
| 03/07/2025 | 0130/1130 | ** | AU | Trade Balance |
| 03/07/2025 | 0145/0945 | ** |  CN | S&P Global Final China Services PMI |
| 03/07/2025 | 0145/0945 | ** | CN | S&P Global Final China Composite PMI |
| 03/07/2025 | 0630/0830 | *** |  CH | CPI |
| 03/07/2025 | 0700/0300 | * |  TR | Turkey CPI |
| 03/07/2025 | 0715/0915 | ** |  ES | S&P Global Services PMI (f) |
| 03/07/2025 | 0715/0915 | ** | ES | S&P Global Composite PMI (final) |
| 03/07/2025 | 0745/0945 | ** |  IT | S&P Global Services PMI (f) |
| 03/07/2025 | 0745/0945 | ** | IT | S&P Global Composite PMI (final) |
| 03/07/2025 | 0750/0950 | ** |  FR | S&P Global Services PMI (f) |
| 03/07/2025 | 0750/0950 | ** | FR | S&P Global Composite PMI (final) |
| 03/07/2025 | 0755/0955 | ** |  DE | S&P Global Services PMI (f) |
| 03/07/2025 | 0755/0955 | ** | DE | S&P Global Composite PMI (final) |
| 03/07/2025 | 0800/1000 | ** | EU | S&P Global Services PMI (f) |
| 03/07/2025 | 0800/1000 | ** | EU | S&P Global Composite PMI (final) |
| 03/07/2025 | 0830/0930 | GB | Decision Maker Panel data | |
| 03/07/2025 | 0830/0930 | GB | BOE Credit Conditions Survey | |
| 03/07/2025 | 0830/0930 | ** | GB | S&P Global Services PMI (Final) |
| 03/07/2025 | 0830/0930 | *** | GB | S&P Global/ CIPS UK Final Composite PMI |
| 03/07/2025 | 1230/0830 | *** | US | Jobless Claims |
| 03/07/2025 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 03/07/2025 | 1230/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 03/07/2025 | 1230/0830 | *** | US | Employment Report |
| 03/07/2025 | 1230/0830 | ** | US | Trade Balance |
| 03/07/2025 | 1230/0830 | ** | US | Trade Balance |
| 03/07/2025 | 1345/0945 | *** | US | S&P Global Services Index (final) |
| 03/07/2025 | 1345/0945 | *** | US | S&P Global US Final Composite PMI |
| 03/07/2025 | 1400/1000 | *** | US | ISM Non-Manufacturing Index |
| 03/07/2025 | 1400/1000 | ** | US | Factory New Orders |
| 03/07/2025 | 1400/1000 | ** | US | Factory New Orders |
| 03/07/2025 | 1400/1000 | * | US | US Bill 08 Week Treasury Auction Result |
| 03/07/2025 | 1400/1000 | ** | US | US Bill 04 Week Treasury Auction Result |
| 03/07/2025 | 1430/1030 | ** | US | Natural Gas Stocks |
| 03/07/2025 | 1500/1100 | US | Atlanta Fed's Raphael Bostic | |
| 03/07/2025 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 03/07/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 03/07/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
