The Overnight Report: Tariff Deadline Looms

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Better than feared employment and ISM services data was enough to lift the markets’ mood, taking the S&P500 to another record. Trumps’ ‘One Big Beautiful Bill’ passed the House of Representatives.

The ASX200 witnessed the start of the switch out of Banks and into Materials yesterday with the iron ore price rallying.

Futures are pointing to a green on screen start to Friday.

World Overnight
SPI Overnight	8610.00	+ 26.00	0.30%
S&P ASX 200	8595.80	– 1.90	– 0.02%
S&P500	6279.35	+ 51.93	0.83%
Nasdaq Comp	20601.10	+ 207.97	1.02%
DJIA	44828.53	+ 344.11	0.77%
S&P500 VIX	16.38	– 0.26	– 1.56%
US 10-year yield	4.35	+ 0.06	1.28%
USD Index	96.80	+ 0.36	0.37%
FTSE100	8823.20	+ 48.51	0.55%
DAX30	23934.13	+ 144.02	0.61%

Good Morning,

Markets were in no mood for downbeat concerns around the Tariff pause deadline next week. For now sentiment is positive and living is easy for a holiday US weekend.

What happened overnight, NAB Markets Today Research

US Payrolls printed much stronger than the consensus (payrolls 147k vs. 106k exp; unemployment rate 4.1% vs. 4.3% exp.). Yields rose sharply in reaction. The 2yr yield up some 11bps to 3.88%, 10yr yield up 8.9bps to 4.35%.

Pricing for Fed rate cuts was pared with now -51.4bps of cuts for 2025 from -65.0bps on Wednesday. As for meeting timing, a September cut is priced at 18.1bps (or 72% priced) from 29.1bps on Wednesday. The initial knee jerk reaction was sustained with the ISM Services Index also stronger (50.8 vs. 50.6 expected).

Equities rallied in response with the S&P500 up 0.8% to a fresh record high. Outsized gains were seen in the IT sector, up 1.3%, and in Financials, up 1.1%, while Materials were flat. Markets though did close early ahead of the Independence Day Holiday.

In FX the USD (DXY) was up 0.4%, only partly paring the 0.6% rise in response to the Payrolls numbers. The other piece of news overnight that occurred post close was the House passing the ‘big beautiful tax bill’ in a 218-214 vote. The bill is now ready to be signed by President Trump in time for July 4.

As for the details of US Payrolls, the headline was 147k in June vs. 106k exp., and the prior two months were also upwardly revised by 16k. Some of the beat looks like it related to government hiring at the state and local level up 73k with private payrolls actually missing expectations at 74k vs. 100k consensus.

While that may suggest a softish hue, the unemployment rate did fall a tenth to 4.1% vs. 4.3% expected and 4.2% previously. The participation rate also fell a tenth to 62.3%. The fall in the participation rate emphasises the slowing seen in the labour force.

Separately released Jobless Claims also fell back to 233k vs. 241k expected and 236k previously. The low ‘firing’ and maybe low ‘hiring’ equilibrium appears to be playing out, and in that context the Fed can afford to wait as it assesses the impact of tariffs on inflation. Fed funds pricing quickly pushed out pricing for a cut with September now only 72% priced. Following the slew of data overnight, the Atlanta Fed GDP Now estimate was revised up to 2.6% annualised from 2.5%.

The Fed’s Bostic spoke post the data in Germany, in which he merely re-emphasised the ability of the Fed to be patient: “I believe a period characterized by such widespread uncertainty is no time for significant shifts in monetary policy,” and “That is especially the case against the backdrop of a still resilient macroeconomy, which offers space for patience”. 

US Treasury Secretary Bessent also spoke overnight. He echoed Trump’s view of the Fed needing to lower rates, citing the 2yr yield being lower than the Fed funds rate. On debt issuance he said “we’re going to take that [observation] into account,” without being more specific. He also said that “our debt management process is very regular, very methodical but we are going to take these contingencies into account.”

The other key piece of data was the ISM Services which printed closed to expectations at 50.8 vs. 50.5 expected and 49.9 previously. The sub-indexes were broadly favourable with a rise in new orders up 4.9 to 51.3 and business activity up 4.2 to 54.2, though employment did fall back -3.5 to 47.2.

The anecdotes still noted tariff concerns, though importantly this doesn’t appear to be spilling over to supply chain disruptions (“Prices have gone up from tariff recovery fees separate line items but the supply chain, deliveries and inventories have remained mostly stable after the initial disruption”).

On tariff developments, the EU is aiming for a trade “agreement in principle” with the Trump administration rather than a more comprehensive deal by the 9-July deadline. EC President von der Leyen said reaching a detailed agreement ahead of the deadline wasn’t possible.

China also isn’t happy with the 40% tariff for Vietnam on “trans-shipping” of goods aimed at Chinese re-exports to the US. China is concerned that similar clauses will be part of other trade deals. The risk ahead of July 9 is of another flare-up in US-China trade tensions.

In the UK some order was restored after UK PM Starmer provided reassurance that Chancellor Reeves’ job was secure and she reaffirmed her commitment to fiscal discipline. All this following the previous day’s debacle in the House after the U-turn on welfare reform and market fear that Reeves was about to get fired.

UK gilt yields fell, led by the long end, with the 10-year rate down -7bps to 4.54%, partially unwinding the 16bps lift the previous day.

So what do we make of all this? Extract from Stephen Innes, SPI Asset Managment

The macro is muddied, the Fed’s trigger finger is twitchy but restrained, and the White House is taking a blowtorch to Powell’s chair, perhaps literally, if rumours of an early replacement gain traction. But for now, the path of least resistance in US stocks remains up. Not because things are great. But because things are just “not bad enough” to force a reset.

Call it the independence rally: free of recession fears, free of immediate Fed cuts, and free, at least for a few days, from the heavy hand of macro reality.

But don’t get too comfortable. The market may have dodged a pothole, but the road ahead still features tariff cliffs, deficit sinkholes, and Powell-shaped speed bumps.

For now, we celebrate. Come Monday, we trade.

Corporate news in Australia

-Dexus ((DXS)) sues AMP ((AMP)) over the forced sale of Macquarie Centre for $830m.

-AGL Energy ((AGL)) acquired Tesla’s battery network in SA.

-HSBC is nearing the end of the sale of its retail banking business in Australia, attracting interest from the major banks.

-Regal Partners ((RPL)) experiences a -40% decline in performance fees due to investment losses.

-REA Group ((REA)) has flagged a reported -15% cut in its tech team as the workforce is rationalised.

On the calendar today:

-AU May household spending

-EZ May PPI

-US Public Holiday

-REJECT SHOP LIMITED ((TRS)) ex-div 77.00c (100%)

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Spot Metals,Minerals & Energy Futures
Gold (oz)	3336.50	– 30.85	– 0.92%
Silver (oz)	37.05	+ 0.62	1.69%
Copper (lb)	5.13	– 0.07	– 1.29%
Aluminium (lb)	1.18	– 0.01	– 0.57%
Nickel (lb)	6.92	+ 0.07	1.09%
Zinc (lb)	1.25	– 0.00	– 0.37%
West Texas Crude	67.15	– 0.29	– 0.43%
Brent Crude	68.88	– 0.19	– 0.28%
Iron Ore (t)	96.24	+ 1.11	1.17%

The Australian share market over the past thirty days

Index	03 Jul 2025	Week To Date	Month To Date (Jul)	Quarter To Date (Jul-Sep)	Year To Date (2025)
S&P ASX 200 (ex-div)	8595.80	0.96%	0.63%	0.63%	5.35%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ARF	Arena REIT	Upgrade to Buy from Accumulate	Ord Minnett
CIP	Centuria Industrial REIT	Downgrade to Hold from Accumulate	Ord Minnett
CMM	Capricorn Metals	Upgrade to Accumulate from Hold	Ord Minnett
DMP	Domino’s Pizza Enterprises	Upgrade to Buy from Hold	Ord Minnett
		Downgrade to Sell from Neutral	Citi
DXS	Dexus	Upgrade to Accumulate from Hold	Ord Minnett
EMR	Emerald Resources	Upgrade to Hold from Lighten	Ord Minnett
GEM	G8 Education	Downgrade to Neutral from Outperform	Macquarie
HLI	Helia Group	Upgrade to Neutral from Underperform	Macquarie
HMC	HMC Capital	Upgrade to Buy from Hold	Ord Minnett
HUB	Hub24	Downgrade to Neutral from Buy	Citi
JHX	James Hardie Industries	Downgrade to Accumulate from Buy	Morgans
LOV	Lovisa Holdings	Downgrade to Hold from Buy	Bell Potter
MPL	Medibank Private	Upgrade to Overweight from Equal-weight	Morgan Stanley
		Downgrade to Neutral from Buy	UBS
MTO	Motorcycle Holdings	Upgrade to Buy from Accumulate	Morgans
NWL	Netwealth Group	Downgrade to Neutral from Buy	Citi
PPT	Perpetual	Upgrade to Buy from Neutral	UBS
PTM	Platinum Asset Management	Upgrade to Neutral from Sell	UBS
QBE	QBE Insurance	Downgrade to Neutral from Outperform	Macquarie
SUN	Suncorp Group	Downgrade to Hold from Accumulate	Ord Minnett

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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