Date: 4th June 2025.
PMI Surprises, ADP Misses, and Trade Talks Tease Progress.
ADP jobs data raises Fed rate cut expectations
Eurozone and UK PMIs revised up, supporting ECB easing
Mortgage applications and housing data remain weak
Oil prices stable amid supply concerns and OPEC+ decisions
Trade optimism builds ahead of the G7, boosting European markets
Global markets are trading cautiously today as investors digest a mix of stronger-than-expected European PMIs, weaker US labour market data, and renewed trade deal speculation ahead of the G7 summit.
US Futures Slide as Trade Tensions and Weak ADP Jobs Data Raise Concerns
US stock futures turned red midday Wednesday after an initial rebound was erased by a weaker-than-expected ADP private payrolls report. The May ADP print showed just 37,000 jobs added, far below expectations and the slowest pace since March 2023. The goods-producing sector shed 2,000 jobs, with notable declines in mining and manufacturing. Services added 36,000 jobs, but key segments like professional and health services saw job losses.
The report raises downside risks for Friday’s Non-Farm Payrolls (NFP) and reinforces growing pressure on the Federal Reserve to cut rates. Former President Trump echoed this sentiment, criticizing Fed Chair Jerome Powell and demanding rate cuts, pointing to Europe’s rate cut spree.
Treasury yields knee-jerked lower, with the 10-year yield falling to 4.42%, and the 2-year at 3.92%, before retracing slightly. Wall Street futures dipped, with the NASDAQ down -0.13%, and the S&P 500 and Dow both off -0.03%.
European Stocks Rise on PMI Upgrades and Optimism Over US-EU Trade Talks
Despite US weakness, European stock markets are mostly higher, led by the German DAX, which hit a fresh record high. Gains came after stronger-than-expected revisions to Eurozone and UK PMIs, but also after the German government approved a new tax relief package. A stronger-than-expected batch of PMI revisions across the Eurozone and the UK fueled optimism, with both regions’ Composite PMIs now showing slight expansion rather than contraction.
Eurozone Composite PMI was revised up to 50.2, shifting from contraction to slight expansion. Services PMI also improved to 49.7, though still below the 50-neutral level. Inflation pressures remained mixed, but falling input costs provided some relief.
UK Composite PMI improved to 50.3, driven by a sharp rebound in services to 50.9. Despite weak new orders and higher costs, business optimism reached a six-month high, suggesting potential resilience in the second half of the year.
The data supports the European Central Bank’s (ECB) expected rate cut tomorrow, with HCOB analysts arguing that slowing goods inflation could justify further easing. While the ECB has in fact cut seven times (from 4.00% to 2.25%), and the Fed has eased by 100 bps, Trump’s comment underscores the political pressure facing the central bank amid cooling growth signals.
Geopolitical Spotlight: G7 Deal Hopes Rise
A high-level meeting in Paris between EU and US officials has stoked hope for broader trade negotiations—particularly with China.
However, mixed signals dominate. While Trump commented overnight that President Xi is ‘extremely hard to make a deal with,’ China’s top diplomat countered by urging the US to steer the relationship ‘onto the right track.’ Meanwhile, reports from The Toronto Sun indicate that a potential US-Canada deal could be announced before the upcoming G7 summit, further boosting risk appetite. Trump's new envoy to Canada, Pete Hoekstra, struck an optimistic tone during a speech in Toronto, fueling speculation. Sources suggest Ottawa is aware of necessary concessions, and there’s optimism for at least a framework deal rather than a full USMCA overhaul.
This could be part of a broader Trump strategy to de-escalate global trade tensions, with implications for tariffs and cross-border trade in the weeks ahead.
Currency Markets & Geopolitical Watch
Crude oil prices hovered near the flatline as the market digested mixed supply signals:
USOIL (WTI) traded at $63.22 per barrel, down -0.3%, while Brent slipped to $65.42.
Traders are awaiting official US inventory data after industry data pointed to a larger-than-expected draw of 3.3 million barrels.
OPEC+ continues to raise output, while Canadian wildfires cause temporary disruptions, although some production has resumed.
The DXY Dollar Index is slightly lower on the day at 98.88, after touching an overnight high of 99.39.
Gold slipped -0.2% to $3,347/oz
Outlook: All Eyes on Friday’s NFP and ECB Decision
Markets are in a holding pattern, torn between optimism on the trade front and deteriorating labour market signals. The ECB decision tomorrow, followed by Friday’s US jobs report, could significantly shape expectations for global monetary policy into the summer.
While equities show resilience, undercurrents of softening growth, lingering inflation pressures, and political friction suggest volatility is far from over.
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Andria Pichidi
HFMarkets
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