Daily Outlook - 4 July 2025

The US economy added 147k jobs in June, much stronger than had been expected. Data for earlier months was also revised upward. The unemployment rate dipped to 4.1%, its lowest level since February though the lower unemployment numbers still seem to be driven by a declining participation rate. Average hourly earnings were only modestly higher m/m at 0.2%. Overall the labour market continues to show few signs of negative impact from tariff or policy uncertainty and the June print has all but erased the prospect of a July rate cut from the Federal Reserve.

Elsewhere in the US the House of Representatives passed Donald Trump’s flagship tax and spending bill by a narrow margin. The tax plans will make permanent tax cuts introduced during President Trump’s first term, cut spending on social programmes and will also scale back clean energy tax credits. Most bipartisan observers suggest the plan will substantially increase the US fiscal deficit and debt to GDP ratios over the coming years.

CPI inflation in Turkey slowed to 35.1% in June, down from 35.4% the previous month and marginally slower than the consensus projection of 35.3%. This marked the slowest pace of annual price growth since late 2021 as the high-interest rate environment that has prevailed over the past two years has helped dampen demand. Prices were up 1.4% m/m, compared with a 1.5% rise in May. There was a modest uptick in annual core inflation, however, which picked up to 35.6% y/y, from 35.4% previously. The TCMB kept its benchmark one-week repo rate unchanged at 46.0% in June as it has pursued a more cautious line following politically driven market volatility in March, but the ongoing slowdown in inflation should see renewed rate cuts through the second half of the year.

The S&P Global PMI survey for Qatar rose to 52.0 in June, from 50.8 in May, marking the strongest reading since March although the expansion rate remains below the long-run average. Output ticked up modestly while new orders saw a marginal decline in June. Nevertheless, employment continued to rise at a robust pace as it has been going for several months. Meanwhile in Lebanon, the BLOM PMI survey ticked up to 49.2 in June, from 48.9 in May, though it remained below the neutral line for the fourth month running following the two consecutive months of positive readings seen in January and February, the first since mid-2023.

The IMF said it would combine the fifth and sixth review of its programme with Egypt and that they will take place in the fall. The focus will be on state-ownership in selected sectors to allow greater private sector involvement.

Today’s Economic Data and Events

10:00 GE factory orders May y/y: forecast 5.7%

13:00 EC PPI y/y May: forecast 0.3%

Fixed Income

US Treasuries plunged on the release of the nonfarm payrolls as markets adjusted their rate cut expectations. Yields on the 2yr UST fell almost 10bps by the close of the day to settle at 3.8799% while the 10yr UST yield fell 7bps to 4.3457%. Markets are now pricing closer to 50bps total of easing by the end of the year, down from closer to 70bps earlier this week.

GCC credit markets were near unchanged overnight with Bahraini bonds showing the most notable upside.

FX

The US dollar gained against nearly all peers overnight as markets responded to the better than expected June jobs numbers. EURUSD fell 0.4% to 1.1757 while USDJPY pushed higher by nearly 0.9% at 144.93. USDCHF also moved higher, adding 0.4% to 0.7951. Sterling was a notable outlier with a gain of 0.1% at 1.3655 helping to soften some of the prior day’s losses.

Both the AUD and NZD lost ground in response to the jobs data while CAD held steady. In emerging markets, USDTRY was up by 0.1% at 39.8257 while USDINR dropped by 0.5% to 85.3175.

Equities

US equity markets gained overnight even as the jobs numbers pushed back when the Fed would begin to ease rates. The Dow Jones rallied 0.8% along with a similar sized gain for the S&P 500. The NASDAQ was the outperformer with a 1% rally. European markets were also stronger with the Euro Stoxx index up 0.5% and the FTSE rallying nearly 0.6%.

There were strong gains in local markets overnight with the DFM up by 1.4% and the ADX 15 rallying nearly 1%. Emaar, Salik and Emaar Development were all major contributors to the gain in the DFM. The Tadawul also rallied with a 1% gain.

Commodities

Oil prices dropped overnight with Brent futures down 0.5% at USD 68.80/b and WTI lower by 0.7% at USD 67/b. Attention will focus now on the weekend where several OPEC+ countries are due to meet and our expectation is that they will increase output in August by another 411k b/d.