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Morning bid Europe: Trade optimism is replaced by caution about US jobs

Stella Qiu gives us a look at what the future holds for European and global markets.

The session in Asia has been pretty quiet, and for good reason. Payroll data from the U.S. due later that day could be the deciding factor in a rate cut in July and cause big movements in Treasuries or foreign exchange markets.

Investors in Asia didn't seem to share President Donald Trump's optimism about trade, which pushed Wall Street overnight to record-high closes. Details are still unclear.

Markets did not react significantly to the latest developments regarding Trump's "big beautiful bill" for tax cuts. The Republicans in the House of Representatives moved closer to advancing the tax package on Wednesday, seemingly overcoming the objections of a few party hardliners that raised concerns over cost.

Trump announced that the U.S. would impose a tariff of 20% on all imports coming from Vietnam. This is lower than the tariff of 46% which was threatened but still higher than previous rates.

Uncertainty surrounded the implementation of a 40% tax on all transshipments through Vietnam aimed at products made primarily in China, but labelled as "Made in Vietnam".

Vietnamese shares rose a modest 0.5% - the most since April 2022. Vietnam's dong currency fell to a new record low of 26218 per US dollar.

Other Asian countries complain that the U.S. is making it difficult to negotiate, partly because the White House's intentions are not very clear. South Korean President Lee Jae Myung stated on Thursday that he was unable to say whether tariff negotiations would be concluded by next Tuesday. Meanwhile, Japan invoked its national interests when talks with the U.S. were struggling.

The Wall Street Futures have gained 0.1%, while the EuroStoxx 50 futures have gained 0.2%.

The main risk for the markets is the release of U.S. payroll figures later that day. The stakes are high following a surprise drop in the private sector payrolls for the first time in over two years.

Analysts predict that the unemployment rate will rise to 4.3% in June, with a 110,000 job increase. A weak report, given that the market only prices in a 25% chance of a Fed rate cut in July, could have a major impact on the markets, sending Treasuries higher and the dollar down.

The sterling was unchanged at $1.3633. Sterling fell 0.8% overnight due to investor concerns about Britain's finances following the government's decision to reverse welfare reforms. This also caused gilt yields and prices to rise.

The following are key developments that may influence the markets on Thursday.

Payrolls for non-farm workers in the U.S.

ISM Services PMI -- U.S. initial and continued jobless claims

-- U.K. S&P Global services, composite PMIs

The ECB has released its June Minutes (by Stella Qiu, edited by Edmund Klamann).

(source: Reuters)