Global financial markets are treading cautiously as investors hold back from major moves ahead of pivotal US nonfarm payrolls data on Friday and the European Central Bank’s (ECB) interest rate decision later today.
Asian equities showed limited momentum, with a regional index dipping 0.1% as Japanese stocks fell after a 30-year government bond auction revealed weaker-than-expected demand.
US Treasury yields stabilized in Asian trading after a rally faded, driven by recent data signaling a slowdown in US economic activity. A contraction in the services sector and the slowest private payroll growth in two years have boosted expectations for Federal Reserve rate cuts, with traders now estimating a 92% likelihood of a September reduction.
Economic Signals Stir Market Caution
The Institute for Supply Management’s services index fell below the 50 threshold in May, indicating contraction for the first time in a year, while private payrolls grew at their lowest rate since 2023.
These figures have amplified focus on Friday’s nonfarm payroll report, which could clarify the impact of recent tariffs and policy uncertainty stemming from President Trump’s April 2025 “Liberation Day’ tariff announcement.
Despite earlier market turbulence, a global stock index hit a record high on Wednesday, suggesting some optimism that the worst of the tariff-related disruptions may have subsided. Analysts caution, however, that weaker economic data could challenge the bullish sentiment embedded in equity and credit markets.
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Bond Markets and Regional Trends
In Japan, concerns about bond market demand intensified after a 30-year government bond auction marked the weakest investor interest since 2023, following lackluster 20- and 40-year bond sales.
This prompted short coverings, lifting Japanese bond prices. In China, a private survey showed stronger services sector growth in May, indicating consumer resilience despite looming US tariff pressures.
In the US, the 10-year Treasury yield held steady at 4.35%, but investors are seeking higher premiums for long-dated bonds amid concerns over America’s growing fiscal deficit. Upcoming US auctions of 10- and 30-year Treasuries next week will further test market confidence.
Did You Know?
The US services sector, which drives about 70% of the nation’s GDP, contracted in May 2025, raising questions about the economy’s strength amid tariff pressures.
Corporate and Currency Updates
In corporate news, Japanese automaker Suzuki Motor Corp. saw its shares drop after halting production of its Swift model due to rare earth supply shortages. Currency markets remained calm, with the Bloomberg Dollar Spot Index and the euro stable, while the Japanese yen weakened 0.3% to 143.10 per dollar. Cryptocurrencies posted slight gains, with Bitcoin up 0.6% to $105,250.10 and Ether rising 1% to $2,635.20.
Commodity markets were mixed, with West Texas Intermediate crude falling 0.5% to $62.50 a barrel and spot gold slipping 0.2% to $3,365.80 an ounce. Investors are now closely watching the ECB’s rate decision for signals on Europe’s monetary policy path.
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