Key Focus This Week “Reciprocal Tariffs” Delayed to August, Markets Eye Fed and Trade Developments

The key market focus this week is the postponement of the U.S. “reciprocal tariffs” policy. Originally set to take effect on July 9, the tariff measures have now been delayed until August 1. The Trump administration has announced it will release details on the specific rates and terms in the coming days and will formally notify 12 countries. Despite heightened tariff threats, market reaction has remained relatively calm. U.S. stock futures fell on Monday, with S&P 500 and Nasdaq futures down 0.3% and 0.4%, respectively, as investors await further developments in trade negotiations and policy clarity.

Meanwhile, President Trump escalated tensions by threatening an additional 10% tariff on countries that he claims support “anti-American” policies of the BRICS nations, reinforcing his hardline stance. Tesla (TSLA) shares dropped roughly 7% in premarket trading after CEO Elon Musk announced the formation of a new “America Party,” sparking a political clash with Trump. The former president criticized Musk for “going off the rails” and claimed that third parties have “never succeeded” in the United States.

In the energy market, OPEC+ announced it will raise production again in August by 548,000 barrels per day to meet recovering global demand. However, WTI crude prices remained little changed, hovering around $67 per barrel.

Additionally, this week’s release of the Federal Reserve’s June FOMC meeting minutes is another key point of focus. Investors are hoping for insights into whether the Fed may reconsider a rate cut path in light of the potential economic slowdown and inflation risks posed by ongoing trade uncertainty.

Last Week’s Key Economic Data & News Recap

U.S. June Jobs Report Beats Expectations, Unemployment Falls to 4.1%

The U.S. Bureau of Labor Statistics reported on Thursday that nonfarm payrolls increased by 147,000 in June, seasonally adjusted, surpassing market expectations of 110,000. The unemployment rate fell to 4.1%. Job gains remained steady, and the labor market showed signs of resilience. Average hourly earnings rose by 0.2% month-over-month and 3.7% year-over-year, suggesting easing wage-driven inflationary pressures.

Surprise Weakness in “Mini NFP”: June ADP Jobs Fall by 33,000

In contrast, the ADP National Employment Report released Wednesday showed a sharp decline in private-sector employment. June ADP payrolls dropped by 33,000, far below expectations of a 98,000 increase and marking the first negative reading since March 2023. May’s data was also revised down to a modest gain of just 29,000 jobs. The services sector experienced the largest job losses since the pandemic.

Despite the hiring slowdown, wage growth remained resilient, with average pay for job holders increasing 4.4% year-over-year, little changed from 4.5% in May.

ISM Services PMI at 50.8 in June; Job Component Contracts Sharply

Data released on Thursday (July 3) by the Institute for Supply Management (ISM) showed U.S. services sector activity expanding at a slower pace in June, with the headline ISM Non-Manufacturing PMI at 50.8, slightly above expectations of 50.6. This follows a 49.9 reading in May, which marked the first contraction in nearly a year. While business activity and new orders rebounded, the employment index recorded its steepest contraction in three months.

The data suggests economic momentum remains soft, with consumers and businesses still responding to the impact of recent U.S. trade policies, including heightened tariffs..

Canada Drops Digital Services Tax to Revive U.S. Trade Talks

On Sunday evening, the Canadian government announced that it had officially scrapped its digital services tax, stating it “expects” to reach a mutually beneficial and comprehensive trade agreement with the United States.

The move came after U.S. President Donald Trump declared he would immediately suspend all trade negotiations with Canada in response to its planned implementation of the tax, and threatened to impose new tariffs within the week.

The resumption of trade talks between Canada and the U.S. has helped boost market risk sentiment, easing investor concerns over escalating trade tensions.

ISM Manufacturing PMI Signals Continued Contraction; Prices Reaccelerate

The June ISM Manufacturing PMI released on Tuesday (July 1) remained in contraction for the fourth consecutive month, coming in at 49.0, slightly above the expected 48.8 and prior reading of 48.5. Readings below 50 indicate contraction. Both new orders and employment components declined, pointing to sustained weakness in U.S. manufacturing.

However, the prices paid index showed signs of inflationary pressures ticking back up, indicating rising input costs.

May JOLTS Job Openings Stronger Than Expected; Quits Also Rise

The U.S. Labor Department reported on Tuesday that job openings surged in May, suggesting ongoing labor market stability despite broader economic uncertainty.

May JOLTS job openings rose to 7.77 million, well above expectations of 7.3 million and the prior month’s 7.39 million.

The increase marked the highest level since November 2024.

The ratio of job openings to unemployed persons rose to 1.1, its first increase in several months, returning close to pre-pandemic levels. This ratio—closely watched by the Fed—serves as a key indicator of labor market tightness. For context, this ratio peaked at 2.0 in 2022.