Markets entered the new month, quarter and second half with a restrained tone, as U.S. Treasury yields rose overnight and investors turned their attention to upcoming U.S. labor data and the second-quarter earnings calendar.
There was no single identifiable trigger for the overnight rise in Treasury yields, but the move came after the latest report showed another unexpected increase in U.S. job openings for May. The rise in openings follows an earlier April JOLTS reading that had shown a big surge in available positions, which some economists had treated as an outlier they expected to be revised lower. May's reading, however, extended the upward trend, with openings reaching a two-year high.
With these data points fresh in markets' minds, attention now shifts to additional employment numbers. Private-sector ADP payrolls are scheduled for release today, while the national June payrolls report will be published a day early on Thursday because Friday is the U.S. Independence Day holiday.
Also on the calendar, Federal Reserve Chair Kevin Warsh is due to speak at the European Central Bank's annual forum in Sintra, Portugal. Markets will be listening for any commentary that could influence monetary policy expectations.
Geopolitical developments injected further caution. Hopes that top-level talks between U.S. and Iranian officials would commence on Tuesday were dashed after the Iranian delegation failed to appear, citing disputes over details of the framework agreement.
In foreign exchange markets, the Japanese yen continued to weaken. On Tuesday the yen fell through the 162-per-dollar level to reach fresh 40-year lows. As of that move, there had been no visible intervention to prop up the currency.
Meanwhile in Asia, South Korea recorded an exceptionally large jump in exports last month. Overall exports rose 70.9% year-on-year in June to $102.25 billion, accelerating from a 53.4% increase in May. The surge represented the fastest pace of growth for the country in nearly 50 years and marked a milestone: South Korea became only the fourth country globally to exceed $100 billion in monthly exports, joining Germany, China and the United States.
Semiconductor shipments were the dominant factor behind the South Korean surge. Semiconductor exports climbed 199.5% year-on-year to $44.8 billion, driven by strong global demand tied to artificial intelligence investment and related technology spending.
Back on Wall Street, market attention is already turning to second-quarter corporate results. Aggregate profit growth for the quarter is projected to be around 22% year-on-year. However, the distribution of that growth is highly concentrated: roughly 60% of the expected aggregate gain is coming from the chip and tech equipment sector, and two firms alone account for approximately 40% of the total projected increase.
Markets are also tracking shorter-term data and events that could shape near-term sentiment. The upcoming ADP private-sector payrolls report and the June ISM manufacturing PMI are listed among the data releases to watch, and Federal Reserve Chair Warsh's remarks in Sintra are flagged as an event that could alter market expectations.
What to watch today
- U.S. June ADP payrolls (8:15 a.m. EDT)
- June ISM manufacturing PMI (10:00 a.m. EDT)
- Fed Chair Kevin Warsh's speech at the ECB forum in Sintra, Portugal
This week also saw the launch of a new mid-week series that delves into subtler themes in finance and markets, beginning with a look at whether a younger population continues to be an economic advantage. A daily podcast on market developments is available for listeners seeking a concise briefing as the new quarter begins.
Investors are approaching the second half of the year with a focus on labour-market data, significant sectoral concentration in earnings expectations, big swings in export volumes tied to semiconductors and notable FX moves. Together, these factors are shaping a market environment that favors close attention to incoming data and corporate results.