Vietnam Trade Deal Counters ADP’s Report of Job Losses: July 2, 2025

Stocks are jumping to new records following President Trump announcing a trade deal with Vietnam consisting of 20% import tariffs and 40% levies on any transshipping. But the gains are modest so far as slowdown fears resurfaced due to ADP reporting the first month of job losses in 27. Optimism is also being tempered as the “Big Beautiful Bill” faces heavy resistance so far in the House of Representatives due to its lack of spending cuts. Furthermore, a global spike in yields is being led by turbulence in the UK gilt space, as fixed income players contemplate the potential for a Chancellor replacement that operates with reduced fiscal constraint. Loftier rates are weighing on risk premiums and containing equity market enthusiasm. The yield curve is ascending in bear steepening fashion as rising odds of a quarter-point trim by the Fed in a few weeks coincides with renewed worries about sovereign debt levels which is reducing the appetite for duration as a result. Investors are picking up shares across most sectors, increasing their greenback exposure, scooping up commodity futures in all majors minus lumber, while additionally reflecting interest in forecast contracts and bitcoins. Traders are unwinding Treasury holdings with a long-end bias and are neglecting volatility protection instruments as well as defensive areas of the equity market.

Private Sector Surrenders Jobs

The US private sector shrank from a worker standpoint in June for the first time in 27 months, according to this morning’s jobs report from payroll company Automatic Data Processing (ADP). The overall reduction of 33,000 was much worse than the 98,000 gain expected as well as the 29,000 employees added in May. But most sectors expanded employment—It was the professional/business services, education/health services and financial activities areas that weighed on performance by trimming 56,000, 52,000, and 14,000 laborers. Limited progress from the leaders last month wasn’t enough to offset the heavy decreases, as the leisure/hospitality, manufacturing and trade/transportation/utilities segments sported increases of 32,000, 15,000 and 14,000. The other four components posted gains of 9,000 or below. Small and mid-sized firms, defined as having 49 folks or less or between 50 and 499 workers, lost 47,000 and 15,000 positions, respectively. Large companies increased by 30,000, however. Compensation trends decelerated during the period, with the median year over year (y/y) change in annual pay descending from 7% and 4.5% for job changers and job stayers to 6.8% and 4.4%. 

Bull Market Has Room to Continue

Equities are poised to rally further if there a few more deals are announced and the GOP’s signature taxation bill becomes law. With self-imposed deadlines looming, there’s a strong chance that we’ll see progress on the cross-border commerce and congressional fronts. Meanwhile, soft economic data will be overlooked by these more significant developments, as it is today. Indeed, this morning’s huge miss on ADP jobs is not worrying anyone about the health of the cycle. It appears to be just the opposite, with participants excited that the Fed may assume an increasingly dovish posture in order to defend the labor market. Besides, shifts to improve international trade alongside supply side efficiency boosts from Capitol Hill can serve to produce better activity figures in the future and for that reason, folks aren’t worried and are posturing in risk-on mode. 

International Roundup

Hong Kong Consumer Spending Climbs

After 14-consecutive months of declining retail sales in Hong Kong, volumes climbed 2.4% y/y in May. In April, retailing sank 2.3%. A 20% y/y jump in visits from foreign tourists helped rev up sales as the government has launched various promotions to attract visitors to the special administrative region.

Price Pressure Stability Continues in South Korea

South Korea’s Consumer Price Index was flat in June month over month (m/m) after sinking 0.1% in May. The recent print matched the economists’ median forecast. Relative to the year-ago period, the gauge was up 2.2%, higher than the estimate for 2.1% and May’s 1.9% result. When compared to May, the furnishings, household equipment and routine maintenance group was up 1.1% followed by the 0.2% northern movement of clothing and footwear.  All other categories either declined or experienced increases of less than 0.1%.

Contraction of Singapore Manufacturing Ends

Singapore’s Manufacturing PMI in June rose from 49.7 to 50, which is the border between contraction and expansion, according to the Singapore Institute of Purchasing and Materials Management (SIPMM). The result comes after two consecutive months of contraction. The city-nation’s important electronics sector, furthermore, climbed from 49.9 to 50.1

Australia Retail Sales Limp

A decline in food sales offset stronger demand for clothing in May, resulting in total retail sales climbing only 0.2% m/m, which while better than April’s goose egg, was below the median economist forecast of 0.3%. When compared to the year-ago period, sales ascended 3.3%. Clothing sales, up 2.9% m/m, benefited from shoppers preparing for winter weather.

As Construction Permits Underperform

May building approvals in Australia were only up 3.2% m/m with April’s -4.1% result generating a lower bar for the metric to turn positive. The recent print was below the estimate for 4.2%. Conversely, the y/y result of 8% surpassed April’s 5.5% rise. Approvals for private houses climbed 0.5%, down from 5.9% in April.

Canada Manufacturing Weakens Further

The Canada Manufacturing Purchasing Managers’ Index from S&P Global dropped further into contraction in June. The recent score of 45.6 was down from 46.1 in May. Firms noted that tariffs had caused orders and output to fall, input prices to climb, and the overall outlook to remain highly uncertain. Indeed, new export orders declined at the fastest pace in the history of the PMI. Purchasing activity by manufacturers fell while employers once again reported trimming their labor forces. June was the fifth-consecutive month in which the index stayed below the contraction-expansion threshold of 50.