Equities Make Fresh Records, Treasuries Finish Off First Half Strong: June 30, 2025

US stocks have reached a new record for the second-consecutive trading day as investors are optimistic that cross-border commerce deals will be announced prior to the July 9 deadline. Another reason for the cheerfulness is that the GOP appears to be making progress on its signature tax bill, albeit the headway has been slow and painful. An empty economic calendar has participants looking to Washington for fresh catalysts and President Trump’s cabinet members remain enthusiastic that trade agreements are nearing their respective finish lines. Markets are closing the first half of the year in stride, folks, with equities and fixed income posting impressive gains in the initial six months of 2025. Today’s activity is no different as traders scoop up shares in most sectors and Treasuries with a duration bias as the yield curve shifts south in bull flattening fashion. Volatility protection instruments and forecast contracts are also seeing buyer interest, as well as gold, silver and crude oil futures. To the downside, however, players are reducing their exposures to the dollar, bitcoin and the copper, lumber and natural gas commodities.  

Busy Trading Days Lead to July 4

Despite today’s quiet calendar, we do have some potentially market moving data coming out in the next few days that may sway participants’ focus from Congress and the White House towards the nearby headquarters of statistical agencies for the time being. But it is a shortened trading week due to the Independence holiday and markets will be closed this Friday. Tomorrow we’ll hear remarks from Fed Chair Powell while folks wait for job openings, ISM-manufacturing and construction expenditure prints hitting the tape intraday at 10:00 am ET. The information will lead to the examination of labor conditions, the health of the manufacturing sector from ordering, employment, investment and onshoring perspectives, and if there’s any light at the end of the long, murky and painful real estate tunnel. Then on Wednesday and Thursday, economists and traders alike will be focusing on jobs reports from ADP and BLS as well as unemployment claims, ISM-services, factory orders, automobile sales and the balance of trade. As we end the week, we’ll have more evidence on the momentum of hiring and layoffs, which are absolutely crucial for the sustainable consumer spending needed to extend the expansion. Additionally, other significant details will emerge from goods-producing activities and more specifically the physical product deficit, household and business purchasing trends and whether Washington is making any progress in propelling factory productivity within American borders.

International Roundup

China’s Manufacturing Continues to Sink

China’s manufacturing sector experienced its third-consecutive month of contraction in June while the services industry continued to expand, according to the government’s Purchasing Managers Index (PMI). The manufacturing gauge stayed below the expansion contraction threshold of 50 with a score of 49.7, slightly above the consensus forecast of 49.6 and May’s 49.5 result. The non-manufacturing PMI, however, strengthened from 50.3 to 50.5. The mixed results come as China continues to stimulate its economy, which has suffered from excess manufacturing capacity and a glut of real estate. On an encouraging note, production increased to 51 and new orders came in at 50.2 but employment and inventory both declined. The non-manufacturing indicator, which consists of construction and other services, benefited from an increase in infrastructure projects. The Caixin PMI, provided by the private sector, will be published tomorrow.

Japan Housing Starts Are Weak, But Construction Orders Are Strong

Japan’s decline in housing starts accelerated last month, tanking 34.4% month over month (m/m) after a 26.6% decline in April, according to the Ministry of Land, Infrastructure, Transport and Tourism.  The recent print was more than twice the 15% collapse predicted by economists. In a related matter, a survey of 50 large contractors found that construction orders gained 14% year over year (y/y) last month following a dramatic 52.7% jump in May.

While Industrial Production Underperforms

Japan’s industrial production was positive in May with a 0.5% m/m increase, which while reversing direction from April’s 1.1% fall, missed the prediction for a 3.4% gain. Relative to the year-ago period, May’s result was down 1.8%, considerably worse than the forecast of 1.6%. Transportation vehicles minus cars collapsed 16.3% m/m, primarily due to weak airplane parts demand. Automobile production, however expanded 2.4% despite the US imposing a 25% tariff on the products. Steel and aluminum, furthermore, climbed 1.9%.

Production Also Sinks in South Korea

South Korea also experienced weakness with its All Industry Output Index falling 1.1% m/m in May. Results for construction, manufacturing and services sank 3.9%, 3% and 0.1% m/m compared to 1.4%, 0.6% and 0.1% declines in April.

Retail sales also limped along, with no change relative to April, which while weak was better than the economist consensus prediction for a 0.1% retreat and the preceding measurement period’s -0.9% result.

Australia’s Price Pressures Are Soft

Inflation in Australia this month remained tempered declines in furniture and furnishing prices offsetting increased costs for transport-related items, according to the Melbourne Institute Monthly Inflation Gauge. The metric climbed 0.1% after falling 0.4% last month.

UK GDP Meets Expectations

The United Kingdom’s gross domestic product expanded 0.7% quarter over quarter during the first three months of this year, meeting expectations and accelerating from 0.1% in the preceding period. The y/y 1.3% pace, while also matching the economist consensus outlook, eased from 1.5% in the final three months of 2025. At a time when entrepreneurs face high levels of uncertainty due to trade tensions with the US, business investment was up 3.9% q/q and 6.1% y/y, strengthening considerably from the fourth-quarter prints of -1.9% and 1.8%. During the first quarter, production, services, and construction moved north 1.3%, 0.7% and 0.3%. Real estate was a major tailwind as homebuyers snatched up properties prior to the implementation of taxes on purchases.