Markets Mixed as Softer US Payrolls Boost Fed Pause Hopes

Here’s your quick read to start the day: a chatty, no-fuss look at overnight moves, the big story, what’s on the docket, and the tickers you need to watch.

By Richard Fargose

July 3, 2026 at 2:55 AM IST

Global Mood: Cautiously Risk-on
Drivers: Weak US Jobs Data, Chip Slump, Oil Oversupply

Asian markets traded mixed on Friday as investors balanced weaker-than-expected US employment data against persistent geopolitical risks, resulting in a cautious risk-on sentiment. Softer US payroll growth reinforced expectations that the Federal Reserve is likely to keep interest rates unchanged in the near term, supporting broader risk assets. However, gains remained limited as weakness in US technology stocks weighed on Asian semiconductor shares, dragging Japanese and South Korean equities lower.

The June US jobs report pointed to a cooling labour market, with hiring slowing sharply and previous months revised lower, strengthening expectations of a prolonged Fed pause. At the same time, geopolitical uncertainty continued to cap investor optimism. Russia launched its largest attack on Kyiv this year, while the next round of US-Iran negotiations was postponed until after Iran's national mourning period, delaying progress on a broader peace agreement. Currency markets also remained in focus amid speculation over possible Japanese intervention to support the yen, adding to the cautious trading environment.

THE BIG STORY
Russia launched its deadliest attack on Kyiv this year overnight, firing hundreds of drones and dozens of missiles that killed at least 27 people and damaged around 130 buildings. Zelenskiy declared Friday a day of mourning and criticised allies for failing to deliver air defences, while the EU signalled fresh sanctions on Russian suppliers. In Iran, days of mass funeral rites are being prepared for Supreme Leader Khamenei across Tehran, Qom, Mashhad, and Iraq — with the next round of US-Iran talks postponed until after his burial on July 9, further compressing the diplomatic timeline.

US June payrolls badly missed at 57,000 against forecasts of 110,000, with prior months revised down by a combined 74,000. The unemployment rate dipped to 4.2%, but only because 720,000 people left the labour force — pushing participation to a five-year low and signalling broad labour market deterioration. Markets promptly dialled back Fed hike expectations on the weak print.

Data Spotlight
The US economy added just 57,000 jobs in June, well below forecasts of 110,000 and a downwardly revised 129,000 in May, marking the lowest monthly gain in four months. Gains were led by professional and business services (36,000), social assistance (25,000) and healthcare (22,000), while leisure and hospitality shed 61,000 jobs, reflecting weaker seasonal hiring likely tied to the World Cup. Prior months were also revised down by a combined 74,000, painting a softer overall picture of the labour market.

Initial jobless claims fell by 1,000 in the last full week of June to a five-week low, coming in below expectations of 220,000. Continuing claims rose slightly to 1,814,000, a three-month high, reinforcing the trend of low firing but equally low hiring. Federal employee claims rose modestly by 13 to 44, remaining under scrutiny amid ongoing public workforce reduction efforts.

Takeaway: June's sharply weaker payroll print and persistently elevated continuing claims signal a meaningful cooling in the US labour market, adding to the case for the Federal Reserve to hold rates steady in the near term. While layoffs remain historically low, sluggish hiring across most major industries points to growing caution among employers amid elevated uncertainty and cost pressures.

WHAT HAPPENED OVERNIGHT

US stocks end mixed as weak jobs report lifts Dow to record, but chips weigh on Nasdaq

The Dow rose 1.14% to a record close, S&P 500 ended flat, and Nasdaq fell 0.80% as a chip selloff offset broader gains. The Dow recorded its fourth straight week of gains.
The US economy added just 57,000 jobs in June, far below the 110,000 estimate, easing near-term rate hike pressure with September hike odds falling to 55% from 64%.
The Philadelphia Semiconductor Index fell 5.4% for a second straight sharp decline, with SanDisk dropping 14.1% and Nvidia slipping 1.4%, despite the index remaining up ~78% year-to-date.
Apple rose 4.8%, supporting all three major indexes, after reports it plans to launch five new iPhone models.
Tesla fell 7.5% despite posting above-estimate Q2 deliveries, as shares had already rallied sharply ahead of the report.
Bending Spoons dropped 11.3%, a day after surging 40% in its Nasdaq debut.
For the week, the Dow gained 2%, S&P 500 rose 1.8%, and Nasdaq advanced 2.1%, with markets now closed Friday for Independence Day

US Treasury yields dip as weak jobs report trims Fed rate hike bets

The 10-year yield fell 2bps to 4.46% after June payrolls badly missed estimates, with April and May figures also revised lower.
The US economy added just 57,000 jobs in June, while the unemployment rate edged down to 4.2%, largely reflecting a drop in labour force participation to 2021 lows.
The probability of a September Fed hike fell to 50% from 64% a day earlier, as the report pointed to a softening labour market.
Warsh said at the ECB Forum that inflation expectations had eased over the past month, signalling no urgency to raise rates, though he reaffirmed the Fed's price stability commitment.
The US bond market will be closed Friday for the Independence Day holiday.

US Dollar slides as weak jobs report trims Fed rate hike expectations

The dollar index fell to 100.8 after June nonfarm payrolls came in at just 57,000, well below estimates, with April and May figures revised lower.
The unemployment rate dipped to 4.2%, but the move reflected a shrinking labour force participation rate rather than genuine job market strength.
Warsh noted at the ECB Forum that moderating inflation expectations had removed the immediate urgency for tightening.
He nonetheless maintained the Fed's long-term commitment to restoring price stability.

Oil settles marginally higher as holiday short-covering offsets supply recovery pressure

Brent settled at $71.80 per barrel (+0.32%) and WTI at $68.69 (+0.16%), with both benchmarks touching their lowest levels since before the Iran war during the session.
For the week, Brent fell 0.60% and WTI dropped 0.78% as the market focus shifted from supply loss fears to how much supply will return.
Qatar said the US and Iran made "positive progress" in Doha talks on the June MOU, with the next round of negotiations set for after July 9 funeral processions for Iran's late Supreme Leader Khamenei.
At least five supertankers carrying 10 million barrels of Saudi oil from Ras Tanura have exited the Strait of Hormuz, with Aramco switching to spot pricing to accelerate Asian sales.
UBS cut its Brent forecasts, lowering Q3 and Q4 estimates by $25 and $10, respectively, to $80 per barrel, and trimming its 2027 outlook by $10 to $75 per barrel.
HSBC expects the near-term supply glut to fade, seeing Brent moving back toward $80 per barrel or higher as restocking absorbs returning West Asia barrels and IEA strategic stock releases end in July.
US crude stocks fell to their lowest since 2018 last week as domestic refinery demand rose ahead of the Independence Day holiday.
Nigeria became the first OPEC member to join the IEA as an associate member, deepening ties between the energy watchdog and Africa's largest oil producer.
Ukrainian forces struck the Lukoil refinery in Russia's Nizhny Novgorod region, adding further risk to Russia's energy supply.

Day’s Ledger*

Economic Data

India June S&P Global Services PMI
RBI Weekly FX Reserves Data
Eurozone June Composite PMI
UK June S&P Global Composite PMI

Corporate Actions

Nestle India board to consider dividend
Arvind board to consider fund raising options
Viceroy Hotels board to consider fund raising options

Policy

ECB President Lagarde Speaks
German Buba President Nagel Speaks
BoE Gov Bailey Speaks

Tickers to Watch

ADANI ENTERPRISES formed a 50:50 JV with International Resources Holding to develop an $11.5-billion aluminium project in Odisha with planned investment of ₹660 billion in Phase I and ₹440 billion in Phase II; the company also opened its QIP at a floor price of ₹3,034.68 per share.
BHARAT PETROLEUM CORP said subsidiary BPRL Ventures BV acquired the remaining 39.14% stake in IBV Brasil Petroleo for ₹23.12 billion, increasing its equity oil and gas portfolio.
BLS E-SERVICES acquired 100% of Atyati Technologies for ₹1.57 billion, strengthening its AI-led banking technology capabilities.
COAL INDIA increased coal supplies to power plants by 5.9% on year to 51.44 mln tn in June, driven by higher summer electricity demand.
LG ELECTRONICS INDIA said GST authorities dropped a proposed tax demand of ₹1.17 billion relating to FY22 input tax credit claims.
PB FINTECH may see stake sale worth ₹19.08 billion as Temasek's Macritchie Investments plans to offload a 2.6% stake through block deals.
STERLITE TECHNOLOGIES raised ₹15 billion through a qualified institutions placement, attracting domestic and global institutional investors.
TITAGARH RAIL SYSTEMS entered into a strategic collaboration with TuTr Hyperloop to develop Hyperloop-based freight transportation solutions in India.

Must Read

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

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