US Trading Hours Summary: June employment indicates some softening

Summary - The overall reaction to a weaker than expect June jobs report was relatively muted.

Yields ticked lower led by the short end after total payrolls missed estimates convincingly with the prior two months jobs growth revised net negative.

The Household survey was even worse than the Establishment Survey, with a sharp 507K drop in the number of employed people.

The unemployment rate fell to 4.2% but the impetus was a notable drop in labor market supply illustrated by a decline in the participation rate.

Gold added to gains and stock prices firmed up broadly, but weakness lingered in portions of the AI infrastructure stack.

The Yen bounced with the USD/JPY falling back below 161.

Energy prices continued to retreat while Fed fund futures markets pushed back the pricing of a Fed rate hike to Dec from Oct. - - Overnight - - Risk-off overnight, driven by a fresh reassessment of AI capex that hammered semiconductors across Asia.

SOX -6%, Kospi down nearly -8%, Nikkei -2%; European tape is currently in a holding pattern into today's jobs data and Friday's US closure.

Worth noting that Meta bucked the selloff trend on plans to resell excess AI compute, while headlines on US government equity stakes in AI firms - including OpenAI reportedly offering the administration a 5% stake - keep circulating. - - On central banks, Sintra reinforced a coordinated retreat from forward guidance: Warsh ("chart a new course," wanting a "good family fight" at the July FOMC), Lagarde ("given up on forward guidance") and Bailey all leaning the same way, with no near-term policy hints. - - OpenAI CEO Sam Altman has proposed handing the Trump administration a 5% equity stake in the company - potentially as part of a broader arrangement involving other leading US AI firms - reportedly to ease regulatory and political pressures while sharing AI's economic upside with the public.

The idea draws inspiration from Alaska's Permanent Fund, with the government stake's returns potentially funding dividends or public benefits for American households, aligning with Trump's view that taxpayers should directly benefit from AI advances.

Discussions, which include talks with President Trump and key officials like Howard Lutnick and Scott Bessent, still remain fluid. - - US - - (US) Fed's Daly (non-voter): Fed policy still in slightly restrictive position; AI investment shock has people wondering if it will be inflationary; We are in early stages of a potential exponential rise in productivity gains from AI - - (US) JUN AVERAGE HOURLY EARNINGS M/M: 0.3% V 0.3%E; Y/Y: 3.5% V 3.5%E - - (US) JUN CHANGE IN NONFARM PAYROLLS: +57K V +113KE (near lowest analysts' estimate) - - (US) JUN UNEMPLOYMENT RATE: 4.2% V 4.3%E - - (US) INITIAL JOBLESS CLAIMS: 215K V 218KE; CONTINUING CLAIMS: 1.814M V 1.820ME - - (US) MAY FACTORY ORDERS: -1.3% V -2.0%E - - (US) WEEKLY EIA NATURAL GAS INVENTORIES: +87 BCF VS. +81 BCF TO +84 BCF INDICATED RANGE - - Europe and Asia - - (IE) Ireland Q1 Final GDP Q/Q: -7.0% v -12.1% prelim; Y/Y: -13.0% v -17.1% prelim - - (RU) Russia Central Bank (CBR) Gov Nabiullina: CBR will look into fuel shortages at the July meeting; assume situation to be short-lived - - Corporate Headlines - -AEO announces CFO transition; reaffirms Q2 and FY 2026 guidance - -BIIB expects Q2 acquired IPR&D*, upfront and milestone expense of ~$164M; Estimated Q2 charge is expected to impact GAAP and non-GAAP diluted EPS by ~$0.95 - filing - -GBX Q3 $0.60 v $1.86 y/y, Rev $576.5M v $842.7M y/y; cuts eps outlook - -LNN Q3 $1.53 v $1.41e, Rev $160.8M v $169Me; Notes US irrigation market conditions remain soft - -RIVN Q2 Vehicle Deliveries 12.2K v 9-11K guided; Raises FY26 Vehicle Deliveries 65-70K (prior 62-67K) - -TSLA Q2 Vehicle Deliveries 480.1K v 405Ke; Production 451.8K v 408.1Ke - -F Q2 US total vehicle sales 549.2K units, -10.3% y/y; EV sales 62.9K units, -40.7% y/y - -OWL Blue owl credit income corp. discloses Q2 tender requests total $3.6B, down 14% q/q; Will fulfill the 5% tender offer pro rata, representing approximately 27% of total shares tendered; $4.7B Q2 redemption requests is slightly better than the $5.4B q/q - filing - -005930.KR Anthropic said to be in talks with Samsung for custom AI chips; Started early stage work - The Information - - -Dow Jones +0.7% - - S&P 500 +0.2% - - Nasdaq -0.3% - - Russell -0.2% - -US 10-year yield 4.473%, -0.6 bps