Trump Clinches Tax Bill Win as Trade Deficit Widens and Global Tariff Letters Loom

QUICK SNAPSHOT
Global Sentiment: Risk-on
Factors: US Jobs Data, Tariff Letters

TODAY’S WATCHLIST
- ECB President Lagarde Speaks  
- BoE Governor Bailey Speaks

THE BIG STORY
President Donald Trump secured a major legislative victory on Thursday as the Republican-controlled House of Representatives passed his sweeping tax-and-spending bill in a narrow 218-214 vote. The package makes his 2017 tax cuts permanent, introduces new tax breaks promised during his 2024 campaign, and ramps up funding for immigration enforcement. But it also slashes health and food assistance programs, eliminates a host of green energy incentives, and is projected to add $3.4 trillion to the national debt, according to the Congressional Budget Office. The win marks a pivotal step in Trump’s push to reshape US domestic policy heading into the election season.

Meanwhile, fresh trade data showed the US trade deficit widening by nearly 19% to $71.5 billion in May, driven by falling exports. Still, softening imports could provide some cushion to second-quarter growth. Trump stated that, beginning Friday, the US will notify countries in groups of ten about the specific tariffs they will face on goods exported to the US. Instead of pursuing numerous bilateral trade agreements, he indicated that the letters would specify general rates between 20% and 30%, noting the difficulty of negotiating individually with over 170 countries.

Data
US job growth remained unexpectedly firm in June, with non-farm payrolls rising by 147,000, surpassing forecasts of a 110,000 increase. However, nearly half of the gains came from the government sector, raising questions about the strength of private sector hiring. Government employment rose by 73,000, largely driven by a 40,000 jump in state education jobs, a rise many economists attributed to seasonal adjustments tied to the school year’s end. Private industry added the fewest jobs in eight months, reflecting growing economic headwinds.

The Labour Department’s report also showed a slight drop in the unemployment rate to 4.1% from 4.2% in May, though this was partly due to people exiting the labour force. Meanwhile, the average workweek shortened, hinting at reduced business activity and fewer hours worked, a possible sign that employers are becoming more cautious even as overall job numbers remain resilient. 

WHAT HAPPENED OVERNIGHT
US stocks surged to fresh record highs on Thursday, boosted by a strong US jobs report and a rally in tech shares led by Nvidia, which rose 1.3% and moved closer to a $4 trillion valuation. The S&P 500 and Nasdaq notched a third consecutive week of gains, while the Dow climbed 0.77%, just shy of its own record. Investor optimism remained intact despite reduced odds of a rate cut this month. Tripadvisor jumped 16.7% after reports that activist investor Starboard Value took a significant stake, while Datadog surged 14.9% on news it will join the S&P 500, replacing Juniper Networks.

US Treasury yields jumped on Thursday following stronger-than-expected jobs data, reinforcing bets that the Federal Reserve may hold off on cutting rates in the near term. The yield on the benchmark 10-year note rose 5.3 basis points to 4.346%, while the 2-year yield, which closely tracks interest rate expectations, surged 9.7 basis points to 3.886%. For the week, the 10-year yield climbed 6.3 basis points, and the 2-year yield advanced nearly 14.6 basis points, marking their largest weekly gains in over a month.

The US dollar rallied on Thursday after a stronger-than-expected US payrolls report suggested the labour market is not weakening as quickly as some had feared. The dollar index rose 0.38% to 97.12, snapping a nine-session losing streak and marking a second consecutive daily gain. The euro slipped 0.37% to $1.1754. Despite the rebound, the dollar remained down 0.1% for the week. The upbeat jobs data tempered expectations for an imminent Federal Reserve rate cut.

Brent crude oil prices dipped slightly on Thursday as concerns mounted that US tariffs could dampen global energy demand, just as major crude producers prepare to potentially raise output. Brent crude futures slipped 31 cents, or 0.45%, to settle at $68.80 a barrel. US West Texas Intermediate crude declined 45 cents, or 0.67%, to $67 in light trading ahead of the Independence Day holiday. 

Day’s Ledger
Economic Data

• Japan May Household Spending 
• Euro May PPI German May Factory Orders Data
• India weekly FX Reserves Data

Corporate Actions

• VRL Logistics to consider bonus share issue
• MIC Electronics to consider financial results
• Vintage Coffee And Beverages to consider fund raising

Policy Events

• ECB President Lagarde Speaks  
• ECB's Elderson Speaks  
• BoE Governor Bailey Speaks

TICKERS

• AEGIS LOGISTICS: Commissions 48,000-tonne LPG cryogenic terminal at Pipavav for associate Aegis Vopak; will transfer facility later.
• ALEMBIC PHARMA: Gets ₹331 million GST demand for excess refunds under Budgetary Support Scheme; plans to appeal.
• BAJAJ FINANCE AUM jumps 25% YoY to ₹4.41 trillion as on June 30; loans booked up 23% to 13.49 million; deposit base rises 15%.
• BAJAJ HOUSING FINANCE AUM rises 24% YoY to ₹1.20 trillion as on June 30; loan assets and disbursements see strong growth.
• BANK OF BARODA domestic advances up 12.5% YoY to ₹9.92 trillion as on June 30; retail leads growth; global business grows 11% to ₹26.43 trillion.
• Bombay HC rules tax incentives under Maharashtra schemes as capital receipts, not taxable income, benefiting Bajaj Auto and Reliance Industries.
• GODAWARI POWER lends ₹300 million to Deccan Gold Mines for local and Kyrgyzstan gold projects; partly used for Geomysore stake buy.
• IEX March quarter  trade volumes rise 15% YoY; prices fall due to early monsoon, strong supply; REC volumes surge sharply.
• KAYNES TECH to invest $17.7 million in Singapore unit by June 2026 via equity infusion; unit handles design and acquisitions.
• L&T FINANCE retail book grows 18% YoY to ₹998 billion as on June 30; 98% portfolio now retail-focused.
• MARICO March quarter  revenue rises in low-20s; upbeat on FY26 despite margin pressure; strong growth in Saffola, international markets, and premium segments.
• RELIANCE POWER clarifies SBI’s fraud tag on Reliance Communications has no effect on its business or governance.
• RELIANCE RETAIL invests in UK-based FaceGym via Tira; to launch brand in India with standalone studios and store-in-store formats.
• UCO BANK business up 13.7% YoY to ₹5.24 trillion as on June 30; advances rise 16.6%, deposits 11.6%; CASA ratio falls.

MUST READ

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• Sugar sector grown into ₹1 trillion industry: Food Minister Pralhad Joshi
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• US job growth picks up with help from public education hiring
• Powell silence on his future complicates Trump Fed chair search
• ECB officials flagged danger of strong Euro at June meeting
• Bessent says Fed ‘a little off,’ flags signal from two-year rate