Trump Eases Vietnam Tariffs as Modi Seeks Trade Expansion with Mercosur Bloc

QUICK SNAPSHOT
Global Sentiment: Risk-on
Factors:  Trade Deals Optimism, West Asia geopolitical tension

TODAY’S WATCHLIST
- US June Non-farm Payrolls Data
- India June S&P Services and Composite PMI

THE BIG STORY
President Donald Trump on Wednesday announced a trade deal with Vietnam, easing tensions just days before a July 9 deadline that could see sweeping tariff hikes on most US imports. Under the agreement, Vietnamese exports to the US will face a reduced 20% tariff down from the originally proposed 46%, while trans-shipped goods from third countries routed through Vietnam will be taxed at 40%. In return, Vietnam will receive zero-tariff access for certain US exports. “It is my Great Honor to announce that I have just made a Trade Deal with the Socialist Republic of Vietnam,” Trump wrote on Truth Social, following a call with Vietnamese President To Lam.  The deal marks a rare de-escalation in Trump's broader trade strategy, which has been defined by rising tariffs and hardline stances. It also highlights Vietnam's growing importance in global supply chains as companies shift production away from China. While Trump has previously struck narrow truces with China and Britain, talks with other key partners like India and Japan remain uncertain, with negotiations facing repeated delays or strategic disagreements. 

Back home, Prime Minister Narendra Modi has embarked on a five-nation tour from July 2 to 9, covering Ghana, Trinidad and Tobago, Argentina, Brazil, and Namibia. During his stops in Brazil and Argentina later this week, Modi will push for an expansion of the preferential trade agreement between India and Mercosur, the Latin American trade bloc comprising Brazil, Argentina, Paraguay, and Uruguay. As the world’s fourth-largest trade bloc after the EU, Nafta, and ASEAN, Mercosur offers India an opportunity to deepen economic ties across the Southern Hemisphere, at a time when traditional trade relationships remain strained under Trump’s tariff-first strategy.

DATA
US private payrolls declined in June for the first time in over two years, as economic uncertainty weighed on hiring decisions. According to the ADP National Employment Report released on Wednesday, private sector jobs fell by 33,000 last month the first drop since March 2023. This follows a downwardly revised gain of 29,000 in May. The figures came as a surprise to economists, who had expected an increase of 95,000 jobs, following an earlier estimate of 37,000 for May. Despite the setback in hiring, the broader labour market remains relatively stable, underpinned by persistently low levels of layoffs. 

WHAT HAPPENED OVERNIGHT
US stocks ended mixed on Wednesday with the S&P 500 and Nasdaq closed at record highs, buoyed by a rally in technology stocks and relief from trade-related uncertainty following a new agreement between the US and Vietnam. The deal helped ease concerns over prolonged trade tensions, providing a fresh tailwind to investor sentiment. Tesla rebounded 5% after posting a sharp decline in second-quarter vehicle deliveries, which, while weak, were not as dismal as some analysts had feared. The stock, however, remains down over 20% year-to-date. The Dow Jones ended slightly lower, weighed down by losses in healthcare stocks. Centene plunged 40% to its lowest level in eight years after the company scrapped its 2025 earnings forecast, citing a sharp drop in expected revenue from its marketplace health insurance plans.

US Treasury yields rose on Wednesday as investors assessed weaker labour market data alongside the implications of President Donald Trump's sweeping tax-and-spending package, which narrowly cleared the Senate. The yield on the benchmark 10-year Treasury note climbed over 3 basis points to 4.283%, while the 30-year bond yield also gained more than 3 basis points to 4.809%. The 2-year note yield edged up 1 basis point to 3.787%, reflecting tempered but persistent uncertainty around the Federal Reserve’s policy path.

The US dollar rose against major currencies on Wednesday, buoyed by data that reinforced market expectations for a Federal Reserve interest rate cut later this year. With traders positioning ahead of Thursday’s June employment report and the July 4 holiday, the greenback regained some lost ground after a prolonged losing streak. The dollar index, which tracks the greenback against a basket of currencies including the yen and euro, climbed 0.154% to 96.786, to end a nine-session decline.

Brent crude oil prices climbed 3% on Wednesday as geopolitical tensions re-emerged after Iran suspended cooperation with the UN nuclear watchdog, raising concerns over future supply disruptions. Sentiment was also buoyed by a trade agreement between the US and Vietnam, seen as a positive signal for global demand. Brent crude settled up 3%, at $69.11 a barrel, while US West Texas Intermediate crude rose 3.1%, to $67.45. However, gains were tempered by a surprise build in US crude inventories, which suggested a temporary easing in domestic demand or rising production.

Day’s Ledger
Economic Data

• China June Caixin Services PMI
• India June S&P Global Services PMI
• Eurozone June Composite PMI
• US weekly Jobless Claims Data
• US May Trade Data
• US June Non-farm Payrolls Data
• US June S&P Global Composite PMI
• US May Factory Orders Data
• US June ISM Non-Manufacturing PMI
• US Baker Hughes Oil Rig Count

Corporate Actions

• Apr-Jun earnings: Balaji Telefilms 
• Jan-Mar earnings: Euro Asia Exports, Hindustan Adhesives, Surana Solar
• Concord Drugs to consider fund raising 
• Deccan Bearings to consider share issue
• Johnson Controls to consider interim dividend
• P N Gadgil Jewellers to consider fund raising 
• Prime Focus to consider fund raising 
• Tuni Textile Mills to consider right issue

Policy Events

• German Buba Balz Speaks  
• FOMC Member Bostic Speaks  
• ECB's Lane Speaks  

TICKERS

• AUROBINDO PHARMA informed that CuraTeQ gets EU approval for Dazublys, a biosimilar of cancer drug trastuzumab, marking its fourth biosimilar authorised in the European Union.
• AVENUE SUPERMARTS’s June quarter revenue rises 16% YoY to ₹159.32 billion; store count reaches 424 as of June, including one temporarily closed for renovation.
• AXIS MAX LIFE investigates possible customer data breach after anonymous tip-off; cybersecurity experts engaged for detailed assessment and remedial action.
• HCL TECHNOLOGIES expands Equinor partnership to accelerate cloud migration, cyber resilience, and user experience upgrades using advanced technologies like augmented reality.
• HINDUSTAN ZINC June quarter mined metal hits record at 265,000 tonnes; refined zinc, lead and silver production dip due to maintenance and lower mine input.
• INDIAN BANK gross advances rise 11.3% YoY to ₹6 trillion as on June 30; total business grows 10.2% to ₹13.44 trillion with healthy deposit growth.
• MOTHERSON SUMI WIRING appoints Gulshan as CFO, replacing Mahender Chhabra, who now heads India finance at global auto parts maker Tenneco.
• NESTLE INDIA to invest ₹1.05 billion to expand Maggi production at Gujarat factory; new line will increase capacity to 121,000 tonnes per annum.
• PNB global advances rise 9.9% YoY to ₹11.31 trillion as on June 30; deposits jump 12.8%, lifting total business to ₹27.19 trillion.
• RBL BANK denies report of potential stake sale to Emirates NBD, calling it speculative and factually incorrect.
• RAIL VIKAS NIGAM appoints Chandan Kumar Verma as CFO, replacing Sanjeeb Kumar; Verma also serves as CFO of HSRC Infra Services.
• SBI classifies RELIANCE COMMUNICATIONS loan as fraud; alleges fund diversion and misreporting, names Anil Ambani to RBI. Insolvency resolution process is ongoing.
• VOLTAS receives ₹2.65 billion GST notice over short payment from merged unit Universal Comfort Products; company will respond within regulatory timeline.

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