Investment Rating - The report indicates a shift in the forecast for the next Fed rate cut to September from December, suggesting a more dovish stance from the Federal Reserve [1][2]. Core Insights - The report highlights that disinflationary pressures are emerging, with expectations that tariffs will have only a one-time effect on price levels. The labor market remains healthy, but job finding has become more challenging [1]. - The report anticipates two additional 25 basis point cuts in interest rates later in the year, with a terminal rate forecast of 3-3.25% [1]. - The market is beginning to price in faster Fed easing, which could lead to a weaker Dollar and higher gold prices, benefiting equities depending on the growth backdrop [2]. Summary by Sections Earlier Fed Cuts - The forecast for the next Fed rate cut has been moved to September, with expectations of two more cuts in October and December [1]. - The terminal rate is now expected to be between 3-3.25%, down from a previous range of 3.5-3.75% [1]. US and UK Fiscal Policy - The report discusses the potential impact of the Trump Administration's fiscal policy, particularly the "One Big Beautiful Bill Act," which may enhance foreign investment appetite in the US [8]. - UK fiscal policy is also under scrutiny due to recent selloffs in Gilts, indicating a need for close monitoring [8]. Q2 Earnings Season - The upcoming Q2 earnings season is expected to show S&P 500 firms beating consensus estimates, with insights into how companies are adapting to higher tariffs [8]. - It is assumed that US consumers will absorb 70% of the direct costs of tariffs, but lower pass-through rates could pose risks to corporate margins [8]. Commodities Outlook - Oil markets are pricing a low probability of major supply disruptions, with expectations of falling oil prices due to strong supply growth [8]. - Conversely, gold prices are expected to rise due to increased central bank demand, and US copper prices may also see significant upside due to potential tariffs [8]. SLR Reform - The Fed's supplementary leverage ratio reform is anticipated to benefit banks by providing more flexibility for short-term secured financing and potentially increasing Treasury purchases during stress periods [9].

Core Viewpoint - The recent ADP employment data indicates a concerning trend in the U.S. job market, leading to speculation that the Federal Reserve may consider an interest rate cut sooner than expected [1][3][7]. Employment Data Summary - The ADP employment report for June shows a decrease of 33,000 jobs in the private sector, marking the largest decline since March 2023, while the forecast was an increase of 98,000 jobs [3][4]. - Job growth in goods-producing sectors increased by 32,000, but service-providing sectors saw a decline of 66,000 jobs, with notable losses in professional services, education and health services, and financial services [3][4]. - Predictions for the upcoming non-farm payroll report suggest a significant shortfall, with UBS forecasting an increase of only 100,000 jobs and a rise in the unemployment rate to 4.3%, the highest since 2021 [4][6]. Market Reaction - Following the ADP report, U.S. stock indices showed mixed results, with the Dow Jones slightly down, while the Nasdaq and S&P 500 posted gains [1][2]. - The dollar index rebounded, rising by 0.44% after a period of decline, indicating a potential shift in market sentiment [6]. Federal Reserve Outlook - The likelihood of a Federal Reserve interest rate cut in July has increased, with market expectations rising from 20% to approximately 27.4% following the employment data release [7]. - U.S. Treasury Secretary emphasized the need for the Fed to act on interest rates, suggesting that the current rates are too high and that the Fed's policies may be lagging behind market signals [7].

Group 1 - The international gold price experienced wide fluctuations but closed higher, recovering the $3300 mark, indicating a potential stabilization trend [1] - Geopolitical tensions have eased, which is a primary factor suppressing current gold prices, while concerns over U.S. debt defaults due to a significant increase in the debt ceiling are limiting downward movement [1] - Gold has benefited from the situation, with a notable increase of over 25% in the first half of 2025, marking the best half-year performance since 2007 [1] Group 2 - The market's short-term focus is shifting towards upcoming non-farm payroll data, which will provide guidance on whether the Federal Reserve will initiate rate cuts [2] - Technically, gold prices are in a bearish arrangement after a death cross between the 5-day and 10-day moving averages, with resistance levels at $3310 and $3345 [2] - Despite the potential for further declines, the recent price action suggests a gradual stabilization, with support levels identified at $3280 and $3260 [2]

Core Insights - The article suggests that inflation may not be as strong as previously anticipated, indicating a potential shift in monetary policy by the Federal Reserve [1] Group 1 - The decline in inflation and weakness in the labor market could lead to the Federal Reserve considering an early interest rate cut [1]

Core Viewpoint - The Federal Reserve does not need to lower interest rates prematurely, as the appropriate actions will become clear when the time comes [1] Group 1 - Bill Zox, a portfolio manager at Brandywine Global, emphasizes the importance of the relationship between the Trump administration and financial markets [1] - If the Federal Reserve lowers interest rates too early, it could lead to an increase in the 10-year Treasury yield, which would be counterproductive [1]