Morning Bid: Trade optimism gives way to caution over US jobs

A look at the day ahead in European and global markets from Stella Qiu

It's been a pretty muted session in Asia and rightly so, given the high stakes in U.S. payrolls data due later in the day that could make or break the case for a July rate cut and spur big moves in Treasuries and foreign exchange markets.

Investors in Asia did not seem to share the optimism on trade that pushed Wall Street to record high closes overnight, after President Donald Trump said the U.S. had reached a trade agreement with Vietnam. Details remain unclear.

The market showed no significant reaction to the latest developments on Trump's "big, beautiful bill" on tax cuts. Republicans in the House of Representatives on Wednesday moved closer toward advancing the package, apparently overcoming objections by a handful of party hardliners who had raised concerns about cost.

Trump said the U.S. will impose a 20% tariff on all imports from Vietnam which, while lower than the 46% tariff that had been threatened, is still much higher than previous rates.

It was unclear how a 40% duty on all trans-shipments through Vietnam, aimed at products largely made in China and then labelled "Made in Vietnam", could be implemented.

Vietnamese shares were up a modest 0.5%, although that was the highest since April 2022. Vietnam's dong currency dipped to a record low of 26,218 per dollar.

Other countries in Asia are complaining that talks with the U.S. are proving difficult, in part because it was not clear what the White House wanted. South Korean President Lee Jae Myung said on Thursday he could not say if tariff negotiations could conclude by next Tuesday, while Japan has invoked national interests as talks with the U.S. struggled.

Wall Street futures are 0.1% firmer, while EUROSTOXX 50 futures were up 0.2%.

Looking ahead, the main risk event for markets will be U.S. payrolls figures due later in the day. Stakes are high after a private sector payrolls report surprised with the first fall in more than two years.

Analysts are forecasting a rise of 110,000 jobs in June with the jobless rate ticking up to 4.3%. Given market pricing of just a 25% probability for a July Fed rate cut, a weak report could shift the dial big-time, sending Treasuries rallying and the dollar lower.

Sterling was flat at $1.3633. It slid 0.8% overnight on investor anxiety over Britain's finances after the government's reversal on welfare reforms, which also caused gilt yields to jump.

Key developments that could influence markets on Thursday:

-- U.S. nonfarm payrolls report for June

-- U.S initial and continuing jobless claims, ISM services PMI

-- U.K. S&P Global services, composite PMIs

-- ECB releases its June minutes

(By Stella Qiu; Editing by Edmund Klamann)