OPENING CALL

Treasury yields have climbed on the increasing likelihood of a second Trump administration. That repricing is holding ahead of the Fourth of July holiday.

U.S. markets will have a shortened trading session today. There is one big setpiece left for investors this week: Friday's nonfarm payrolls.

In recent market action:

The yield on the 10-year Treasury note was little changed. It settled Tuesday at 4.435%, up from 4.287% Thursday before the Biden-Trump debate.

Stock futures edged up. Nasdaq and the S&P 500 both notched new highs Tuesday.

Global stocks were largely up, too. The Stoxx Europe 600, Japan's Nikkei 225, and Hong Kong's Hang Seng all rose. India's Sensex briefly topped 80000 for the first time.

Premarket Movers

Skydance Media reached a preliminary agreement to buy National Amusements and merge with Paramount Global, rekindling deal talks that fizzled last month. P aramount stock rose 7%.

Tesla stock continued to rally premarket, after rising 10% in the previous session.

Postmarket Movers

Scilex and Denali Capital Acquisition signed a letter of intent for a proposed business combination. Scilex shares rose 34%.

VivoPower's electric-vehicle subsidiary extended the time it has to complete a business combination. VivoPower shares rose 67%.

Watch For:

ADP National Employment Report for June; International Trade for May; Weekly Jobless Claims; ISM Report on Business Services PMI for June; Factory Orders for May; EIA Weekly Petroleum Status Report; FOMC Meeting Minutes; Canada International Merchandise Trade for May

Today's Headlines/Must Reads:

- Sudden Return of the Trump Trade Sends Treasurys Reeling

- GE Appliances Spins Stronger Sales from Supply Chain Overhaul

- The Underground Network Sneaking Nvidia Chips Into China

MARKET WRAPS

Forex:

The dollar remained under pressure after falling following remarks by Jerome Powell on inflation.

"The remarks are very much in line with our view that recent data have increased the odds of a September cut from the Fed," Jefferies said.

The euro's gains are likely to remain limited ahead of the second round of the French parliamentary election on Sunday, Swissquote Bank said.

Traders are likely to sell the euro around the $1.0750 level, although buyers would likely come in around the $1.0700 area on hope that worries about far-right National Rally leader Marine Le Pen securing a majority are overdone.

"In all cases, we won't have a clearer picture on the euro's next direction before next Monday."

The Labour Party appears on course for a massive majority in Thursday's U.K. general election but this should have little impact on sterling, which could trade in narrow ranges once the exit poll is released, Ebury said.

"A Labour supermajority is fully priced in, and indeed would not deviate too much from the status quo, with only modest tax and spending hikes set out in the manifesto," Ebury said.

The prospect of closer U.K.-EU ties under Labour, in particular, has been greeted positively by market participants, Ebury said.

If Labour's majority is smaller than expected, sterling could fall, although this seems unlikely, it added.

The yen may weaken further on bets that Japan could be less likely to intervene in foreign-exchange markets, according to analysts.

Traders are speculating that Japan's top currency diplomat, Masato Kanda, could be less prone to intervene again as he "runs out the string on his tenure" which lasts until end-July, forex.com and City Index said.

It noted media reports saying that Kanda will be replaced by Atsushi Mimura, presently director-general of the Japanese Finance Ministry's international bureau, on July 31.

Earlier on Wednesday, the PBOC set the CNY fixing versus USD at a 7-month low of 7.1312 and Mizuho Securities Asia said there are no signs of relief in the yuan's depreciation trend, as the PBOC remains determined to release CNY depreciation pressure via its CNY fixing guidance.

Bonds:

The 10-year Treasury yield remains near its highest level in a month, driven by recent political and economic developments, Tickmill said.

A Supreme Court ruling in Donald Trump's favor along with last week's televised debate results increased the odds of a second term for him, Tickmill said.

"It could lead market participants to anticipate inflationary policies such as tax cuts, tighter immigration controls, and higher tariffs under a potential Trump presidency."

ING said politics have helped the Treasury curve to steepen, driven by a rise in longer-dated yields.

Increasing prospects of Donald Trump winning this year's presidential elections--likely resulting in increased tariffs which would raise inflation--plus prospects of increased fiscal spending in Europe after the far-right performed strongly in French elections have caused yield curves to steepen in recent days, ING said.

However, renewed focus on monetary policy should cause steepening driven by short-dated yields.

"U.S. data should refocus markets on the potential monetary policy shifts ahead. And we think it holds growing prospects of a front-end led steepening of curves."

The relief trade in French government bonds continues as election tail risks decline, leading to a narrower 10-year OATs/Bunds yield spread, Commerzbank Research said.

"Fading election tail risks seem key as 2nd round withdrawals are proceeding as anticipated, hence limiting the risk of an absolute majority for RN [far-right National Rally]."

That said, price action in OATs remains fluid, Commerzbank said.

Energy:

Oil prices edged higher as reports of a larger-than-expected draw in U.S. crude stockpiles signals solid demand during the summer driving season in the world's top consumer.

Crude inventories fell by 9.16 million barrels last week, according to reports citing figures from the API.

Prices were also supported by escalating tensions in the Middle East and risks of supply disruptions due to Hurricane Beryl in the Atlantic.

"There is rising possibilities of the storm hitting the upper Gulf of Mexico and impacting offshore oil production," ANZ Research said.

Brent Chart

The price of Brent crude oil could extend its uptrend, based on the weekly chart, UOB Global Economics & Markets Research said.

Among positive technical factors, Brent broke above resistance at weekly Ichimoku cloud's top and its weekly moving average convergence divergence indicator is turning positive.

However, the trendline connecting the highs of September 2023 and April 2024, which is currently near $90.00/bbl, poses a significant resistance.

Metals:

Gold futures rose as investors look towards the release of the Federal Reserve's meeting minutes later Wednesday for clues on monetary policy.

Currently, the market is pricing in around a 67% chance of Fed rate cuts in September, up from around 63% before Powell's remarks on Tuesday, XS.com said.

Panmure Liberum said gold prices appear increasingly sensitive to U.S. real rates again after earlier being propelled higher by a cocktail of other influences, including central bank purchases.

According to Panmure Liberum, "the net-long position being built by U.S. CFTC 'non-commercials' suggest short-term price risk remains to the upside."


TODAY'S TOP HEADLINES


Chipotle Stock Is More Expensive Than Nvidia. It's Down 10% From Its Peak.

Chipotle stock has been falling since it went through a 50-for-1 split last Wednesday, showing cracks in its unremitting rally over the past year. High-flying valuations might have scared away some investors, but it's too early to turn sour on the stock.

After gaining more than 60% in the past 12 months, Chipotle stock reached the latest peak of $3,427.61 on June 18, equivalent to $68.55 on the post-split basis. As of Tuesday, the stock has declined 10% from that level to $61.40 per share.


Private-Equity Fundraising Slogs Through First Half as Assets Remain Frozen

Private equity's long-awaited fundraising recovery failed to materialize in the first half of the year as the industry remains hampered by the billions of dollars of assets it can't profitably sell.

Firms globally raised $293 billion in this year's first six months, setting roughly the same pace as last year, when private-equity managers raised $577 billion, according to figures released Wednesday by research provider PitchBook Data.


Venture Capital Is Increasingly Becoming a Haves and Have-Nots Industry

While the venture-capital market broadly struggles, top firms and startups are chugging along, according to new data and analysis on the first half of the year from research firm PitchBook Data.

This splitting of the market has created a haves and have-nots environment for both companies and firms, where many venture firms and startups are struggling to raise capital even as stalwart firms and hit startups-many of which are focused on artificial intelligence-are able to raise funds, said Kaidi Gao, a venture analyst at PitchBook.


Supreme Court's Agency Power Rulings Could Change Regulatory Landscape For Years to Come

A spate of Supreme Court rulings over the last week promises to dramatically reshape how regulation is created and upheld in the U.S., starting with proposed rules by the Biden administration to rein in businesses on noncompete clauses and bring transparency to how companies navigate the risks of climate change.

In one of the final actions of its term, the court on Monday issued a ruling allowing newly created businesses to contest even decades-old regulations, including those that may have beat back prior claims of government overreach.


Democratic Unity Cracks in Wake of Biden's Debate Performance

WASHINGTON-A show of Democratic unity in the wake of President Biden's disastrous debate performance is starting to crack as a handful of lawmakers break ranks to warn the party is heading for defeat.

(MORE TO FOLLOW) Dow Jones Newswires

07-03-24 0619ET