Markets Wait for Trade, Auction Updates Ahead of CPI: June 10, 2025

Markets are advancing as Wall Street awaits news from US-China trade discussions in London and the results of a $58 billion offering for 3-year Treasury notes this afternoon. Equity bulls are hoping for positive developments on both fronts, which will likely meaningfully bolster risk-asset valuations. But heightened bickering on the other side of the Atlantic alongside a lack of demand for US government debt would impede the rally’s momentum and throw a bone to the bears. Meanwhile, the domestic economic calendar is quiet ahead of two consecutive days of pivotal inflation data with the CPI and its PPI cousin on deck tomorrow and Thursday. One highlight for today, however, is the first increase in small business optimism this year, with NFIB survey respondents reporting a stronger economic outlook amidst improving revenue prospects. Investors are responding to the mix of information by scooping up shares across all sectors ex industrials and increasing their exposures to forecast contracts as well as the crude oil and copper inputs. The greenback, Treasuries and gold futures are near their flatlines, though, but bitcoins and the natural gas, lumber and silver commodities are facing selling pressure.

Small Business Sentiment Improves

Small business optimism posted its first climb of the year last month, with expectations that President Trump’s tariffs won’t be as draconian as feared propelling results. The National Federation of Independent Business’s (NFIB) headline result came in at 98.8, flying past estimates calling for 95.9, which would’ve been similar to April’s 95.8. Accelerating economic growth projections and a buoyant sales outlook were the two components driving the gain. But plans to boost capital expenditures also supported the increase. As far as the single most important problem plaguing managers, 18% reported taxes, 16% said quality of labor and 14% cited inflation. It’s the first time that taxation has been the top issue in almost five years, or since December 2020. Job openings remained incredibly challenging to fill against the backdrop of a lack of qualified candidates.

Investor Focus to Shift Towards Inflation, Duration

The market’s attention is poised to switch to price pressure data and longer duration Treasury auctions starting tomorrow. Indeed, the CPI and PPI coincide with afternoons featuring a combined $61 billion in 10- and 30-year offerings on Wednesday and Thursday. Inflation expectations are top of mind for fixed-income players approaching the debt instruments, with May cost figures and cross-border trade negotiations likely to influence demand during the sales. Economists, meanwhile, will be closely watching the distinct dynamics of the gauges and how uncertainty could be shaping trends across services, goods and commodities. I’m looking for a slightly lighter-than-expected headline result at 2.4% but am bracing for a potential escalation in automobile charges.

International Roundup

UK Job Markets Weakens

Payrolls weakened significantly last month in the UK with 109,000 job losses accelerating from April’s 55,000 reduction. It was the sharpest decline since COIVD and recent softness contributed to an increase in the unemployment rate to 4.6%, the loftiest level going back to 2021. Anecdotal evidence suggests that firms are holding back on recruiting new workers while they don’t replace job leavers.
Additionally, compensation trends softened. Average earnings ex-bonus grew only 5.2% year over year (y/y) during the three-month period between February and April, missing the median expectation of 5.4% and slowing considerably from the previously reported 5.5%. Real paycheck growth based on the Consumer Price Index including owner occupiers’ housing costs was 1.4% y/y.
As Consumers Spend Less

Anemic consumer confidence contributed to UK shoppers curtailing their outlays to the slowest level of the year in May, according to the British Retail Consortium (BRC)-KPMG Retail Sales Monitor. Transactions advanced only 1% y/y, which while stronger than the 0.7% y/y gain in May of last year was a deceleration from earlier months of this year. Food revenues climbed 3.6% last month, driven by football tournaments and two bank holidays fueling demand and bar barbecue and picnic items. Spring weather also brought a larger number of visits to pharmacies, with the segment climbing 12% as hay fever suffers scooped up allergy medications. New video game releases also supported cashier activity, but overall non-food products sank 1.1%.

Investor Sentiment Strengthens in Europe

The Sentix Investor Sentiment Index hit 0.2 for month, up considerably from -8.1 in May and the highest since the same month of 2024. Economists expected a pessimistic reading of -6. Expectations improved to 14.3 from 3.8 and in May the current conditions scored advanced from -19.3 to -13.

Australia Consumer Pessimism Lingers

Consumer confidence in Australia as measured by Westpac Banking Corp. ascended to 92.6 this month, up 0.5% but still below the pessimism-optimism threshold of 100.  Investors may have become slightly less negative following the country’s Reserve Bank cutting its key interest rate to 3.85% last month as price pressures have eased. Conversely, global trade uncertainty and the country’s slowing economic growth are weighing upon sentiment.

Japan Machine Tool Orders Climb Again

Orders for machine tools sank 11.2% m/m in May after plunging 13.8% in the preceding month. On a y/y basis, however, orders were up 3.4% y/y, the eighth-consecutive month of gains, according to the Japan Machine Tool Builders Association. The y/y result weakened from April’s 7.7% pace. Domestic requests for machines contracted 5.2%, but orders from other countries hiked north by 6.7%.