US equities higher with large dispersion across sectors and indices. Brent crude fell towards US$95 per barrel on a conditional ceasefire between Israel and Lebanon. Small movement for rates and currencies

US equities recovered from earlier weakness indicated by futures markets, although performance diverged across the major indices. The Dow rose more than 1.5% toward a record high, while disappointing Broadcom guidance weighed on technology stocks. The S&P 500 was about 0.5% higher in afternoon trading and European equities also posted solid gains. Brent crude fell towards US$95 per barrel as a conditional ceasefire between Israel and Lebanon eased a sticking point in US-Iran peace talks. Moves in G10 currencies were small and Treasury yields edged lower.

There was limited first-tier economic data to provide the market with direction. Initial jobless claims rose to 225k, slightly above the 215k consensus. The increase looks like normal week-to-week noise rather than a material deterioration in labour market conditions. More broadly, both initial and continuing claims remain subdued. To date, AI-related automation concerns and geopolitical uncertainty don’t appear to be having a meaningful effect on claims.

US treasuries traded modestly lower in yield led by the front end as lower oil prices and weaker tech sentiment supported demand. Yields are 2-4bp lower across the curve since the NZ close. 10-year notes dipped 2bp to 4.46% in a continuation of the narrow trading range from recent sessions. The 2/10y curve steepened marginally to 42bp from the flattest level in the past 12 months. European yields edged lower with few catalysts.

Bloomberg reported that Bank of Japan officials are considering a 25bp policy rate increase this month and see scope for a further hike later this year. The BOJ is expected to discuss raising the policy rate to 1% at its meeting ending 16 June, with additional increases also under consideration. A 25bp move this month is already largely priced, with around 43bp of tightening discounted by December. The Bank will also unveil updated bond-buying plans, with officials seeing little need to maintain the current pace of reductions into the new fiscal year.

The report had limited impact on the yen. USD/JPY remains near 160, close to levels where the Ministry of Finance has previously intervened. Still-wide US-Japan rate differentials continue to weigh on the currency. The yen underperformed within the G10 in May despite authorities spending more than US$70 billion. This is part of a broader theme across Asia with South Korea and Indonesia stepping up support for their currencies via a range of measures.

There was subdued price action in G10 currencies overnight. The US dollar index declined as oil prices fell though the move was not large. The NZD was confined to a narrow range against the dollar and is little changed on the other key crosses.

NZ fixed income yields edged lower in the local session yesterday, supported by an improved tone in global bond markets as oil prices retraced. The sharp fall in Q1 building work points to downside risk for our Q1 GDP forecast. Two-year rates closed 1bp lower at 3.48%, after rebounding from the 3.46% May low reached ahead of the RBNZ Monetary Policy Statement.

The Crown Financial Statements for the 10-months to April showed a positive variance to Budget projections, with the core Crown residual cash deficit $0.7bn smaller than forecast. The weekly government bond tender attracted strong demand, with NZ Debt Management receiving $2.3bn in bids for $450m on offer. Demand was particularly strong for the May‑2031 line. Ten‑year NZGB yields closed 1bp lower at 4.55%.

There is no domestic data today. Focus this evening turns to the US May labour market report, where consensus expects a solid 85k rise in nonfarm payrolls. That would suggest the strong March and April outcomes reflected underlying momentum rather than merely a rebound from February’s weakness. The unemployment rate is expected to hold at 4.3%. Canada also releases labour market data.

Stuart Ritson is a senior Markets Strategist at BNZ Markets.