Trump seizes on weak data to renew Fed pressure

Good morning. Here's what happened overnight and what you need to know today.

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1.

Data pulse: US services activity unexpectedly contracted and private hiring slowed sharply in May, pushing the dollar lower and prompting Donald Trump to renew calls for interest rate cuts. The ISM services PMI fell to 49.9, its first contraction since June 2024 and the lowest in nearly a year. Economists had expected a rise to 52.0. Tariff-driven uncertainty and higher input costs pushed the ISM prices-paid index to 68.7, the highest since November 2022. ADP reported private payrolls rose by just 37,000, well below the 110,000 forecast. That triggered renewed calls from Trump for the Fed to lower rates. “ADP NUMBER OUT!!! “Too Late” Powell must now LOWER THE RATE. He is unbelievable!!! Europe has lowered NINE TIMES!” he posted. Economists warned against reading too much into the ADP data, with official figures due Friday. Meanwhile, the Fed’s Beige book also showed US economic activity declined slightly in recent weeks amid lingering uncertainty over trade. The dollar weakened and Treasury yields fell. (Capital Brief)(ISM)(ADP)(Reuters)

2.

Putin’s call: US President Donald Trump said Russian President Vladimir Putin told him he “will have to respond” to Ukraine’s recent drone attacks on Russian airfields. In a social media post, Trump said they spoke for about an hour and 15 minutes, discussing the weekend’s strike on Russia’s docked airplanes and “various other attacks” by both sides. He called it “a good conversation, but not a conversation that will lead to immediate peace.” They also discussed Iran, agreeing that “Iran cannot have a nuclear weapon,” with Putin suggesting he would join nuclear talks. The call, their first since Ukraine’s drone attacks on Russian airbases, came just after a second round of Istanbul talks ended without breakthrough. Earlier, Putin dismissed Zelenskiy’s call for leader-level talks, while Iran’s Supreme Leader Ayatollah Ali Khamenei rebuffed a US nuclear proposal as interference. “Why are you interfering and trying to say whether Iran should have uranium enrichment or not? That’s none of your business.” Khamenei posted. (Capital Brief)

3.

Pacific posturing: Foreign ministry spokesman for Beijing, Lin Jian, accused Australia of “brazenly” spreading a narrative of China as a threat when Australia’s Defence Minister Richard Marles met with US, Japanese and Philippine allies at a conference in Singapore on the weekend. Lin said the countries spread the ‘false narrative’ to leverage the East China Sea and South China Sea issues to “sow discord and incite confrontation between regional countries…China strongly deplores and firmly opposes it,” Lin said at a press conference on Tuesday night. The accusations follow comments from US Defence Secretary Pete Hegseth last weekend, who warned that a Chinese invasion of Taiwan was imminent. Hegseth also called on Australia to increase its defence spending to 3.5% of GDP. Albanese dismissed the suggestion, reiterating the Labor government's commitment to increasing defence investment to 2.3% of GDP over the next four years, up from its current level of 2.02%. (Capital Brief)(China Embassy transcript)(NBC)

4.

Ley lines: Opposition Leader Sussan Ley has hired Kane Silom, a staffer to former treasurer Josh Frydenberg, to run her communications team, Capital Brief reported. Silom joins Ley’s office as director of communications, coming from the office of Liberal MP Sarah Henderson, who was removed from the frontbench in last month’s reshuffle. He previously worked for Andrew Robb, Bruce Billson and Family First senator Steve Fielding. Ley’s long-time media adviser Liam Jones will remain as Silom’s deputy. The appointment follows criticism of the Opposition’s media strategy after last month’s federal election loss, and comes as Ley navigates a tumultuous start to her leadership, facing backbench criticism and grieving the death of her mother, Angela, whose funeral was held on Friday. (Capital Brief)

5.

Threat cluster: Hackers are conning employees into installing a modified version of a Salesforce-related app to gain access to Salesforce data before extorting them. Google’s Threat Intelligence Group said that the hackers (identified as UNC6040) have “proven particularly effective in tricking employees…into actions that grant the attackers access or lead to the sharing of sensitive credentials, ultimately facilitating the theft of organisations’ Salesforce data.” The scammers relied on manipulating end-users rather than exploiting any vulnerability inherent to Salesforce. The hackers, known as ‘the Com,’ successfully breached the network of at least 20 companies in the US and Europe by impersonating IT personnel to convince employees to hand over user credentials and steal Salesforce data. The news comes as shares in cybersecurity firm CrowdStrike plummeted 8% after its Q2 revenue came in below estimates as it continues to deal with fallout from its botched cybersecurity update last year. (Google)(Reuters)(Bloomberg)(Reuters)

6.

Beautiful bill: The nonpartisan Congressional Budget Office lowered its estimate of how much US President Donald Trump's tax-cut and spending bill will add to national debt, saying it would add about USD2.4 trillion ($3.7 trillion) to the nation's USD36.2 trillion in liabilities. While the bill includes USD1.5 trillion in spending cuts, some Republicans are pushing to scale back the more than USD700 billion in savings to Medicaid or to remove Trump-backed tax cuts for those earning overtime pay and tipped wages or income from Social Security retirement payments. The revised assessment comes one day after Elon Musk blasted the bill as a “disgusting abomination.” The bill must now pass the Senate where Republicans hold a 53-47 majority, but several GOP members have already said they will oppose the bill as it does not sufficiently address budget deficits.(WSJ)(Reuters)(Bloomberg)(CBO)(FT)

7.

Trade pressure: Despite the US administration raising steel and aluminium tariffs to 50% from 25% on Wednesday, the EU trade commissioner, Maros Sefcovic, said that talks between the parties are headed in the “right direction.” Sefcovic also described talks with Chinese officials as “focused and in depth," despite any sign of progress on their dispute over European tariffs on Chinese-made EVs or anti-dumping measures on European brandy. Striking a different tone, Trump lamented that China’s Xi Jinping is “very tough, and extremely hard to make a deal with!” Trump is pressuring trade partners to submit “best offer” proposals on trade imbalances before 9 July when higher levies kick in. The UK Prime Minister Keir Starmer said that he wants a US trade deal finalised in the next two weeks to avoid the increased US steel tariffs, after being granted an exemption from the higher 50% levy on steel imports. (Bloomberg)(FT)(Reuters)

8.

Bank unbridled: Shares in Wells Fargo momentarily climbed after the US Federal Reserve lifted a cap on its assets which had been mandated by the Fed since 2018. The Fed removed the USD1.95 trillion ($3.01 trillion) asset cap it had imposed to restrict its growth after Wells Fargo’s 2016 fake accounts scandal. On Tuesday evening the Fed said that Wells Fargo had “met all the conditions for removal of the growth restriction,” while other elements of the enforcement action remain in place. The decision, which arrived two quarters earlier than had been expected, was described by Morgan Stanley as a “positive catalyst” which marks the start of a multi-year period of growth. Wells Fargo suffered while restricted by the growth cap, while small and large rivals expanded their asset holdings significantly throughout the seven-year period. Shares closed slightly lower. (Capital Brief)(US Federal Reserve)(Reuters)(WSJ)