Markets are bracing for the U.S. nonfarm payrolls report, expected to show a slowdown to 126,000 new jobs in May, with unemployment steady at 4.2%, though mixed signals from higher jobless claims (247,000) and a weak ADP report (37,000 jobs) suggest cooling hiring momentum. The European Central Bank cut rates for the eighth time in a year, but ECB President Christine Lagarde hinted at a potential pause in easing, while lowering inflation forecasts to hit 2% in 2025, dropping to 1.6% in 2026, and rebounding to 2% in 2027, boosting European stocks and pushing German 10-year Bund yields to a low of 2.49%. Eurozone Q1 GDP is expected to edge up to 0.4% quarter-over-quarter, but Germany faces challenges with a projected sharp decline in April industrial production (-1.0%) and a shrinking trade surplus (€19.1 billion), driven by weak exports and global trade tensions. ECB officials, including Lagarde, will speak today, potentially shedding light on future policy moves.

The yen weakened as markets awaited the U.S. jobs report, with cautious optimism sparked by Trump-Xi talks, though lacking concrete details. Japanese household spending unexpectedly fell 0.1% in April, missing the 1.5% growth forecast, signaling inflation’s strain on consumers and complicating the Bank of Japan’s plans, though Governor Kazuo Ueda reiterated readiness to raise rates if economic conditions align. Japanese stocks, including the Nikkei 225 (+0.4%) and Topix (+0.5%), rebounded modestly, while 10-year JGB yields dropped to 1.45% after strong bond auctions eased market pressures. The BOJ plans to further reduce bond purchases next year, signaling steady monetary policy normalization amid concerns over Japan’s fiscal health.

Australian PM Anthony Albanese signaled openness to a beef trade deal with the U.S. to ease tariff tensions, despite strict biosecurity laws, ahead of potential G7 summit talks with Trump. Australia’s housing sector saw a 3.1% surge in private house approvals in April, though total dwelling approvals dropped 5.7% due to a sharp decline in multi-unit developments. The S&P/ASX 200 dipped 0.1% but remains set for a fourth weekly gain, with markets cautiously optimistic about U.S.-China trade talks despite ongoing tensions.