The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

1149 ET - Confirmation by the Trump Administration of a phone call between President Trump and Chinese President Xi sends Treasury yields higher. The yield for the 10-year note is now at 4.392%, up 0.033 percentage points. The 2-year note's yield is up 0.035 p.p. to 3.918%. Both turned higher after confirmation that a call took place and trade was discussed by the U.S. and China. The U.S. dollar index trims some of its earlier losses, and is down 0.1% on the day. Pressure may ultimately send the USD index back down, Quasar Elizundia of Pepperstone says in a note. "The US dollar is in a fragile position, extending losses amid an increasingly uncertain economic environment," Elizundia says. (kirk.maltais@wsj.com)

1124 ET - Canada is likely to show no GDP growth for 2Q as a whole, suggests CIBC Capital Markets' Katherine Judge. It comes after Canadian trade tumbled in April in the wake of President Trump's tariffs. The country's good-trade deficit widened to the largest level on record, with a steep decline in exports to the U.S. The drop in trade and production curtailments, along with the weakening in Canada's labor market, should be enough to see the Bank of Canada cut interest rates by a quarter percentage point in both July and September, Judge says. (robb.stewart@wsj.com; @RobbMStewart)

1120 ET - Counterintuitively, the threat of tariffs overhanging Canada in the first quarter had a positive impact on the economy as it prompted many U.S. companies to place orders early to avoid paying more in the future. This was bound to reverse once the tariffs came into effect, but the shock was actually much greater than anticipated, at least with regard to trade data, says National Bank of Canada's Jocelyn Paquet. Canada's goods-trade deficit ballooned to a record high as exports to the U.S. collapsed. This is sure to translate into much weaker-than-expected growth in Canada in 2Q, and such a dramatic drop in exports is bound to have repercussions on production and hiring, Paquet says. (robb.stewart@wsj.com; @RobbMStewart)

1104 ET - The U.S. housing market is staging a comeback, but the rebound is sharply divided, according to Realtor.com. The number of homes for sale in the U.S. topped 1 million for the first time since 2019, but only metros in the South or West have fully returned to pre-pandemic inventory levels. The Northeast and Midwest remain stuck in a supply squeeze. All 50 of the largest U.S. metros posted annual inventory gains in May 2025. Newly listed homes rose 7.2% year-over-year. But these increases haven't translated into a hot spring buying season. Homes took a median 51 days to sell, six days longer than last year, and price cuts rose for the fifth straight month. (chris.wack@wsj.com)

1047 ET - The luxury housing market slowed in April. Financial volatility led both buyers and sellers at the high end to hit pause, Zillow says. The typical luxury home--defined as the top 5% most valuable homes in each region-is now worth about $1.8 million nationwide, and more than double that in six major metros: San Jose, Los Angeles, San Francisco, Miami, San Diego and New York. Luxury home values have increased 2.7% over the past year, outpacing the 1.4% growth seen in the broader market. High mortgage rates, elevated home prices and ongoing macroeconomic uncertainty have made many people hesitant to enter the market. However, the limited supply of high-end homes and their desirable features continue to keep home values ticking higher, even in a more subdued market, Zillow says. (chris.wack@wsj.com)

1022 ET - New listings of U.S. homes for sale rose 6.3% year-over-year during the four weeks ending June 1, Redfin says. That's one of the smallest increases of the last three months. The biggest drops were in San Jose, CA. and four Florida metros: Orlando, Fort Lauderdale, Tampa and West Palm Beach. On the buying side, pending home sales declined 0.4% year-over-year to their lowest May level since 2020, and mortgage-purchase applications fell 3% week-over-week. Prospective buyers are backing off because housing costs are near record highs, with the median home-sale price up 1.2% year-over-year and the weekly average mortgage rate approaching 7%, and because the U.S. economy is seen as unpredictable by some. The typical home now sells for about 1% less than its asking price. (chris.wack@wsj.com)

1018 ET - U.S. Treasurys offer greater value than eurozone government bonds, Insight Investment's Jill Hirzel says in a note. The ECB has less room to cut interest rates further relative to the U.S. Federal Reserve, Hirzel says. "With the ECB now clearly ahead of the Fed and signaling a more cautious pace of easing from here, we see relatively greater value in U.S. Treasuries." (miriam.mukuru@wsj.com)

1011 ET - Eurozone government-bond yields rise during European Central Bank President Christine Lagarde's meeting, reversing from earlier falls. While Lagarde struck a rather dovish tone overall to support the economy in an uncertain macroeconomic environment, markets had hoped for more, says RBC BlueBay AM's Kaspar Hense in a note. "Markets were hoping--in our view somewhat unreasonably--for an even more dovish outcome, which led yields to sell off on and the euro to strengthen, albeit also supported by weaker U.S data," the senior portfolio manager says. The 10-year Bund yield rises 2 basis points to 2.548%, having traded at 2.484% at the time of the ECB's rate decision, according to Tradeweb. The euro rises 0.5% to $1.1484%, a six-week high. (emese.bartha@wsj.com)

1004 ET - The European Central Bank's lower outlook for inflation in both 2025 and 2026 puts further rate cuts in play, Aegon AM's Colin Finlayson says in a note. "Even though they want to be noncommittal on future rate decisions, the dovish tone to their forecasts would give the ECB enough bandwidth to cut rates further if incoming data requires," he says. As a result, the market will try to price in further cuts, having only expected one more cut in the next six months. Any escalation in U.S. trade tensions was referenced as a downside risk to the ECB's outlook and forecasts, he adds. (edward.frankl@wsj.com)

1002 ET - The impact from President Trump's hefty tariffs on Canadian imports will now take center stage for Bank of Canada rate-policy setting after an "ugly" April trade report, says Royce Mendes, economist at Desjardins Group. Mendes says the firm has immediately shaved its forecast for 2Q growth, to a range between 0% to 0.5% annualized from 0.5% to 1%. He notes the month-over-month drop in exports in volume, or price-adjusted, terms was the largest excluding the Covid-19 pandemic. Mendes was critical of BOC decision to hold rates this week, saying its rationale was on shaky ground. He expects three more quarter-point rate cuts in 2025. (Paul.Vieira@wsj.com, @paulvieira)

0953 ET - European equities are likely to gain as the European Central Bank continues to cut interest rates, Quintet Private Bank's Daniele Antonucci says in a note. The ECB on Thursday cut rates by 25 basis points, lowering the deposit rate to 2.0%, as widely expected. The planned increase in defense and infrastructure spending are also likely to boost the European equities market, Antonucci says. (miriam.mukuru@wsj.com)

0945 ET - It's unwise to read too much into a bad week in the volatile jobless-claims data series, but two straight weeks of sizable increases, lifting the 4-week moving average, "is very hard to dismiss," economists at Pantheon Macro write. "Unadjusted claims have been climbing at an average year-over-year pace of about 5% for a few months now, indicating that a gradual but genuine slackening of the labor market is underway," the Pantheon team writes. Tariff uncertainty and companies' resulting reluctance to hire won't help either, Pantheon adds. The full May jobs report is due Friday at 8:30 a.m. ET. (matt.grossman@wsj.com; @mattgrossman)

(END) Dow Jones Newswires

June 05, 2025 11:49 ET (15:49 GMT)

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