The bond market is looking calmer this morning, as traders welcome Keir Starmer’s endorsement of Rachel Reeves.The prices on UK government debt are rising in early trading, which pulls down the yield (or interest rate) on the bonds.The yield on UK 30-year bonds has dipped by 0.8% in early trading, to 5.361%.

Yesterday it had surged to 5,408%, from 5,234%,UK 10-year bond yields have also dipped by around three basis points, to 4,55% from 4.

58% last night.These moves suggests the bond markets are relieved that Starmer is standing by Reeves, easing concerns that a new chancellor might be less committed to the fiscal rules, so might look to borrow more.But while today’s recovery eases some of the pressure on the government, it doesn’t wipe out all of Wednesday’s jump in borrowing costs – traders will be wondering how the government will patch up the multi-billion pound black hole in the public finances.Shorter-dated two-year and five-year bond yields have also slipped back, as prices recover some ground.Time to recap…The US economy added 147,000 jobs in June, a sign of continuing strength in the labor market amid Donald Trump’s trade war.

The number of jobs added surpassed expectations, as economists largely anticipated a drop in openings.In another boost, the unemployment rate decreased to 4.1%, down from 4.2% in May.Job gains were seen in state government and healthcare, which saw increases of 47,000 and 39,000 jobs, respectively.

Meanwhile, federal government job losses continued, with another 7,000 roles down in May, as the Trump administration continues to cut jobs.The total job loss in the federal government has been 69,000 since January.Economists said the data cut the chances of an early interest rate cut from the US Federal Reserve.The dollar strengthened, while US bond prices fell, pushing up yields, and Wall Street hit a record high.UK government bonds have rallied after Keir Starmer backed Rachel Reeves to remain as chancellor for “a very long time” despite lingering investor concerns over a multibillion-pound hole in Britain’s public finances.

The yield – in effect the interest rate – on British 10-year government bonds, also known as gilts, fell on Thursday morning to trade close to 4.5%, reversing much of the rise on Wednesday sparked by feverish speculation over Reeves’s future.The pound rose against other leading currencies, while a closely watched business survey showed that Britain’s dominant service sector recorded its fastest rate of growth in 10 months.But….some of the gains were later pegged back after the release of the stronger-than-anticipated US job market figures, which fuelled a rise in US government borrowing costs as investors bet the Federal Reserve may delay cutting interest rates.

The boss of Currys, the UK’s biggest electrical goods retailer, has urged the government not to increases taxes on retailers this year, saying it would damage investment and force prices to rise.The EU and US are closing in on a high-level “framework” deal that would avert 50% tariffs on all exports from the bloc next Wednesday, Donald Trump’s self-imposed deadline.Richard Branson’s hopes of returning Virgin trains to the west coast mainline have been dashed after the UK rail regulator rejected its application amid concerns over delays and cancelled journeys.The boss of P&O Ferries was paid £683,000 in the financial year after the cross-Channel operator outraged the public and parliament by dismissing almost 800 mainly British workers.The London stock market has closed at its highest level for two weeks, lifted by UK-focused companies.

The FTSE 100 index of blue-chip shares has ended the day 48 points higher at 8823 points.Top risers included banks NatWest (+3.2%) and Lloyds (+3.2%) and Tesco (+2.3%), while mining companies were among the fallers.

AJ Bell head of financial analysis Danni Hewson says:“Borrowing costs, which shot up yesterday as investors priced in her potential departure from Number 11, have reversed course today, with a number of big names openly stating that they added to their gilt stash in a bet the turmoil would be short-lived,“There has also been better news from the UK service sector as the latest PMI figures came in hotter than expected, with both businesses and consumers feeling a little more confident about spending,“For once London’s blue-chip index was dominated by improved domestic sentiment – banks, retailers and housebuilders all made gains whilst global mining stocks slumped,“It was a similar story on the FTSE 250,External issues pulled down companies like Watches of Switzerland which is already seeing US retailers pushing through price hikes on its products.

“The deadline for tariff talks is fast approaching and with the White House laser focused on getting that ‘big, beautiful bill’ signed into law investors might be nervous that the clock will run out before deals can be struck.In the world of trade, the EU and US are closing in on a high-level “framework” deal that would avert 50% tariffs on all exports from the bloc next Wednesday, Donald Trump’s self-imposed deadline.Talks in Washington could go down to the wire, but diplomats and officials said the EU was willing to accept Trump’s 10% blanket tariffs.Negotiators will only accept this, however, in exchange for an extension in talks and possible concessions on a 25% car tariff, which is hurting the German car industry, sources said.European Commission president, Ursula von der Leyen, has pointed out today that it is “impossible” to agree a final EU-US trade deal before July 9…A permanent risk premium could be attached to UK bonds following yesterday’s sell-off, warns Kathleen Brooks, research director at XTB:In the UK, the bond market is recovering on Thursday after Wednesday’s sell off.

The Prime Minister has confirmed that Rachel Reeves will remain in place as Chancellor, however, bond yields have not fallen back to the levels that we saw before bonds started to sell off 24 hours ago.The 10-year yield had been down 10bps at one stage, however, this has been eroded, and yields are only down 5bps at the time of writing.A sharp rise in US yields is dragging UK yields higher as we move through Thursday.This suggests 2 things:1: highly indebted western economies can see their sovereign debt markets move in unison, which is bad news for those who hoped there could be a full reversal in UK bond yields today.2: there could be a permanent premium attached to UK yields as we move through the summer months to October’s budget.

The premium this time is linked to Labour’s left having increasing control over Kier Starmer and pushing him for ever greater levels of public spending.If the government wants to avoid an embarrassing and devastating fiscal crisis, they need the guts to cut public spending to more reasonable levels.The bond vigilantes are circling, and Labour could be forced to U-turn on the U-turns.Back on Wall Street, Nvidia is on track to become the most valuable company in history.The chipmaker’s market capitalization has risen to $3.

915trn today, after its shares rose 2% in early trading, lifted by continued optimism about demand for high-performance chips to power artificial intelligence systems,Tht gives it a slightly higher market capitalization than Apple’s record closing value of around $3,915trn on December 26, 2024, Reuters reports,The US Department of Labor has given Donald Trump the credit for June’s solid jobs numbers:The jobs report again shattered expectations, with 147,000 new jobs added in June! @POTUS’ America First policies continue to unleash historic growth and prosperity for our workers 🇺🇸 pic,twitter.

com/VYDpginpfZThe president has reposted this message on his Truth Social site, so I guess we can conclude it was the Trump economy in June rather than the Biden economy (which took the blame for GDP shrinking in January-March)Today has been a rough day for some airline passengers in the UK.Low-cost airlines Ryanair and easyJet both cancelled hundreds of flights due to French air traffic control strikes.Ryanair said it was forced to make 170 cancellations on Thursday and Friday as the strikes affect flights to and from France – and also flights over the country to destinations such as the UK, Greece, Spain and Ireland – impacting more than 30,000 passengers.Luton-based rival easyJet said it had cancelled 124 flights today and was scrapping 150 tomorrow due to the industrial action.Ryanair chief executive Michael O’Leary renewed calls on EU Commission President Ursula von der Leyen to take “urgent action” to reform European Union air traffic control (ATC) services in light of the disruption, which comes at the start of the European summer holidays.

O’Leary said:“Once again, European families are held to ransom by French air traffic controllers going on strike.“It is not acceptable that overflights over French airspace en route to their destination are being cancelled/delayed as a result of yet another French ATC strike.“It makes no sense and is abundantly unfair on EU passengers and families going on holidays.”Analysts at ING predict that Donald Trump will have to wait until September for a cut to US interest rates.Following today’s stronger-than-expected jobs report, they say:The June US jobs report shows nonfarm payrolls rising 147,000 versus the 106,000 consensus with 16,000 of upward revisions to the past two months of data.

Meanwhile, the unemployment rate surprisingly fell to 4.1% from 4.2% while the market was solidly backing the view that unemployment would actually tick higher to 4.3%.President Trump has been calling for the Federal Reserve to cut the policy rate 200-300bp immediately and two of his appointees (Chris Waller and Michelle Bowman) had suggested that they could vote for a rate cut as soon as this month’s FOMC meeting.

But the rest of the FOMC is far more cautious and today’s data indicates there will be no rate cut before the September FOMC meeting, especially with tariffs set to push inflation higher over the next few months.Wall Street has hit fresh record highs, as investors hail today’s stronger-than-expected jobs report.The news that the US economy added 147,000 new jobs in June helped the S&P 500 share index and the Nasdaq to both open at fresh record highs.The Dow Jones Industrial Average rose 81.3 points, or 0.

18%, at the open to 44565.75 points.The S&P 500 gained 0.3%, and the Nasdaq Composite rose by 0.5%.

In other economic news… America’s trade deficit has widened again.The US trade deficit surged by 18.7% in May to $71.5bn, new data from the US Census Bureau and the US Bureau of Economic Analysis shows, up from $60bn in April.The increase was driven by a 4% drop in US exports during the month, while imports were flat.

The report also shows that the US trade deficit with China shrank by over a quarter in May, after the US imposed high tariffs on Chinese imports,The deficit with China decreased $5,7bn to $14,0bn in May, with exports down $1,7bn to $6.

9bn and imports down $7.4bn to $20.9bn.The report shows that in May the US also recorded deficits with the European Union ($22.5bn), Mexico ($17.

1bn), Vietnam ($14.9bn), Ireland ($11.8bn), Taiwan ($11.5bn), Germany ($6.8bn), Japan ($5.

8bn), South Korea ($5.4bn), India ($5.1bn), Canada ($2.8bn), Italy ($2.6bn), Malaysia ($2.

4bn), and France ($0,5bn),The US ran a trade surplus with the Netherlands ($4,8bn), Hong Kong ($3,6bn), South and Central America ($3