Without a steer from the US, which is closed today for 4 July, European indices are trading down this morning with the FTSE 100 down a quarter of a per cent and the Cac and Dax even lower. US futures are also softer but not too much to dwell on, given it’s a holiday. In the UK, the Prime Minister and Chancellor put on a show of unity to calm markets, nudging gilt yields down and the pound higher.

Yesterday, European shares edged higher, with the Stoxx 600 up 0.4 per cent, Dax 0.61 per cent, and Cac up 0.21 per cent. Gains were led by semiconductor stocks after the US eased chip design export restrictions to China. The FTSE 100 rebounded 0.55 per cent on a decent services PMI report. The S&P 500 notched a fresh record high as tech led, rallying 0.83 per cent after a jobs report showed the US economy continuing to defy expectations. President Donald Trump also won a massive victory last night with the tax bill clearing its final hurdle in Congress – animal spirits are here. The small-cap Russell 2000 and Nasdaq rallied 1 per cent, and the Dow up 0.77 per cent.

The US labour market defied expectations with a strong June print. Nonfarm payrolls rose by 147,000 last month, ahead of expectations for around 110,000 and the upwardly revised 144,000 in May. The unemployment rate fell to 4.1 per cent versus 4.3 per cent expected. While we cannot rely entirely on the data the Bureau of Labor Statistics is providing, it does signal that hiring remains relatively robust. Looks like September is the earliest we can expect to see the Federal Reserve cut.

The 9 July tariff deadline is coming, but the market isn’t worried about this. The direction of travel since April has only been positive. However, we could yet see some surprises. Trump said on Thursday that the administration would start sending out letters today setting unilateral tariff rates. Only China (sort of), Vietnam and the UK have signed deals so far.

Nvidia shares rose to an all-time high yesterday, taking the chipmaker’s market cap above $3.9trn. Companies in the renewable energy sector rose as the adopted Senate version of the tax bill dropped a levy on solar and wind projects. First Solar rose 8 per cent to take its weekly rise to almost 20 per cent. Cybersecurity firm CrowdStrike rallied as Wedbush Securities analyst Dan Ives raised his price target on the stock to $575 from $525. US-listed chip designers Cadence Design Systems and Synopsys rose after the US government lifted restrictions on exporting chip-design software to China.

At the same time, the US ‘Buffett indicator’ (which divides a country’s market cap by its GDP) is at an all-time high while market breadth is at an all-time low: how is this not a bubble? The number of companies involved in the S&P 500 breakout is historically low, with extreme concentration in tech stocks. Ten companies make up around 38 per cent of the S&P 500’s market cap and 30 per cent of its profits, historically extreme. It will be interesting to see what happens when this apparent bull market hits July, a quiet summer month, and there hasn’t been a negative return in a decade. Key risk events ahead – tariff deadline on 9 July, and then onto earnings season, which kicks off on 15 July. And we also have the small matter of the Federal Reserve and interest rates.

By Neil Wilson, investor strategist at Saxo UK