The US official jobs report for June shot past consensus estimates. In total, the US economy added 224,000 jobs last month whereas 160,000 had been expected. One might wonder whether the figure could be high enough to give the Fed some wiggle room. As fears of a recession diminish, the Fed may decide not to give in to pressure from investors and a president who has been overstepping the mark and, as such, maintain its policy rate unchanged in the range of 2.25-2.00% when it next meets on 30 and 31 July.

So far this year, an average of 172,000 new hires have been recorded. Though lower than in 2018 (227,000/month), this is a perfectly respectable number and bodes well for consumer spending and GDP as a whole. Hiring is happening across all sectors. The unemployment rate has risen to 3.7% because more people are in the market for work – which is a good sign. Elsewhere, Donald Trump seems to be on a senseless mission as he pursues his trade war, since the US trade deficit has actually widened most recently. Yet global inflation is low and this could justify a preventive rate cut, just in case. It doesn’t matter if it’s this month or later. Following the jobs report, the market has toned down its expectations of rate cuts by the central bank, although they still remain high.

The appointment of Christine Lagarde as next head of the ECB seems to confirm the trend towards even more monetary easing. As for the US, investors will likely look for some clues in Jerome Powell’s testimony on monetary policy before Congress next week.

The easing in the China-US trade dispute at the G20 may justify higher bond yields. But the truce is brittle. For one, China has provided scant detail about its planned purchases of goods. It is this perception that is maintaining the attractiveness of the asset class. In equity markets, the perceived reduction in tensions between China and the US, helped by the generally positive outcome for stress tests on US banks, contributed to an uptrend last week. Financials did particularly well.

In contrast, manufacturing indicators have been persistently weak (below the 50 mark almost everywhere), pointing to a slide in investment spending, and this is weighing on global demand for manufactured goods and the share-price performance of industrials.

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