Macroeconomic data released last week showed a moderate slowdown in business activity together with a resilient labour market, stoking fears of continued tight monetary policy from rate-setters.

Bond yields continued to drift higher, with the 10-year Treasury reverting to upwards of 4% and its German equivalent clocking in at 2.60%.

In the US, the contraction in manufacturing output worsened in June to the lowest reading so far this year. The manufacturing PMI was 46.3, down from 48.4 in May. Conversely, growth in services accelerated by more than expected, with the ISM services PMI index rising to 53.9 from 50.3 in May, compared with the economists’ consensus of 51.2. The business activity component stood at 59.2 compared with 51.5 in the previous month. New orders rose to 55.5 from 52.9. The price index component was down at 54.1 versus 56.2.

On the jobs front, private-sector hiring surged in the US last month, providing further evidence of a robust labour market. The monthly ADP survey showed that 497,000 private-sector jobs were added in June, which was far higher than the 245,000 expected.

But the news was different from non-farm payrolls. According to these figures, 209,000 jobs were added in June, below the 240,000 forecast, easing fears of an overheating labour market. The unemployment rate stood at 3.6% in June versus 3.7% in May.

The average hourly wage was up 0.4% month-on-month, which was more than expected (0.3%). The year-on-year increase was 4.4%.

In Europe, manufacturing output ultimately contracted by more than initially estimated as the ECB’s tighter monetary policy began to bite. The manufacturing PMI was 43.4, down from 44.8 in the previous month. The composite PMI, which tracks broad economic activity, slid to 49.9 from 52.8 in May.

In China, growth in manufacturing activity slowed again in June. The manufacturing PMI stood at 50.5 in June, compared with 50.9 in May. The services PMI came in at 53.9 last month, compared with 57.1 in May. This was its lowest level since January.

Against this backdrop, the S&P 500 ended the week down 1.16% while the tech-heavy Nasdaq fell 0.94%. The Stoxx 600 Europe contracted by 3.10%.

Source: Bonhôte

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