This morning we saw that inflation in China slowed even further in June with headline CPI coming in at 0%, and PPI slipping from -4.6% in May to -5.4% We already know that inflation has been slowing sharply over the last few months, and we also know that PPI inflation in China and Europe is now in negative territory. There is a fear however that central banks are on the cusp of a serious policy mistake when it comes to their determination to drive inflation lower. What last week’s economic data also tells us is that while the economy in Europe could well be set to contract for the third successive quarter in succession, the US economy appears to be holding up reasonably well With earnings season set to get underway in earnest over the next week or so, there is increasing nervousness that after such a good first half of the year, that the second half of the year is likely to be much more challenging. The bond market is certainly reflecting the fact that rates are likely to stay higher for longer after the yield curve steepened as 10-year yields outperformed 2-year yields on a week-on-week basis.
One thing that we were able to take away from last week was that further rate rises from the Federal Reserve as well as the European Central Bank are almost certain when they both meet in 2 weeks’ time, however there is now rising concern that we may see further rate increases after that in September as well.
The unemployment rate still fell to 3.6%, while average hourly earnings growth came in unchanged at 4.4%, which was at a slightly higher level than expected. There was also a 2-month net revision lower of -110k, taking some of the lustre off recent gains, and removing some of the euphoria around the ADP jobs number of 497k, the day before. US markets on the other hand, while still finishing the week lower, still managed to perform better after a slightly weaker than expected non-farm payrolls job report, which showed that the US economy added 209k jobs in June, down from 306k in May. With economic data continuing to look on the soft side and central banks showing little sign of easing up when it comes to interest rate rises there was little to cheer for markets in Europe, with concerns about weakness in the Chinese economy adding to the gloom. European markets underwent a shocker of a week last week, posting their biggest declines since March, despite a modest rebound on Friday.
0 kommentar(er)
