Market Update

Following Jay Powell, the Fed Chair's address last week, which aligned with our expectations in emphasizing a cautious and data-driven approach to tapering its bond-buying initiative (QE), our attention promptly turned to today's (Friday 3 September 2021) US employment statistics.
The actual job increase of 235,000 came as a substantial surprise, especially when juxtaposed against the anticipated growth of 732,500 by leading economists.
Scrutinizing the details, it became evident that the Delta variant significantly influenced these unexpected results. The leisure and hospitality industry, which had been playing a pivotal role in job market recovery in recent months, reported a job reduction of 42,000.
We interpret this data as being in the "Goldilocks zone." It's neither so low that it signals a faltering economic rebound, nor so high as to expedite the Fed's QE tapering plans. In our view, this data essentially pushes the possibility of the Fed initiating tapering to beyond their November monetary policy discussion. Moreover, when tapering does commence, its pace might be so gradual that bond purchases by the Fed could continue well into 2022.
In other news, Japanese stocks witnessed a buoyant week. This surge followed the announcement by the largely unpopular Japanese Prime Minister, Yoshihide Suga, that he would refrain from contesting in the upcoming Liberal Democratic Party leadership elections later this month. As this effectively concludes his tenure as Prime Minister, there's optimism that his successor might introduce substantial stimulus measures to rejuvenate the Japanese economy.
In the forthcoming week, our focus transitions from the US to the UK and Eurozone. Key events include the disclosure of the UK's July GDP, UK industrial and manufacturing output data, and an ECB monetary policy discussion. Additionally, we'll be keeping an eye on Chinese CPI and PPI figures.