Market Update

This week's US employment data delivered a mixed bag. While unemployment dipped, the addition of 209,000 new jobs fell short of the anticipated 240,000 and was a noticeable decrease from May's 309,000 jobs. Despite the seeming slowdown in hiring, the labor market appears resilient, especially given the backdrop of 10 successive rate hikes by the Fed since March 2022 – their most aggressive policy tightening in four decades. Even though consistent hiring has been buffering the economy from looming recession fears, the uninterrupted job additions for 30 months and a decline in the unemployment rate to 3.6% suggest that another Fed interest rate hike might be on the horizon, aimed at curbing inflation. However, Wednesday's perception of the Fed's minutes as hawkish, hinting at more rate hikes, might be premature; the Fed's approach remains rooted in evolving data.
Another pivotal factor for the Fed's inflation deliberation will be the current trajectory of US wage growth. June witnessed average hourly earnings rising by 4.4%, consistent with May's increase. This uptrend not only favors businesses in their expansion endeavors but also augments consumer spending power. Paired with this is the data revealing a 0.3% rise in US Factory Orders, mirroring April's increase. Yet, with inflation consistently surpassing the Fed's 2% benchmark, all eyes are set on the Fed's upcoming meeting on the 25th and 26th for potential corrective measures.
Turning to the Eurozone, Germany, its economic powerhouse, reported a notable bounce-back in May's factory orders. However, year-on-year figures depict a 4.3% dip, with an increasing tilt towards services over goods. While this uplift in orders brings a glimmer of hope during unstable growth phases for German businesses, overarching apprehensions around the Eurozone's energy prices linger.
Meanwhile, last week's Chinese PMI data slightly unnerved markets. Although the factory growth pace moderated in June with PMI figures landing at 53.9, falling short of predictions, it still symbolizes the sixth consecutive month of growth (a figure above 50 indicates expansion). This ongoing growth reaffirms the steady resurgence of the Chinese economy, even if at a tempered rate.