US labor market report surprises markets

The US labor market data for June was better than expected. 224,000 new jobs were created, well above market expectations of 160,000. The unemployment rate rose slightly, from 3.6% to 3.7%. The market had expected this figure to remain unchanged. Growth in average hourly earnings, which rose by 3.1% y/y, remained marginally below the market estimate of 3.2% y/y. As expected, average weekly working hours remained unchanged from the previous month, at 34.4.

Today's data confirms that the weakness in the labor market in May was due to the environment and was not an indication of the onset of a sustained downturn. In May, the trade war with China had intensified and triggered a temporary sell-off on stock markets. With today's data, a rate cut at the end of the month has become less likely, and the markets should in turn react negatively. However, the issue is not off the table yet, as recent data from the manufacturing sector has once again been weak. Next week, Fed Chairman Jerome Powell will report to both chambers of the US Congress and will probably shape interest rate expectations. We continue not to expect any rate cuts in the US this year.

 

Global sentiment remains weak

The leading indicators for June released this week show that the global manufacturing sector remains under pressure. The current weakness is particularly pronounced in the capital goods sector, while the consumer goods sector is performing better. On the other hand, sentiment for global services improved slightly in June after a sharp slump in May.

The data shows how important the resumption of trade talks between the US and China on the fringes of the G20 summit is, particularly for global manufacturing (especially machinery and equipment manufacturers). Given the economic need (especially for China), we expect a gradual rapprochement on both sides in the second half of 2019, which should gradually brighten global growth prospects. In this context, next week's release of Eurozone industrial production data in May will be of interest. Industrial production in April was around 0.7% below the average for 1Q19 and thus far points to a slight decline in industrial production in 2Q19.

 

Download The Full Week Ahead

This document is intended as an additional information source, aimed towards our customers. It is based on the best resources available to the authors at press time. The information and data sources utilised are deemed reliable, however, Erste Bank Sparkassen (CR) and affiliates do not take any responsibility for accuracy nor completeness of the information contained herein. This document is neither an offer nor an invitation to buy or sell any securities.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD struggles to recover above 1.0900 as markets remain cautious

EUR/USD struggles to recover above 1.0900 as markets remain cautious

EUR/USD stays on the back foot and trades below 1.0900 following Thursday's sharp decline. Dovish comments from European Central Bank officials and the risk-averse market atmosphere make it difficult for the pair to stage a rebound on Friday.

EUR/USD News

GBP/USD falls toward 1.2900, looks to post weekly losses

GBP/USD falls toward 1.2900, looks to post weekly losses

GBP/USD continues to push lower toward 1.2900 in the American session on Friday. Disappointing Retail Sales data from the UK, combined with the US Dollar (USD) recovery amid souring mood, causes the pair to stay under bearish pressure ahead of the weekend.

GBP/USD News

Gold extends daily slide, trades near $2,400

Gold extends daily slide, trades near $2,400

Gold's correction from the record-high set earlier in the week deepens on Friday. With the US Dollar (USD) benefiting from safe-haven flows and the 10-year US yield holding steady above 4.2%, XAU/USD tests $2,400 and looks to post small weekly losses

Gold News

Top 10 crypto market movers as Bitcoin and Ethereum hold steady ahead of $1.8 billion options expiry

Top 10 crypto market movers as Bitcoin and Ethereum hold steady ahead of $1.8 billion options expiry

Bitcoin and Ethereum hold steady above $64,000 and $3,400 as $1.8 billion in options expire on Friday. WazirX hack of $230 million potentially linked to Lazarus Group ushers correction in Shiba Inu, among other assets. 

Read more

Week ahead – Flash PMIs, US GDP and BoC decision on tap

Week ahead – Flash PMIs, US GDP and BoC decision on tap

US data awaited amid overly dovish Fed rate cut bets. July PMIs to reveal how economies entered H2. BoC decides on monetary policy, may cut rates again.

Read more

Majors

Cryptocurrencies

Signatures