A smaller than expected 187k NFP rise and -49k in downward revisions to May and June provided the spark for the bond market to correct from the post-Fitch and supply driven selloff. The belly of the curve outperformed as the jobs report did not alter Fed policy expectations and the markets continue to price in only about a 33% risk for another rate hike. The steepening of the 2-year/30-year yield curve by 30 basis points was one of the biggest weekly moves in over a decade. The ‘soft landing’ or even ‘no landing’ narrative is gathering momentum, and JP Morgan on Friday became the latest Wall Street bank to remove or delay their US recession call. Stocks initially rallied on the employment headlines, but spillover from disappointing Apple earnings results, which overshadowed Amazon’s beat, saw buying peter out and profits taken through the afternoon.
This morning: German industrial production contracted -1.5% m/m in June – more than anticipated after two strong months of orders inflow for the manufacturing sector. The strong bounce in manufacturing orders offers some hope for the coming month, but construction is likely to continue to struggle. Consumption may have strengthened in the second quarter, but these numbers leave the risk of a downward revision to Q2 GDP.
- FX – USD Index rose at 102.05, EURUSD fell back to 1.0980, USDJPY recovered some losses but is struggling to break 142.30. Cable holds at 1-month lows, currently at 1.2720.
- Stocks – The US100, US500 and MSCI World index last week all registered their biggest weekly losses since March. Amazon closed +8.27% and Apple at -4.8%. Today, Asian share markets were in a cautious mood, JPN225 is flat, EUROSTOXX 50 -0.3%, UK100 0.5%, US500 +0.3% and US100 +0.5%.
- Commodities – USOil at $82.85, after Saudi Arabia and Russia confirmed that they will extend voluntary output cuts. Ukraine added a new front in its war against Russia over the weekend, using drones to strike a naval vessel at a Russian oil-exporting port in the Black Sea and an oil tanker in the Kerch Strait.
- Gold – pulled back to $1935.44 below PP.
Today: July CPI and earnings out of Disney will highlight the calendar this week. Asia’s corporate earnings season picks up this week, with Alibaba the standout in a trickle from China.
Biggest Mover: (@6:30 GMT) GBPUSD holds at 1-month lows. It is approaching the resistance line of a down channel Support: 1.2620.
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Andria Pichidi
Market Analyst
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