Welcome to the weekly macroeconomic round-up, where we spotlight a few of the most significant events in the last few weeks.
US jobs market continues to grow, despite fears of a slowdown
The US economy added 372,000 jobs in June, far above the 265,000 that had been forecast. This would usually be positive news, but seen against the backdrop of surging inflation and a tight labour market it increases the likelihood of further aggressive rate rises by the US Federal Reserve (Fed).
The unemployment rate has now stabilised to a level just above pre-pandemic levels. It is worth noting, however, that the unemployment rate was predicted to be higher due to changes in labour market dynamics and restrictions to participation, such as a lack of affordable childcare.
A glimmer of hope was offered by a decline in new job openings last month, which may be an early sign that the jobs market is starting to slow along with the rest of the economy. For the time being, though, it looks certain that the Fed will continue with its rate hiking cycle and the potential for a recession remains high.
It was a broadly positive week in equity markets, with the MSCI All Countries index ending the week up 1.6%, while the tech-focused NASDAQ, which has suffered heavy losses for much of this year, finished the week up 4.6%. Energy markets declined slightly, the MSCI ACWI Energy index falling by 2.2%. However, it remains one of only two sectors which is in positive territory for the year to date, the other being tobacco.
The currency markets were once again dominated by the strength of the US dollar and relative weakness of other currencies, with the dollar hitting levels not seen since 2002. Sterling fell to 1.18 against the US dollar as political uncertainty compounded recessionary fears in the UK. The US dollar/yen rate hit 137.2, marking a 24-year high for the dollar.
Bonds had another negative week, with longer-dated gilts, as measured by BAML 10+yr Gilts, falling by 3.1% as yields rose.
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