Highlights
U.S. markets as measured by the S&P 500 index reversed the previous week’s losses, gaining 0.33% in the holiday-shortened week. The tech-heavy Nasdaq Composite followed suit, gaining 1.01%—supported by shares of Apple and Google parent Alphabet, which both rose in the wake of an antitrust ruling that some investors viewed as less severe than expected—while the Dow Jones Industrial Average shed 0.26% for the week. The week’s economic calendar brought several reports that painted a bleak picture of the health of the U.S. labour market, the most notable of which came on Friday morning from the Labor Department’s non-farm payrolls report. The closely watched report revealed that U.S. employers added just 22,000 jobs in August, a sharp decline from July’s revised figure of 79,000 and well below estimates for around 77,000. August’s unemployment rate also ticked up to 4.3%, the highest since 2021. These numbers solidified market expectations of a rate cut at the upcoming policy meeting this month with analysts pricing in a 100% chance of at least a 25-basis-point cut while the probability of a 50-basis-point cut rose from 0% to about 10%. Across the Atlantic, the pan European Euro STOXX 600 ended lower for a second consecutive week, shedding 0.61% from the previous week’s close, amid concerns about global growth after weak U.S. jobs data and a stronger euro. Headline inflation in the eurozone ticked up in August to 2.1%, staying close to the European Central Bank’s (ECB’s) 2% medium-term inflation target. Comments made by ECB policymakers mainly reinforced the view that interest rates would remain unchanged in September and for some time after that. Meanwhile, unemployment in the bloc eased to 6.2% in July from 6.3%, a low last hit in November 2024. In Asia, the Nikkei 225 Index added 0.70% marking a second consecutive week of gains. Japanese auto shares were boosted by the U.S. officially implementing a trade deal with Japan reached in July, which caps tariffs on most Japanese goods, including autos, at 15%. Meanwhile, the yield on the 10-year Japanese government bond (JGB) fell to 1.57% from 1.61%, hovering near 17-year highs midweek on political uncertainty, with Prime Minister Shigeru Ishiba facing calls to step down. Finally, Mainland Chinese stocks as illustrated by the onshore benchmark CSI 300 Index fell 0.81% in local currency terms as investors pocketed gains after a recent rally. China’s stock markets have surged since April, largely due to domestic liquidity rather than strong corporate earnings or an improving economy. However, economic indicators have pointed to a broad slowdown in China’s economy, which is struggling with the threat of higher U.S. tariffs, a years long property downturn, and persistent deflation.
Data Highlights
U.S. Non-Farm Payrolls for August came in significantly weaker than expected at 22K, well below the 75K forecast and the prior 79K reading. Canada’s unemployment rate ticked higher to 7.1%, missing the 7% forecast and rising from the previous 6.9%. In Europe, the unemployment rate for July held steady at 6.2%, in line with expectations and slightly below the prior 6.3%. Eurozone inflation was reported at 2.1% in August, higher than the 2% forecast. Switzerland’s unemployment rate stood at 2.8%, matching the market expectations U.K retail sales grew by 1.1% year-on-year in July, falling short of the 1.3% forecast. Australia’s GDP growth rate for Q2 rose to 1.8%, stronger than both the 1.6% forecast and the prior 1.4%.
Week Ahead
China Inflation Rate– Tuesday |Eurozone Interest Rate Decision, U.S Consumer Price Index – Thursday | U.K GDP MoM – Friday
