- NFP surprises, challenging task for the Fed
- Industrial slump continues
- PMIs decline in Asia across the board
US – strong NFP, but is it enough?
The NFP report stunned investors showing a gain in employment of 224k in June. This will make a task of lowering rates in July difficult for the Fed but does that mean that there’s no case for the cut? Not necessarily. The NFP is very volatile and the more stable ADP showed a negative tendency in both May and June. Business indicators deteriorated as well. So the Fed might still decide to cut but it’s no longer as certain as it looked like.
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The NFP in the first half of this year was very volatile but on average it wasn’t weaker than in the 2011-2018 period. Source: Macrobond, XTB Research
Europe – industrial issues alive
The ECB must getting closer to delivering another round of monetary easing because much-hoped recovery isn’t arriving. The PMI data for June improved slightly but remain at low levels, especially for manufacturing and another disappointment caused by a release of May industrial orders in Germany doesn’t help the euro.
Yes, base effect for German May industrial orders wasn’t favourable but the print at -8.6% y/y is still a major disappointment. Source: xStation5
Asia – weaker PMIs do not bode well
Weakening business conditions aren’t anything new in Asia but things are getting worse. A series of PMIs in June showed a rare consensus where nearly all publications saw declines and most didn’t meet (already lowered) market expectations. Sure, trade truce between US and China is a ray of hope but without a removal of tariffs, recovery in the data might not take place soon.
Global PMI slumped again in June, partly due to weakness in Asia. Source: Macrobond, XTB Research
