Tonic markets in the wake of the data that emerged from the US employment report. The slowdown in job creation (+315k from the previous + 528k) was widely expected (consensus was +30k), but coupled with the surprise increase in unemployment to 3.7% fueled the expectations of a stronger Fed. cautious about raising rates.
At the moment the main Wall Street indices mark over + 1% and Europe is doing much better with increases in the order of 3% for Dax and Ftse Mib. “The markets have assimilated the rise in unemployment as a first sign of a weakening of the US economy that will induce the Fed to lower interest rates in the future to avoid a recession”, argues Federico Vetrella, IG Italia’s Market Strategist, who sees however, the Fed will continue to act aggressively on interest rates in the short term until inflation eases substantially.
Now the gaze shifts to the appointments of the next few weeks. “The 50/75 bp hypothesis remains open for the Fed in the meeting on 21 September. The decisive factor will be the August inflation data published on 13 September ”, he asserts Antonio Cesarano, Chief Global Strategist, Intermonte.
Then there is the component to look at salary, which mark an annual increase of 5.2%, less than the + 5.3% expected and in line with the previous + 5.2%. “In the past, the critical level taken as a reference by the Fed as a signal of an overheating of the economy has been an annual wage growth of 4%. At the moment, we are still close to 6%. It’s great news for the paycheck, but it’s also a major cause of the rampant inflation we’re experiencing, ”explains Callie Cox, eToro’s US investment analyst.