Week in Review: Softer Jobs keep Fed on Rate-Cut Path

In Europe, the ECB left rates unchanged at 2% but lifted its 2025 inflation and growth forecasts, prompting markets to assume that interest rate cuts are over in the region. German data was mixed, with exports down and factory orders weaker, though output improved. In the UK, GDP was flat in July, retail sales were firmer, but the housing market softened further. Political uncertainty persisted in France after President Macron appointed Sebastien Lecornu as prime minister following the collapse of François Bayrou’s government.

Economic data kept focus on inflation and the labour market. August CPI rose 2.9% year-on-year, with core CPI steady at 3.1%. Treasury yields dipped as investors priced in Fed action, with the 10-year briefly touching 4.0%. Jobless claims rose to their highest since 2021 and payrolls were revised down by 911,000 – the largest downward revision on record - pointing to a softer jobs backdrop. Consumer sentiment also slipped, with households worried about business conditions and employment, while long-term inflation expectations edged up.

Global markets ended the week broadly higher. The Dow gained 0.95%, the S&P 500 rose 1.59%, and the Nasdaq climbed 2.03%. In Europe, the Euro Stoxx 50 advanced 1.36% and the FTSE 100 gained 0.82%. In Asia, Japan’s Nikkei jumped 4.07%, Hong Kong’s Hang Seng rose 3.76%, and the Shanghai Composite added 1.52%. Bond markets were stable overall, with U.S. 10-year yields easing slightly, while German and Japanese yields edged up. Commodities were firmer, as gold rose 1.6% and Brent crude 2.0% to $66.80. Bitcoin gained 4.5% for the week.

Market Moves of the Week

South African equities advanced, with the JSE All Share Index rising 2.88%. Resource stocks were the standout performers, surging 5.99%, while financials gained 2.86% and industrials added 1.33%. Listed property also firmed, up 3.04%. The rand strengthened against the U.S. dollar, appreciating 1.20% to close at R17.39, supported by improved risk sentiment.

Chart of the Week:

The Bureau of Labor Statistics cut payroll estimates for the year to March 2025 by 911,000 jobs—the largest downward revision on record. This equates to roughly 76,000 fewer jobs per month, pointing to a softer labour market than previously reported. Combined with unemployment rising to 4.3%, the data reinforces concerns that U.S. economic momentum is slowing. Source: Bloomberg.

Credits: Strategiq