The Impact of Labor Market Data on U.S. and Global Markets
As the U.S. markets return from the Independence Day holiday, they are met with significant cooling in the labor market. This has caused the dollar to decline for the fourth consecutive day, hitting its lowest point in three weeks. On the other hand, British markets are rallying due to the predicted landslide victory for the UK's Labour Party in Thursday's elections.
The soft labor market indicators from Wednesday, such as weekly jobless claims and private sector hiring, have all missed forecasts, painting a picture of weakening growth. The U.S. payrolls growth is expected to have slowed in June, with annual average earnings growth also expected to ease.
Despite ongoing uncertainty from the Federal Reserve, markets are now pricing in two rate cuts this year, with an 80% chance of a first move in September. This comes as Wall Street futures remain steady, looking to maintain record highs as corporate earnings for the second quarter begin to roll in.
In the UK, the Labour Party's expected landslide victory has led to a surge in British mid-cap stocks and a decline in UK gilt yields. This has raised hopes for economic stability under the new government after years of Conservative Party rule. Unlike France, where the far-right made gains in recent elections, the British public has largely supported center or center-left parties.
Overall, global markets are showing mixed reactions, with France and the Eurozone experiencing gains, while China's stocks hit a 4-1/2-month low. The Brazilian real has strengthened after President Lula da Silva ordered spending cuts to address fiscal concerns.
As we await the U.S. June employment report and UK election results, it is clear that labor market data plays a crucial role in shaping market sentiment and investor decisions. Stay tuned for more updates on how these developments impact financial markets worldwide.