- The slowdown in U.S. employment growth in June and the downward revision of previous figures have led traders to reassess the Federal Reserve's policy path. The probability of maintaining interest rates unchanged in September has risen to 46.8%, and the cooling expectations for rate hikes have driven global stock markets towards their best weekly performance in two months.
- The European Stoxx 600 Index reached a new all-time high, with a potential weekly gain of 2.6%. The rebound in Asian chip stocks has lifted indices in South Korea and Japan, and the global stock composite index is expected to rise by 2% this week.
- The U.S. dollar index, after reaching its highest point in over a year, is experiencing high-level fluctuations. Safe-haven and easing expectations have pushed the spot gold price above $4,160 per ounce, while shipping disruptions due to Middle East tensions remain a potential risk for core inflation.
Cooling Labor Market Reshapes Rate Expectations
The significant slowdown in U.S. non-farm employment growth in June, along with downward revisions for the previous two months, indicates that the U.S. labor market is returning to a cooling trajectory. The CME FedWatch tool shows that the implied probability of the Federal Reserve maintaining the benchmark interest rate unchanged at the September meeting has surged from 35.8% the previous day to 46.8%, significantly alleviating market concerns about imminent rate hikes. As a result, the U.S. dollar index has temporarily halted its upward momentum, with funds flowing back into risk assets and commodity markets.
Global Stock Markets Record Best Bi-Monthly Performance
Driven by rate cut expectations and valuation advantages, the MSCI Global Stock Composite Index recorded a 2% gain this week. The European Stoxx 600 Index rose by 0.6% on the day, reaching a new all-time high, as low valuations and limited AI exposure attracted defensive funds in the financial and healthcare sectors. Meanwhile, Asian chip giants regained upward momentum, with the South Korean KOSPI Index and Tokyo's Nikkei 225 Index showing significant rebounds. The return of major economies' service sector PMIs to expansion territory also supported market confidence.
Precious Metals and Commodities Rise in Response
With the reduced probability of rate hikes and the U.S. dollar retreating from its highs, spot gold prices rose by 1% in a single day, successfully breaking through the $4,160 per ounce mark. The cumulative weekly gain is expected to reach 1.8%, marking the first weekly increase in gold prices since the end of May. Meanwhile, international oil prices moderately rebounded, with Brent crude futures rising by 0.45% to $71.12 per barrel, reflecting an overall warming of market sentiment towards commodities during the non-U.S. holiday period.
Supply Chain Bottlenecks Still Pose Inflation Risks
Despite the current weak employment data, macroeconomic inflation risks have not been completely eliminated. Analysts point out that shipping issues, such as the closure of the Strait of Hormuz, have forced global vessels to reroute, leading to an overall decline in shipping capacity. The resulting supply chain price effects continue to ferment within global economies. In the foreign exchange market, the yen's exchange rate against the U.S. dollar has been fluctuating around 161 after hitting a forty-year low this week, with Japan's potential covert adjustments to intervention strategies keeping the market on high alert.
