This week kicks-off with US factory orders and durable goods. The S&P Global services PMI prints for China and the US, eurozone PPI, and US trade and ISM services follow on Tuesday. Eurozone retail sales and Germany factory orders may garner market attention on Wednesday. China trade and FX reserves, and US initial jobless claims and wholesale inventories feature on Thursday. The BoE is expected to cut rates by 25bps, and Governor Bailey’s press conference follows. We will also hear from the Fed’s Bostic on monetary policy, and the ECB’s Rehn on geopolitics.
In what was a volatile week amid trade uncertainty and mixed US data, the yield on the 10-year UST rallied 17bps to 4.22%, while the S&P Index fell 2.36%. The dollar, measured by the DXY Index, rose 1.53%, despite the sharp downturn following the disappointing non farm payroll figures. Brent crude also held onto gains, closing 1.80% higher, to $69.67pb.
As expected, the FOMC held rates at the target range of 4.25-4.50%. The decision was not unanimous, with two members, Waller and Bowman, dissenting in favour of a 25bps cut, suggesting a growing dovish sentiment within the committee. Fed Chair Powell noted the central bank’s focus on the unemployment rate. To that end, the unemployment rate increased to 4.2%, in-line with market expectations. As we have written previously, the labour market is certainly one to watch, as the report on Friday signalled an increasingly fragile sector. Non farm payrolls rose 73k (exp. 104k) coupled with a two-month revision of -258k, the largest revision since May 2020, and worst three-month reading (+35k) since the pandemic.
Earlier in the week, US Q2’25 GDP was revised higher to 3%. However, subdued consumer spending, particularly for the upper-income basket, coupled with a rise in related delinquencies painted a mixed picture. The ISM manufacturing contracted further in July to 48, a 9-month low. All underlying sub-categories were disappointing; manufacturing employment sank to 43.4, a five-year low. A number of respondents stated, “These tariff wars are beginning to wear us out” or “Tariffs are causing complete uncertainty around sourcing strategies.”
Elsewhere, China’s Manufacturing, non-manufacturing and services data softened in July, with the S&P Global PMI manufacturing falling into contraction in July. China’s July Politburo meeting did not introduce new stimulus policies, instead focusing on implementing existing measures due to stronger-than-expected growth. While the urgency for new monetary cuts has eased, the government continues to prioritise capital market reform and “anti-involution” efforts to promote fair competition and boost investor confidence.
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