Skip navigation Scroll to top
Scroll to top

LGT Navigator: US jobs report paves the way for further interest rate hikes

July 11, 2022

On capital markets, inflation fears, the prospect of a steep rise in interest rates and fears of a global recession remain the dominant forces. The June US labor market report reaffirmed the prospect of further monetary tightening. Investors are hoping for new impetus from the corporate reporting season in the US, which starts on Thursday.

x

Asian stock exchanges start the new week inconsistently. In Hong Kong, the Hang Seng Index loses more than -2.5%. This, after the Chinese authorities have imposed fines on various technology companies for violating anti-monopoly regulations. Tech giants Alibaba and Tencent are also affected. The Shanghai Composite trades -1.5% weaker. In China, consumer prices rose more than expected in June. Year-on-year, prices increased by +2.5%, as reported by the statistics office. Thus, inflation is at its highest level in two years. The Nikkei gains in Tokyo +1.2%.

On Wall Street, the labor market report caused little movement on Friday. The S&P 500 lost almost -0.1% by the end of trading and the Dow Jones declined -0.2%. In contrast, the Nasdaq Composite gained +0.1%. Thus, the technology index has risen in five straight days for the first time this year. The focus now moves to the quarterly reporting season in the US. On Thursday, the major Wall Street banks JPMorgan Chase and Morgan Stanley kick off the Q2 earnings season, followed by Citigroup and Wells Fargo on Friday. 

Employment growth in the US remains robust

The US economy created +372’000 new jobs in June. This exceeded expectations, as on average analysts had expected an increase of +265’000 in non-farm payrolls. However, the two previous month's figures were revised downward by a total of 74’000. The unemployment rate remained at a low 3.6% in June. At the same time, wage growth slowed minimally last month. Average hourly wages increased by +0.3% month-on-month and by +5.1% year-on-year (previous month +5.3%). Overall, the labor market in the US remains solid, and the latest data are unlikely to change the direction of the Federal Reserve. Thus, a next interest rate step by the Fed is to be expected on July 27. 

Euro at record low

On the foreign exchange market, the euro remained under pressure on Friday. Against the greenback, the currency was at times quoted at USD 1.0075, the lowest rate since the end of 2002. The downward trend of the euro also continued against the Swiss franc, and a new record low of just under CHF 0.9870 was observed on Friday. 

ECB urges banks to brace for shocks from climate risks

The European Central Bank (ECB) wants the commercial banks it supervises to arm themselves against the threat of billions in risks from climate change. Efforts to measure and manage climate risk need to be stepped up, warned Andrea Enria, head of the ECB's banking supervision. Background is the first climate stress test devised by the ECB, in which banks had to disclose how well they are equipped to deal with financial and economic shocks from climate risks. While banks have made progress in taking climate risks into account since 2020, only about 20% allowed climate risks to be factored into their lending. The ECB's climate stress test has no direct impact on commercial banks' capital requirements.

Economic Indicators July 12

MEZ Country Indicator Last period
11:00 DE ZEW economic expectations (July) -28.0
13:00 OPEC Monthly report

 

Earnings Calender July 12

Country Company Period
AUT Telekom Austria Q2
US Pepsico Q2

 

LGT helps you make informed investment decisions

All about global economic and market trends at a glance

Subscribe to LGT's research newsletters

You can also follow us on Facebook or LinkedIn – or visit MAG/NET and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

Imprint
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

Risk Disclosure (Disclaimer)
This publication is an advertising material / marketing communication. This publication is for your information only and is not intended as an offer, solicitation of an offer, or public advertisement to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any confirmation or guarantee as to its being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. Information that has been published should therefore not be understood as implying that no change has taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax-related or other consulting matters, nor should any investment decisions or other decisions be made on the basis of this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future. Investments in foreign currencies are also subject to fluctuations in exchange rates. We disclaim all liability for any loss or damage of any kind, whether direct, indirect or consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them. In line with internal guidelines, persons responsible for compiling this report are free to buy hold and sell the securities referred to in this report.