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US Labour Market in Focus 

Surpassed expectations for US labour market, house prices in the UK continue to fall, and losses for the equity market.

US Labour Market & ADP Figures Smashing Expectations

Yesterday, US ADP figures greatly surpassed expectations with 497,000 jobs being created over the course of June. This beat expectations of 228,000 and showed a significant increase from April and May’s figure of 291,000 and 267,000 respectively. This also marked the highest print since February 2022 and acted as a further signal to the markets that the US labour market remains tight.

Most of the job creation came in the services sector with hospitality and transportation/trade and utilities sector also seeing significant gains. Conversely, some 16,000 jobs were lost in the financial services sector while the information technology industry also saw a loss of 30,00 jobs. In a further nod to the challenges facing the US manufacturing industry, the sector lost 42,000 jobs last month as PMI figures sunk to there lowest level in several years.

The hotter-than-expected labour print raised expectations that the Fed would need to tighten further to bring down inflation, especially following the Fed’s minutes which revealed hawkish sentiments amongst policy makers. This helped bring yields on the two-year note to their highest levels since 2007 while the 10-year surpassed 4%.

While the print signalled the heat of the labour market is still prevalent, wage price increases slowed, indicating that the inflationary pressures from the labour market may be easing. As such, the chief economist at ADP stated that “Consumer-facing service industries had a strong June. But wage growth continues to ebb in these same industries, and hiring likely is cresting after a late cycle surge”.

As such, all eyes are on Nonfarm payrolls today at 13:30 where the market is expecting to see a print of 225,000 – a sizable increase from last month’s figure of 339,000. If this figure is realised, it would mark the second lowest print since December 2020, though it would still be considerably over the 100,000 jobs needed each month to keep up with growth in the working age population.

Halifax Index: UK House Prices Continue to Fall

According to the Halifax house price index, the price of residential property fell for the second consecutive month, with the 2.6% decline marking the greatest fall since 2012. This followed May’s print of a 1.1% depreciation (annualised) which comes as analysts assess the impact of higher interest rates on households and the impact that the temporary Stamp Duty cut had on raising house prices last year. Existing property prices fell as much as 3.5%, showing the greatest drop since August 2009, in contrast to new houses which rose 1.9% (though this was their slowest increase in around three years).

Halifax cited the squeeze on household finances as the key factor behind house price depreciation, as mortgage rates continue to climb. Here, the director of Halifax mortgages stated that “Consumer price inflation is likely to come down in the near term as energy and food prices look set to reverse their steep rises, but core inflation is clearly proving stickier than originally expected. With markets now forecasting a peak in Bank Rate of over 6%, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue to put downward pressure on house prices over the coming year.”

Equity Market Suffers Losses as Markets Consider Further CB Tightening

As markets around the world considered the course of CB tightening yesterday, equities saw a broad sell-off. This was perhaps most acute on the continent where the Stoxx 600 sunk to its lowest level since late March as fell 2.3%. This came as the Euro Stoxx 50 index also plunged 2.9% while the yield on the 2-year bund rose to its highest level since 2008. Meanwhile across the pond, the Dow Jones slipped over 1% as the Nasdaq also slipped 80bps as markets


considered the publication of the Fed minutes. Over in the UK, the FTSE 100 fell to lowest closing level in 2023 with the index tumbling 2.2%, to finish the day at 7,280pts. This came as the yield on the 2-year UK government bond rose 10bps to its highest level since 2007 – hitting 5.5%. 


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