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Solid US employment data pressures markets

Strong signals from the US labour market put equity markets under pressure on Thursday. Surging job creation painted the picture of a labour market that could stem further interest rate hikes by the US Federal Reserve (Fed), which sent stocks spiralling and Treasury yields spiking.

Shane Strowmatt, LGT
Reading time
5 minutes
Construction workers
© Shutterstock

Nearly a half of a million new jobs were created in June in the US, according to the ADP Research Institute’s employment report, which was released Thursday. Leisure and hospitality as well as construction were among the strongest sectors. A separate report showed that the number of job cuts by companies in the US fell to its lowest in eight months. Applications for unemployment benefits ticked up by a modest 12,000 last week, reaching 248,000. More details on the US labour market will follow on Friday when the government releases its employment report for June.

In New York, equity markets came under pressure as the labour data was clearly interpreted by traders as a signal for the Fed to go ahead with further interest rate hikes. The slight losses from the previous day deepened on Thursday. The Dow Jones Industrial lost 1.07% to end the session at 33,922.26 points. The S&P 500 fell 0.79% to 4,411.59 points. The technology-heavy Nasdaq 100 dropped 0.75% to 15,089.45 points.

Stock markets in the Asia-Pacific region followed the sell-off on Wall Street for a second day of losses. The Hang Seng Index lost 0.4% and the Shanghai Composite dropped 0.6% in early trading. Japan’s Nikkei 225 was down 0.6% after nominal salaries increased at the fastest paces in almost three decades. Australia’s S&P/ASX 200 led Asia-Pacific losses, down 1.6%. South Korea’s Kospi was down 1.3% after the world’s largest memory chip and mobile phone manufacturer, Samsung, said operating profit likely fell by 96% in the second-quarter. The stock was trading down 2.2%.

In Europe, factory orders in Germany jumped in May, according to data released Thursday. Demand for factor goods increased by 6.4% when compared with the previous month, beating market expectations. The German economy has been struggling since entering a recession late last year, with inflation increasing again in June to 6.8%.

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Swiss unemployment (07:45 CET), German industrial production (08:00), Swiss foreign currency reserves (09:00), US employment report (14:30), ECB President Christine Lagarde speaks at an event in France (18:30).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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