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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.


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


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