Macro

UK:
In June, the UK housing market experienced the continued impact of rising mortgage rates. According to Halifax, a home loan provider, house prices fell by 2.6% compared to the previous year. This decline represents the largest drop since 2011.

EU:
German economic data for the second quarter indicated ongoing weakness in industrial production, factory orders, and exports. Industrial output in May disappointed expectations by falling 0.2% compared to April. Although new orders experienced a surge of 6.4% in May, driven by increased demand for ships, spacecraft, and military vehicles, there was a 6.1% sequential decline over three months. Exports also showed volatility, unexpectedly shrinking by 0.1% month over month, while imports increased by 1.7% in May.

The eurozone witnessed a sequential decline of 1.9% in factory gate prices in May, primarily due to a decrease in energy costs. Retail sales volumes in the eurozone remained flat for the second consecutive month in May, as increased spending on non-food items offset declines in food and automotive fuel sales. On a year-over-year basis, retail sales experienced a decline of 2.9%, marking the eighth consecutive monthly decrease.

The European Central Bank’s (ECB’s) monthly survey revealed a moderation in consumer inflation expectations for the next 12 months in May. Survey participants projected inflation at 3.9% in a year, down from 4.1% in April. ECB President Christine Lagarde maintained her hawkish stance, stating in an interview that policymakers still have work to do to address inflation, which is expected to surpass the 2% target in 2024 and 2025.

US:
The release of the Federal Reserve’s meeting minutes on Wednesday had a notable impact on market sentiment. While the decision not to raise rates in June was unanimous, some members expressed a preference for another increase. Dallas Fed President Lorie Logan, who advocated for a rate hike in June, anticipated two more rate increases in the remainder of the year, reinforcing expectations of rates remaining “higher for longer.” The market response led to the pricing in of approximately a 44% chance of two or even three quarter-point hikes by December, according to the CME FedWatch Tool.

However, the probability decreased to around 36% by the end of the week, likely in response to data indicating a slowdown in the job market. The Labor Department reported that nonfarm jobs increased by 209,000 in June, slightly below expectations and the lowest figure since December 2020. Additionally, the previous two months’ gains were revised downward by a total of 110,000 jobs. The unemployment rate decreased marginally from 3.7% in May to 3.6% in June. The report also highlighted a notable increase of around 11% in the number of individuals employed part-time due to economic reasons, partially attributed to reduced working hours due to slack work or business conditions.

Interestingly, the week shed light on the contrasting job markets faced by factory and service workers. The Institute for Supply Management (ISM) released its Manufacturing Purchasing Managers’ Index (PMI) on Monday, indicating a renewed slowdown in job growth within the sector, with hiring trends contracting for the first time since March. In contrast, the ISM’s gauge of services employment presented a different picture, reaching its highest level (53.1, with numbers above 50 indicating expansion) since February. Additionally, the overall Services PMI from ISM also reached its highest level (53.9) since February, surpassing estimates.