Global markets eye inflation data after U.S. employment figures temper rate hike expectations

Global markets experienced a shift last week as weaker-than-expected U.S. employment data tempered expectations of further Federal Reserve interest rate hikes. This, combined with optimism surrounding new Middle East agreements, fueled a greater appetite for risk among investors. The focus now turns to inflation data in the new week.

The U.S. labor market showed signs of losing momentum, with non-farm payrolls rising by only 23,000 in July, falling significantly short of the 85,000 increase that had been anticipated. This development reduced the likelihood of a Fed rate hike in September or October, with the market pricing in an 85% chance of a hike in December. Positive commentary from U.S. President Donald Trump regarding negotiations with Iran also contributed to market optimism.

Minneapolis Fed President Neel Kashkari's statement, "I am not calling for a dramatic increase in interest rates," drew attention ahead of the inflation data. In the corporate world, SpaceX reported a 92% revenue increase to $7.81 billion. Meanwhile, Meta's artificial intelligence model reportedly hacking a company during its testing phase reignited discussions about regulation and high valuations in the tech sector.

In response to these developments, the yield on 10-year U.S. Treasury bonds fell to 4.65%. Gold prices saw a notable increase of 7.4%, reaching $4,342 per ounce. European stock markets performed well, buoyed by positive corporate financial results and an increase in manufacturing PMI data to 51.9. Energy giant bp announced a 150% profit increase to $5.7 billion, driven by rising oil prices, and HSBC's profits rose by 80%. A significant development in Europe was the EU's announcement that it would use revenue generated from frozen Russian Central Bank assets to aid Ukraine.

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I am not calling for a dramatic increase in interest rates.