The American two-year yield is up 14 points while the ten-year yield is up 8 points since the Swedish market closed on Monday.
Monday’s ISM Purchasing Managers’ Index for the service sector rose more than expected to 51.4 in July from 48.8 the previous month, indicating a slight recovery.
ING Economics notes that the latest ISM data suggests “a decent situation with a growing economy, more job creation, and inflation above target.”
The American labor market weakened slightly, indicating that the Federal Reserve should begin lowering interest rates in the coming quarters, said San Francisco Fed Chief Mary Daly.
Despite the weaker job report, Daly did not draw conclusions that the labor market has seriously deteriorated.
“Policy adjustments will be necessary in the coming quarters,” said Daly. “We now have confirmation that the job market is slowing down, and it is crucial that we do not let it slow down too much to tip into a downturn.”
The extent of the Fed’s rate cut will depend on incoming data, she added.
Daly still sees strengths in the job market where companies have slowed their hiring of new workers, but most are not laying off employees.
“We have a fairly stable job market,” Daly said. “Beneath the surface of the job market report, there is a bit more room for confidence.”
Daly’s comments come after the weaker-than-expected job report on Friday.
Several Fed officials have cautioned against reading too much into a job report.
On Tuesday morning, several Asian markets recovered slightly after significant declines on Monday.
The yen weakened against the dollar to 145.25, while Japanese yields rose in both longer and shorter maturities.
In the morning, data showed that Japanese household consumption rose by 0.1 percent, seasonally adjusted, in June compared to the previous month, with expectations of +0.2 percent, after a decrease of 0.3 percent the month before.
Compared to the same month the previous year, consumption decreased by 1.4 percent, with an expected decline of 0.9 percent.
As expected, Australia’s central bank, RBA, left its benchmark rate unchanged at 4.35 percent.
In a statement, RBA noted that inflation remains above the target and has proven to be persistent.
They acknowledge that the outlook remains uncertain and recent data suggests that the process of lowering inflation to the target is slow and bumpy.
Monetary policy needs to be restrictive until RBA is confident that inflation is on a more permanent downward trajectory towards the target range, they wrote.
RBA’s primary goal is to lower inflation to the target.
In the UK, the warm weather contributed to British retail returning to modest growth last month as customers spent money on summer clothes and health and beauty products, according to Bloomberg News.
British retail sales rose by 0.3 percent in July compared to the same month in 2023, following a 0.5 percent decline the previous month, with expectations of a 0.3 percent increase.
In the Netherlands, consumer prices rose by 3.7 percent in July compared to the same month the previous year, according to final statistics. In June, the inflation rate was 3.2 percent.
In Europe, attention is focused on German industrial orders for June. Commerzbank believes that both new orders and industrial production will have been higher in June than the previous (weak) month.
Analysis:
The US markets are showing signs of recovery with the ISM data indicating a growing economy and increased job creation. The Federal Reserve is expected to lower interest rates in response to the slightly weakened labor market. International markets are also seeing some recovery, with Asian markets bouncing back after previous declines. Central banks in Australia and the UK are maintaining their rates, while inflation remains a concern in various regions. Overall, the global economic landscape is a mix of positive indicators and challenges, reflecting the ongoing uncertainty and need for careful monitoring by investors and policymakers.