But the unexpectedly large drop in weekly U.S. jobless claims was the clear trigger for Thursday’s rally. And that now biases the debate about July’s worrying unemployment rate rise toward rising labour force participation and weather-related quirks, rather than outsize job shedding per se.
With a thin diary on Friday and next week’s U.S. July inflation report now on the radar, futures market have turned more equivocal about whether next month’s expected Federal Reserve rate cut will be a quarter or a half point.
Some 38 basis points of easing are now priced for September, with 100 bps over the remainder of the year. Ten and 30-year Treasuries shrugged off the week’s weak auctions and yields on both slipped again on Friday, the 10 year subsiding back below 4%.
Fed policymakers seem increasingly confident that inflation is cooling enough to allow rate cuts ahead.
“All the elements of inflation seem to be settling down,” said Richmond Fed boss Thomas Barkin. “I’m relatively hopeful based on the conversations I’m having that that’s going to continue.”
Futures on Wall Street’s main stock indexes were all up between 0.5% and 1% before Friday’s open.
Despite some wild single stock moves through the bumpy earnings season, LSEG data shows annual profit growth for the S&P500 tracking 13.8% for the second quarter – two points higher that pre-season estimates.
Eli Lilly was the standout on Thursday. Its shares jumped almost 10% after the drugmaker raised its annual profit forecast as sales of its popular weight-loss drug Zepbound crossed $1 billion for the first time in a quarter.
As eyes drift back to the inflation picture, China’s deflation scare eased somewhat as consumer prices stayed positive at an above-forecast 0.5% last month.
But to the extent that Chinese producer prices matter more for inflation around the world, the continued annual deflation in factory gate prices may be more significant.
In the slipstream of Wall Street’s surge on Thursday, stocks in Europe and Japan gained ground today too – the latter closing the week down just over 2% after an eye-watering 10%-plus round-trip on Monday and Tuesday.
China’s mainland benchmark underperformed and closed slightly in the red.
In deals, British investment platform Hargreaves Lansdown agreed to a 5.44 billion pound ($6.94 billion) takeover by an international consortium, which is betting on grabbing market share in the increasingly competitive UK wealth market.
