Bloomberg
“BOE’s Carney Nudged Step Closer to Rate Hike by Jobs Numbers.”
U.K. employment rose to a record high in the three months through May and wage pressures showed few signs of abating, keeping the Bank of England on course for an interest-rate increase next month.
The number of people in work rose by 137,000, more than forecast, taking the employment rate to 75.7 percent, the highest since records began in 1971. While headline measures of wage growth eased modestly, an underlying gauge climbed to the highest since January.
The pound rose following the data, which point to continued strength in the labor market and reinforce expectations for a rate hike in August. Money markets are pricing in an 80 percent chance of tightening, while a majority of economists in the latest Bloomberg survey also predict a move.
The report from the Office for National Statistics on Tuesday also showed that unemployment held at a 43-year low of 4.2 percent. Earnings growth excluding bonuses slowed to 2.7 percent, as forecast, but that’s still well ahead of year earlier levels. On a three-month annualized basis, private-sector wage growth jumped to a four-month high of 2.8 percent.
BOE Governor Mark Carney and fellow policy makers have cited strength in the labor market and limited spare capacity as reasons to raise rates again, though they’ve not said exactly when they’ll do that. Three of nine officials voted to tighten in June, with the majority willing to wait to assess the economy’s recovery from a snow-blighted first quarter.
Overall, the figures point to healthy demand for labor, with the number of vacancies rising to the highest since records began in 2001 and the rate of inactivity — people neither in work nor looking for a job — falling to an all-time low. With wage growth running ahead of inflation, households are enjoying a return to real spending power after a yearlong pay squeeze. They may not be out of the woods just yet though, with a report tomorrow forecast to show inflation picked up again in June.
Reuters
“BofA profit beats on consumer loan growth, lower expenses.”
Russia’s political and media establishment heralded talks between the Russian and U.S. leaders in Helsinki as a victory for Vladimir Putin in breaking down Western resolve to treat Russia as a pariah.
The praise from Russia’s elite for Putin’s performance at the summit contrasted sharply with the reaction in Washington where U.S. President Donald Trump’s own Republican party accused him of failing to stand up to Putin.
In Moscow, there was a recognition that the summit did not produce any breakthroughs on issues such as Syria, Ukraine or arms control. The Kremlin, in the run-up to the summit, had played down expectations of major progress.
Instead, the focus was on the symbolism of the leader of the world’s biggest superpower sitting down one-on-one with Putin after four years of international isolation triggered by Russia’s 2014 annexation of Ukraine’s Crimea region.
“It’s funny to recall the nonsense from Obama et al about Russia being a weak ‘regional power’,” Alexey Pushkov, a member of the upper house of the Russian parliament, referring to former U.S. President Barack Obama.
The opportunity for Putin to present himself as an equal to the U.S. president was a major objective for the Kremlin as it prepared for the summit, according to people close to the Russian foreign policy establishment.
BBC News
“EU signs its biggest free trade deal with Japan.”
The European Union and Japan have signed one of the world’s biggest free trade deals, covering nearly a third of the world’s GDP and 600 million people. One of the biggest EU exports to Japan is dairy goods, while cars are one of Japan’s biggest exports.
The move contrasts sharply with actions by the US Trump administration, which has introduced steep import tariffs. EU Commission head Jean-Claude Juncker said the deal underlined the «win-win» solutions offered by free trade.
Mr Juncker said: «[The] impact of today’s agreement goes far beyond our shores. Together we are a making, by signing this agreement, a statement about the future of free and fair trade. «We are showing that we are stronger and better off when we work together. And we are leading by example, showing that trade is about more than tariffs and barriers. It is about values, principles and finding win-win solutions for all those concerned.»
The US was in talks with Japan and other Asian countries 18 months ago about a wide-ranging free-trade agreement, the Trans-Pacific trade agreement, but Donald Trump withdrew from this in one of his first moves after becoming president. Since then, his «America First» policy has seen tariffs introduced on a range of items, including steel, which both Japan and the EU export to the US.
Firms in the EU, the world’s biggest free-trade zone, currently export more than $100bn (£75bn) in goods and services to Japan, the world’s third-biggest economy, every year.
Japan’s Minister for Economic Revitalisation, Toshimitsu Motegi, said: «At a time when protectionist measures are gaining steam globally, the signing of the Japan-EU deal today will show the world once again our unwavering political will to promote free trade.»
Bloomberg
“Tech Shares Fall; Dollar Gains on Risk Aversion: Markets Wrap.”
U.S. technology shares fell as disappointing subscriber growth from Netflix threw a wet blanket over the rest of the FAANG stocks. The dollar strengthened as Federal Reserve Chairman Jerome Powell made the case for further tightening before a U.S. Senate panel.
The Nasdaq 100 slumped for a second day, as Netflix helped to drag down Facebook, Apple, Amazon and Google parent Alphabet. Results from Goldman Sachs narrowly beat investor expectations, while trading revenue disappointed. On the Stoxx Europe 600 Index, gains in mining and chemicals shares were outweighed by declines in telecommunications and household goods.
Earnings and U.S. monetary policy have become the main drivers of market sentiment this week. That’s giving respite from a backdrop of worsening trade relations between the world’s biggest economic powers. Company results have been mixed thus far, with Deutsche Bank AG and Bank of America Corp. beating estimates, counterbalancing the Netflix reading.
Powell said Tuesday in statement to the Senate Banking Committee that the the central bank will continue to gradually raise interest rates “for now’’ to keep inflation near target amid a strong U.S. labor market.
Commodities climbed after Monday falling to the lowest in 11 months as crude traded in New York steadied at about $68 a barrel. Emerging market stocks headed lower for a second day. The New Zealand dollar jumped after the central bank’s core inflation measure accelerated at the fastest pace in seven years. Japanese stocks outperformed in Asia, while the yen held close to its weakest level since January. Treasuries edged higher with most European sovereign bonds, as the Bloomberg Dollar Spot Index halted three days of declines.