North America
US equities closed largely higher thanks to a stronger-than-expected jobs report. The strong employment data brought fresh concerns that Fed action may not yet have been effective in tapering economic growth, leaving the door open for further Fed intervention. The S&P 500 and Nasdaq composite rose by 0.36%, 2.15%, while the Dow Jones dipped 0.14%. The labour department showed that employers added 528,000 nonfarm jobs in July. This figure came in more than double the consensus estimates of 250,000. Total nonfarm employment in the U.S. has now reached pre-pandemic levels at 3.5%. Despite this, jobless claims edged up in-line with projections to 260,000. Meanwhile, US-China relations met new lows across the week, as House Speaker Nancy Pelosi opted to visit Taiwan (This marks the first for a US House speaker in 25 year), deepening a rupture between the world’s two most powerful countries. Pelosi said her visit to Taiwan was not intended to change the status quo for the island but to maintain peace in the Taiwan Strait, which separates Taiwan and mainland China. President Biden said that the US military opposed Pelosi visiting Taiwan, however, the White House has said it is up to the House speaker where she travels. On Thursday, China fired multiple missiles into waters surrounding Taiwan and began a series of huge military drills around the island. On Friday, China said it was ending cooperation with the US on key issues including the climate crisis, anti-drug efforts and military talks. Last week, the U.S. Congress passed the CHIPS and Science Act, which aims to bolster up the U.S. semiconductor industry and contains restrictions on chip firms considering expanding in China.

Europe & UK
European markets closed mixed as investors reacted to comments from ECB officials that suggested that rate-hiking cycles could be more aggressive than previously expected. The pan-European STOXX 600 dipped 0.59% while the local French CAC 40, German DAX & British FTSE 100 rose by 0.37%, 0.67% and 0.22% respectively. Off the back of rate hikes in July, the Eurozone recorded a rise in unemployment for the first time in over a year. Inflationary pressures consisted, with consumer price growth in the Eurozone accelerating to 8.9% in July from 8.6% in June (above expectations for 8.6% and well clear of the ECB’s 2% target). The jobless rate remained unchanged at a record low of 6.6%, but the number of job seekers increased by 25,000 to just under 11 million. Meanwhile, eurozone manufacturing contracted last month, with final data signaling the sharpest decline in production since the initial wave of COVID-19 lockdowns in spring 2020. This trend was seen in Europe’s largest individual economy, Germany, where manufacturing activity dropped in July, marking the first time in over 2 years. Manufacturing orders fell, (thanks in part due to a large decline in new orders outside the eurozone – despite the recent Euro weakness). New orders declined as the nation noted rising input prices (gas, electricity). German consumers appeared to be affected by the same constraints, with German retail sales having dropped 8.8% year-over-year in June. Meanwhile in the UK, the Bank of England (BoE) opted to raise interest rates by 0.50%, the largest increase in over 27 years, bringing rates to 1.75%. The rate hikes came as central bankers spoke of persistent inflation, projecting figures of 13.3% by October. Inflation is expected to remain elevated through 2023 before returning towards the BoE’s 2% target in 2024/25. More worrying, BoE forecasts suggest that a recession lasting approx. 5 quarters would begin this winter.

Japan
Japanese indices rose as an earnings season’s rally was upended by increased US-China tensions. The Nikkei 225 & TOPIX declined by 1.35% & 0.35% respectively. New reports show that the world’s third-largest economy likely grew at an annualized rate of 2.5% in Q2 (a rebound from a 0.5% contraction in the Q1). On the trade front, Japan ran a current account deficit for the first time in 5 months in June as surging imports eclipsed exports despite the weaker yen, further highlighting the pressure from energy and raw material prices. The deficit reached ¥132.4 billion ($980 million) in June, reversing ¥872 billion from the same month a year earlier. To aid the current swathe of inflationary pressures, a government panel agreed to a hike in the average minimum wage across 2022, with current wage growth having been muted at best. The Bank of Japan (BoJ) believes that wage growth will aid the overarching 2% inflation target. Meanwhile, Japan’s prime minister condemned China’s firing of ballistic missiles during military drills around Taiwan. Five Chinese missiles appear to have fallen in Japan’s exclusive economic zone, with four of those believed to have flown over Taiwan’s main island.