ep 387 | The week ahead - Will US inflation fall enough for the Fed?
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On point with Craig's Investment Partners. The information provided here is general in nature and it's not financial advice. It doesn't take into account your situation, objectives, goals, or risk tolerance. All investments are subject to risks and none are guaranteed. Before you make any investment decisions, we recommend you contact an investment advisor. For more information about our services or to view the Craig's Investment Partners Financial Advice Provider disclosure statement, please visit our on our website which is cragsip.com. Welcome to On Point. I'm Mark Lister, Investment Director at Craig's Investment Partners, and I'll be talking about a range of topics including economics, portfolio strategy, investor education, and anything else that's happening out there in financial markets.
Hey team, hope everyone is well. You should be after that game at Mount Smart last night. That was epic. We could talk about that all day. I didn't go up to it because we had uh kids football on Saturday morning here at home. But uh awesome, wasn't it? So still buzzing on the back of that. Financial markets been buzzing this week too. They staged a very strong rebound. That was on the back of hopes for a resolution in the Middle East and a fall in oil. Prices we saw US crude finish the week just above $78 a barrel. Uh it actually fell to the lowest levels in a month during the week. The SP 500 index in the US was up 3.6% for the week. That's its strongest week in four months. European shares up 2.2%, Japan up 1.8%, the UK pretty flat but up slightly.
Emerging market equities did. Slipped back half a percent. The Aussie market had a great week. The ASX surged 3.2% and the local market up not quite 1%. Interest rates are the US tenure treasury yield down slightly, finished the week at 4.6%. Here in New Zealand, our five-year swap rate, which is a wholesale rate, pretty much flat at 4%. Markets are still looking ahead to September for the Reserve Bank meeting. They still see an OCR hike as pretty much a done deal, and they expect the OCR to reach about 3.5% by the middle of next year. It's 2.5% right now. Looking back at some of the key releases, and we saw a swag of economic data in the US are the ISM indices, Institute of Supply Management Indices.
What market moves set the tone for the week’s outlook?
We got these for July, one for manufacturing, one for services, both pretty solid. Both pretty strong, both pointing to further expansion. Uh, the inflation indicators also elevated those, so there was sort of good news and bad news. Activity strong, but inflation pressures still high. Then we got the jobs report, and this was out on Friday in the US, so it was out today, Saturday, Saturday the 8th, when I'm recording this. Uh, second month in a row that it was below expectations, and by quite a decent margin, we saw a lot. Loss of 23,000 jobs. That's much weaker than we expected. We're expecting plus 80,000 and the lowest in about five months. The unemployment rate slipped back to 4.1%. Sounds like good news, but that came mostly because of a decline in the participation rate.
So not really good news. It's falling for the wrong reasons there. Wage indicators more subdued as well. That's probably Good news from a Federal Reserve perspective. If you're looking for bright sides, uh, average hourly earnings up 3.2% for the year. So uh that was down from what we've seen in recent times and was actually the lowest since 2021, softer than the three and a half percent that was expected. Here in New Zealand, we had some labor market figures too. We got the June 2026 labor market report. Not much good news on this, pretty hard. To put a positive spin on it. The headline unemployment rate rose to 5.6%. That's up from 5.4%, and it was above expectations, as well as being the highest since 2015.
Underutilisation, which is a broader measure of labor market slack, that was up even more. That rose from 12.9% to 13.8%, the highest since late 2013. Uh more positively, maybe employment actually grew half percent over the quarter. That was ahead of forecast, but that wasn't enough to uh impact that unemployment rate and stop it from rising.
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Chapters
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