HIGHLIGHTS
- US stocks are up by 0.61% but international markets continue to decline.
- Italian politics and higher trade tensions troubled the markets.
- Another strong jobs report.
MARKET RECAP
US markets were up by 0.61% but international markets continued to decline, down by 0.16% for the week, now down 1/2% for the year and the trend, as measured over 6-months, 3 months, 1 month and 2-weeks are all down.
It was a news-filled week. The threat of Italy leaving the eurozone knocked equity markets down on Tuesday and sent bonds higher. Except for Italian bonds, which sold off. The trade war with China, which was supposed to have been on hold, was put back on, as the Trump administration proposed 25% tariffs on Chinese tech imports. But apparently going after China was not enough, Trump imposed tariffs on steel and aluminum imports from allies Canada, Europe, and Mexico. All threatened to retaliate against the US.
JOBS
Nonfarm payroll increased by 223,000 in May, beating the estimate of 190,000. The unemployment rate fell to 3.8%. Average hourly earnings were up 0.3% for the month and 2.7% year over year. The average workweek remained steady at 34.5 hours. The labor force participation rate dropped by 0.1% to 62.7%.
ITALY
Stocks tumbled on Tuesday on worries that Italy might exit the euro currency union. The idea is that by introducing a new, less expensive currency, Italy would be more competitive on world markets and exports would increase. But such a move would be costly and complex. First, Italy would have to pay back its existing debts, inflation might skyrocket and uncertainty would stall the economy.
TARIFFS
Trump imposed tariffs on US allies like Canada, Mexico, and Europe, prompting promises of swift retaliation. Though the impact in the near future will not be severe, if these tariffs are not rescinded and they become part of the long-term landscape, it will be another handicap for the US economy down the road. The US Chamber of Commerce says the tariffs will threaten up to 2.6 million jobs.
SCOREBOARD
