06 June 2022
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US labour market remains robust

By Daniel Richards

  • US non-farm payrolls rose by a larger than expected 390k in May (consensus estimate 318k), while the April reading was revised higher to 436k from 428k previously.  Despite the strong pace of job gains, the unemployment rate was unchanged at 3.6% as 330k people entered the labour force last month. Jobs gains were fairly broad-based across most sectors although retail employment fell by 61k in May. Wage growth moderated to 5.2% y/y from 5.5% in April, but this is likely still faster than the Fed would like to see.  The next key data point for markets and the central bank will be May CPI inflation due Friday, with headline CPI forecast to remain elevated at 8.3% y/y due to higher energy prices while core CPI is expected to slow to 5.9% y/y.
  • China’s Caixin composite PMI improved in May to 42.2 from 37.2 in April but remains deeply in contraction territory.  The Caixin services PMI came in less than the 46.0 forecast at 41.4, although this was also an improvement from April.  China continues to ease restrictions in Beijing as Covid appears to be ebbing there, with public transport, office work and eating-in at restaurants now allowed.
  • Eurozone final PMIs were revised slightly lower from their flash estimates, although the composite index remained firmly in expansion territory at 54.8 in May, only slightly lower than 54.9 in April. Retail sales declined -1.3% m/m in April, well below the slight gain that the market had been expecting, with the biggest monthly declines in Slovenia and Germany.  The ECB meets on Thursday this week and is expected to announce and end to bond purchases with a view to raising rates in July.  
  • Saudi Arabia’s PMI was unchanged at 55.7 in May with business activity, new work and employment rising at a similar rate as in April. Egypt’s PMI remained in contraction territory at 47.0 in May as both output and new work declined while cost pressures increased.
  • Turkey CPI rose by a smaller than forecast 3.0% m/m in May (consensus estimate 4.0% m/m) with the annual rate rising to 73.5% y/y from 70% y/y in April, the fastest inflation since 1998. Food inflation reached 91.6% y/y while core CPI, which excludes food and energy prices, also accelerated by more than expected to 56.0% y/y from 52.3% y/y in April. Pipeline inflation pressures remain high with producer inflation reaching 132.2% y/y in May.

No key economic data and events today

Fixed Income

  • US Treasuries closed last week considerably lower as a better-than-expected US jobs report for May cleared the way for the Federal Reserve to hike by 50bps in June and July. The 2yr UST yield added almost 18bps to close the week at 2.6525% while the 10yr yield gained nearly 20bps to settle the end of the week at 2.9332%.
  • Loretta Mester, president of the Cleveland Fed, said she would support a 50bps hike at the September meeting as well if there isn’t “compelling evidence” of prices easing. Fed speakers will now go into a blackout period ahead of the June 15 meeting.
  • There were also strong moves on the downside in European bond markets as high inflation will increase pressure on the European Central Bank to hike by as much as 50bps at the July meeting, when hikes are seemingly due to being. Yields on the 2yr Schatz added more than 30bps to close at 0.642% while the 10yr bund yield rose 31bps to 1.27%. In the UK gilts also sold off last week with the 10yr yield up 24bps at 2.154%.


  • The dollar recovered some ground last week after falling the prior two weeks. The broad DXY index added 0.5%, abetted by rising yields on the back of a strong nonfarm payrolls report for May. USDJPY provided most of the gains for the dollar with the pair adding 3% last week to 130.88. EURUSD was relatively steady in week on week terms but showed some wide intra-day volatility, closing out at 1.0719. GBPUSD fell more than 1% to 1.2488.
  • In commodity currencies USDCAD moved in favour of the Canadian dollar with the Bank of Canada sounding a hawkish tone at its meeting and also with oil prices heading higher again. USDCAD closed down 1% on the week at 1.2594. AUDUSD added 0.6% to 0.7207 while NZDUSD fell by 0.3% to 0.651.


  • US equity markets managed to close up over their four-day week last week, as the Dow Jones, the S&P 500 and the NASDAQ added 1.0%, 1.6% and 2.5% w/w respectively. Nevertheless, that obscures the losses seen on Friday and there remain heightened concerns around recession risk, while a fifth of firms missed earnings targets in the first quarter.
  • In Europe, UK markets were closed on Thursday and Friday and so missed the w/w losses recorded elsewhere. While the DAX closed flat, the CAC dropped -0.5% w/w and the composite STOXX 600 ended the week -0.9% lower.
  • There was more market positivity in Asia, where there were comparatively robust gains as Chinese authorities promised more steps to support growth. The Shanghai Composite and the Hang Seng added 2.3% w/w, while the Nikkei gained 3.7%.


  • With the OPEC+ plan to accelerate some of the return of its production failing to convince markets, oil prices moved higher last week. Brent futures settled up 0.2% at USD 119.72/b while WTI added more than 3% to close at USD 118.87/b.  

Click here for charts and tables

Written By

Daniel Richards Senior Economist

Edward Bell Head of Market Economics

Khatija Haque Head of Research & Chief Economist

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