The unexpectedly weak US employment report for June, when a mere 18,000 jobs were created, “was a timely reminder that the world’s biggest economy is still fragile, and that its health seems inconsistent with the current level of many risky assets”, says Capital Economics. For instance, employment is still seven million shy of the January 2008 peak of 138 million. Yet industrial metals are at similar levels. Moreover, growth is slowing globally. A survey tracking the global manufacturing sector is at its lowest level since July 2009 – lower than in last year’s ‘soft patch’. Its equivalent for the services sector is also in a downtrend. China is set to slow further, as inflation at a three-year high of 6.4% suggests that the government will tighten further “to prove that it is on top of rising prices”, says Philip Salter in City AM.
Momentum is also ebbing in the eurozone, where growth is tepid or nonexistent beyond the core. Jitters over a possible break-up have flared up again now that Italy and Spain are in the market’s cross hairs. Given all this, stocks are in danger too, says Ian Campbell on Breakingviews. Risk aversion is set to rise and stocks across the world look set to retest their March lows.