Weak US labor market data increased the likelihood of a Fed rate cut. Oil prices fall amid rumors that OPEC plans to raise production

On Friday, the Dow Jones Index (US30) declined by 1.23% (-3.02% for the week). The S&P 500 Index (US500) dropped by 1.60% (-2.50% for the week), and the Nasdaq Tech Index (US100) closed down by 1.96% (-2.48% for the week). The US stocks fell on Friday as investors reacted to weak July employment data and a new round of tariffs announced by President Trump. Non-farm payrolls increased by just 73,000 in July, well below expectations, and sharp downward revisions to previous months’ data pointed to deeper labor market weakness. Treasury yields fell, and the probability of a Fed rate cut in September rose above 80%. Sentiment also soured after the US imposed new tariffs ranging from 10% to 41% on imports from key partners, including Canada, India, and Taiwan. On the corporate front, Amazon dropped nearly 8% due to disappointing cloud forecasts, dragging the broader market, while Apple fell 2.9% despite strong results. Exxon (-1.8%) and Chevron (-0.1%) beat expectations, Eli Lilly rose by 3% on hopes of drug coverage, while Moderna plunged 6.6% amid renewed vaccine concerns.

The Mexican peso fell to a one-month low, breaking through 18.80 per USD, despite broad dollar weakness, primarily reflecting domestic factors and tariff concerns weighing on the currency. The S&P Global Manufacturing PMI for July remained at 49.1 for the thirteenth consecutive month, while the business confidence index stayed below the 49.4 threshold, indicating falling export demand and reduced capital expenditures.

The Canadian dollar strengthened to 1.38 per USD, rebounding from a two-month low as the dollar weakened following the weak US non-farm payroll report showing just 73,000 new jobs vs. 110,000 expected, and a net downward revision of 258,000 positions. This boosted bets on a Fed rate cut in September. At the same time, Canada’s economy showed surprising resilience: after a 0.1% GDP contraction in May, a 0.1% increase is expected in June, with manufacturing output rising by 0.7%. This supports the Bank of Canada’s decision to hold rates steady at 2.75%, standing in sharp contrast to the Fed’s more dovish stance. Although President Trump’s surprise announcement of 35% tariffs briefly shook markets, Canadian exemptions under USMCA effectively cap export taxes at around 5%, softening any major impact on cross-border trade flows.

European stock markets mostly declined on Friday. Germany’s DAX (DE40) fell 2.66% (weekly: -4.09%), France’s CAC 40 (FR40) closed down 2.91% (weekly: -4.77%), Spain’s IBEX35 (ES35) dropped 1.88% (weekly: -1.68%), and the UK’s FTSE 100 (UK100) closed Friday 0.70% (weekly: -0.57%). European equities closed sharply lower on Friday, following a steep global market sell-off as the US government expanded the range of imports subject to tariffs. While the base tariff remained at 10%, rates were sharply increased for India (25%), Canada (35%), and Switzerland (39%). Overall, the average US tariff rate will rise to 15%, compared to roughly 2% in 2024. Additionally, banks and industrial giants fell sharply following the pessimistic US labor report: Siemens, Intesa Sanpaolo, ING, BNP Paribas, and Schneider dropped more than 4%.

WTI crude oil prices fell by 2.7% to $67.3 per barrel on Friday amid reports that OPEC and its allies may soon agree to raise output. Market sentiment also deteriorated following newly signed tariffs by President Trump on imports from dozens of countries, including Canada, India, and Taiwan, which will take effect on August 7.

Silver hovered around $37 per ounce on Monday after rising nearly 1% in the previous session, supported by rising expectations of a Fed rate cut following the weak July jobs report. A falling dollar and lower Treasury yields further boosted silver’s appeal.

Asian markets mostly declined last week. Japan’s Nikkei 225 (JP225) dropped by 1.73%, China’s FTSE China A50 (CHA50) fell by 2.19%, Hong Kong’s Hang Seng (HK50) declined by 3.74%, while Australia’s ASX 200 (AU200) posted a slight weekly loss of 0.06%.

On Monday, the offshore yuan held its recent gains at 7.19 per USD after the People’s Bank of China announced the formation of a new committee on macroprudential and financial stability. The central bank reaffirmed its accommodative stance, pledging to manage key financial risks and maintain ample liquidity in H2 with an “appropriately loose” monetary policy. Lending to strategic sectors such as technology and green development has surged, reflecting policy priorities. Meanwhile, investors are watching the key October policy plenum, where officials are expected to present countermeasures to persistent deflationary pressure, excess industrial capacity, and the ongoing real estate downturn. Recent signals from the Politburo point to more stimulus through bond issuance and demand-boosting measures.