US Jobs data reinforces monetary tightening expectations - Raiz Invest


George Lucas, Raiz Group CEO

US stocks slid to another weekly loss after the release of US labour market data reinforced expectations for continuing monetary policy tightening from the US Federal Reserve. The jobs data showed the US economy added 390,000 jobs in May, slightly below the 436,000 in April.

After the release, the S&P 500 index fell 1.6 per cent on the day, cutting gains made on Thursday and closing the week 1.2 per cent lower. The index has now dropped in eight of the past nine weeks.

On the US Fed’s plans ahead, the central bank has already lifted its main rate by 0.75 percentage points this year and this is expected to continue hiking as it focuses on easing inflation.


Price rises on global oil markets

Looking closer at inflation, it’s not being aided by high energy prices with Brent crude trading around $120 a barrel. That’s despite OPEC striking a deal to boost oil production to help lower energy prices.

In the short term it’s hard to see energy prices falling as European Union countries recently agreed to an embargo on seaborne imports of oil and petroleum products from Russia. This is important as roughly 90 percent of the EU’s total imports of those items are from Russia.

Additionally, there’s the Ukraine Black Sea port blockades as well as fertiliser bans to factor in, meaning food shortages will continue to be a problem in Europe and other nations.


Australia house prices decline in May

In Australia, house prices declined across the eight capital cities in May, with reports that housing values across the country fell for the first time since September 2020.

Also domestically, there was also a solid rise in GDP in Q1, which supports my view that households in Australia will be able to absorb higher interest rates. However, it’s worth remembering there’s a long way to go yet. This week the RBA raised the cash rate by 0.50%, taking it to 0.85% and representing the biggest hike in 22 years and the first consecutive hike in 12 years.



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