Chinese Deflation: NFP Read, Wages Growth, and US Inflation Figures Impact Market

Chinese deflation

Asia began the trading week digesting the news of a softer-than-expected NFP read, faster-than-expected wages growth in the US, combined with deflation in Chinese consumer and producer prices.

Lower job additions came as a relief for Fed watchers on Friday, but the wages grew faster than expected, and the unemployment rate fell slightly to 3.6%. All in all, the US jobs data was still hot, and backed the Federal Reserve's (Fed) campaign of policy tightening with further rate hikes. This being said, the US 2-year yield slipped below 5%, the 10-year yield consolidated above 4%, as the US dollar index was sold off aggressively below the 50 and 100-DMAs.

Due Wednesday, US inflation is expected to have fallen from 4% to around 3% in June, with a possibly uptick in the monthly data. But core inflation could prove stickier at around the 5% mark. In all cases, softening, and ideally softer-than-expected inflation figures carry the potential of pushing the Fed hawks back. That could give quick support to the US stocks which ended the first week of July, and the first week of H2, in the negative.

By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank

Ipek Ozkardeskaya

Ipek Ozkardeskaya provides market analysis on FX, leading market indices, individual stocks, oil, commodities, bonds and interest rates.

She has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist in Swissquote Bank. She worked as Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.

She is passionate about the interaction between the economy and financial markets. She has been observing and analyzing a wide variety of relationships between the economic fundamentals and market behaviour over the past decade. She has been privileged to live and to work in the world's most exciting financial hubs including Geneva, London and Shanghai.

She has a Bachelor's Degree in Economics and a Master's Degree in Financial Engineering and Risk Management from the University of Lausanne (HEC Lausanne), Switzerland.