The latest data on labor market are weak, but they do not indicate that the job market or the economy is on the precipice.
But it's probable soft landing for the US economy. While these data show some weakness, they are not indicators of an immediate recession. First, it's likely that Hurricane Beryl had a significant impact on July data: the San Francisco Fed estimated that adverse weather conditions may have decreased payrolls by 15-30 thousand. Furthermore, if we look at the composition of jobs, we notice that in cyclical sectors, such as manufacturing and construction, the number of payrolls has increased.
Expectations of a first rate cut are growing
However, they increase expectations for a 25-point cut by the Fed at the next meeting in September, with two further cuts likely at the November and December FOMC meetings. The hard landing remains only a hypothesis, even if the markets will continue to talk about it for a long time. The mere fact of talking about it will clip the wings of stock market recoveries, which will occur but will be nervous and in need of continuous positive confirmation.
Next week, the inflation data will be even more important, because it will give an idea of how much the Fed may actually cut in September. Although there are signs of a slowdown, part of the market has begun to think about the beginning of a process that will end in a recession next year.
The ABC television station will host a presidential debate between Donald Trump and Kamala Harris on September 10th. The TV network announced it, specifying that both have confirmed their presence. During a press conference in Mar-a-Lago, Florida, former President Trump said he was ready to challenge his opponent also on September 4 and 25 on Fox and NBC. Trump also said there would be a peaceful transition “if the elections are honest.”
European price lists recovering, insurance bills arrive
I European price lists close "only" slightly down, after having touched heavy declines in the morning. The recovery was favored by the in tune start of Wall Street (Nasdaq +2,2%). The trend of requests for unemployment benefits in the United States in the week ending on the 3rd of August, stuck at 233 thousand against expectations of over 240 thousand.
Today is insurance securities day. In the first semester, the Unipol Group, one of the great protagonists of the list with the stock that grew by +73% in 2024 against +3,3% of the FTSEMIB, recorded a consolidated net profit of 555 million euros, with an increase of 7,4% compared to the same period of the previous year. Considering the contribution of the investments in BPER and Banca Popolare di Sondrio, the recalculated net profit stands at 632 million euros. There direct insurance income it grew by 10,4%, reaching 8.165 million euros compared to 7.393 million in the first half of 2023.
Generali shows financial solidity with an operating result growing by 1,6%, reaching 3,7 billion euros, thanks to the positive contribution of the Life and Asset & Wealth Management segments. Normalized net profit was 2 billion euros, down from the previous year due to extraordinary events, but would have remained stable excluding these effects. The Solvency Ratio stands at 211%, reflecting a solid capital position despite the acquisition of Liberty Insurance and the launch of a €500 million buyback program. The stock has grown by +16% in 2024 against +3,3% of the FTSEMIB.
Markets recovering from the big hangover
The markets remain hangover from last month's big hangover, provoked by Japan and the race for artificial intelligence”.
On July 31, however, the Boj began to raise rates, while the Fed is about to move in the opposite direction. the Bank of Japan has moderated its tone and made it clear that it will allow time to dismantle what remains without getting too hurt.
However, the issue of double “American magic”: the one according to which the United States would never have gone into recession) and of Artificial Intelligence (the one according to which the securities linked to it would have risen for many years.
The American magic is over, the soft landing remains
But Double American magic is truly over? The smaller one, Artificial Intelligence, probably yes, at least for some time. The sector will lead the first part of the recovery, but will then retreat to the second row until revenues show signs of seriously accompanying the very strong investment expenses incurred so far. The truly decisive theme therefore remains, the great magic of the American no landing/soft landing.
The debate is very open. The Atlanta Fed estimates that as of August 6, US GDP in the third quarter is growing at an annualized rate of 2.9 percent, more overheating than recession. The signs of stability in employment coming from the Department of Labor have given relief to a market worried about economic growth. The slowdown remains welcome, because it brings the rate cut closer, but it is welcome as long as it does not become a slowdown that is a prelude to a stalemate.
Our idea is that, although there are signs of a slowdown, However, a soft landing framework prevails. The hard landing remains only a hypothesis, even if the markets will continue to talk about it for a long time. The mere fact of talking about it will clip the wings of stock market recoveries, which will occur but will be nervous and in need of continuous positive confirmation.
