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Daily Market Update

The German yield curve inverted today after the ECB raised rates (as expected) to 4.25%.  With multiple economies to deal with, the ECB could be having a hard time as some economies will be facing growth scares before others.  They've firmly got their eyes on the inflation aspect, however, and are not taking the risk that it spirals into wage inflation.

Lots of data has past since I last commented, included the important ADP Employment change.  Measuring the private sector employment, it crashed yesterday, posting a 119,000 swing in jobs since May's release.

ISM index rebounded just into expansion territory of 50.2, but the prices paid component was a lofty 91.5

US Vehicle sales dropped 700,000 units or 5% for June, 600k of that was domestic vehicles.

This morning, the all important payrolls number is out a day early, because of the US holiday tomorrow.

The US economy lost 62,000 jobs in June, and last month was revised WAY down to a loss 62,000.  Unemployment remained at 5.5%, and Initial jobless claims (reported weekly) was way higher at 404,000.

We perceive this number as being very bearish...  Even though some were expecting a huge loss of 100k or more, the revision from last month and the continuation of a downward trend is enough to make us worry.

 The yield curve has gotten slightly steeper on this news.  Long bonds are dropping while the 2 years are flat on the day.  Interesting, however, that the gains in the bond market are being given up.  The reaction in the market are not what we would expect, particularly given the large downward revision of last month's number.

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