Key Takeaways
- July payrolls fell by 23,000 against expectations of an 80,000 gain, the first monthly decline in more than four years, with 103,000 of downward revisions to May and June. Market pricing of a September hike faded sharply.
- Before the print, the melt-up ran: the S&P 500 posted its first record close in two months, the Dow touched 54,349, Amazon became the fifth $3 trillion company and Palantir rose 29.5 per cent on a 93 per cent growth quarter.
- Oil whipsawed as Washington called off strikes on Iran and floated a Strait of Hormuz deal: Brent fell from near $90 to the low $80s, and OPEC+ completed its quota unwind with a final 188,000 bpd rise for September.
- Washington and Tokyo confirmed the first coordinated yen intervention in more than a decade, and the Fed announced its first official survey of the $1.3 trillion private credit direct lending market.
The week in one paragraph
For four days this was a melt-up week: an Iran de-escalation knocked a third of the war premium out of oil, the S&P 500 printed its first record close since June, and two companies, Amazon and Palantir, carried the AI trade to new highs. Then Friday’s July jobs report showed the US economy shedding workers for the first time in more than four years, and the argument that has dominated markets all summer, whether the Federal Reserve’s next move is a hike, quietly lost its legs. Equities took the news well, because for once bad news on growth was good news on rates. Whether that trade survives next week’s inflation data is now the question.
1. Payrolls turn negative: minus 23,000
The Bureau of Labor Statistics reported a fall of 23,000 in July nonfarm payrolls against consensus near 80,000, the first outright monthly decline since the pandemic recovery began. The details were no kinder: May and June were revised down by a combined 103,000, leaving June at just 20,000, unemployment ticked down to 4.1 per cent on a smaller labour force, and wage growth cooled to 3.2 per cent year on year. Local government education, retail and financial services shed jobs while healthcare carried what growth remained. Treasury yields fell and futures rose on the release, because a shrinking jobs market is very hard to square with the three FOMC dissents for a hike only nine days earlier. The September debate we traced in pricing the September hike has not ended, but the bar for tightening into a contracting labour market is far higher than it was at breakfast on Friday.
2. The Iran stand-down and the oil whipsaw
The week opened with Washington calling off planned strikes on Iran and offering a deal to reopen the Strait of Hormuz. Brent fell 4.7 per cent on Monday to $83.75 and WTI dropped 5.2 per cent, unwinding a slice of the premium we anatomised in the invisible blockade. The relief did not travel in a straight line: by Thursday, doubts about the talks had put nearly 4 per cent back on Brent. Meanwhile OPEC+ used the calm to finish the job it started in 2023, approving a final 188,000 bpd quota rise for September that completes the unwinding of roughly 3.5 million bpd of cuts, with delegates signalling a pause thereafter. Supply policy is now set; the oil price is a geopolitics trade again.
3. Records, a fifth $3 trillion company, and a 93 per cent quarter
Equities spent the first half of the week making history. Monday’s relief rally lifted the Dow 1.3 per cent to a record; Tuesday brought the S&P 500’s first record close in two months; Wednesday the Dow touched 54,349 before a pre-payrolls pause on Thursday. The drivers were narrow and telling. Amazon became the fifth company worth $3 trillion, capping the melt-up’s fine print of concentrated leadership and rising yields. And Palantir grew revenue 93 per cent and rose 29.5 per cent, against an options market pricing a 12 per cent move, splitting the AI trade into hardware sceptics and software believers a week after the market graded Big Tech’s capex line by line.
4. The yen intervention goes official
On Monday Japan’s finance ministry confirmed it had bought yen in coordination with the US Treasury, the first joint intervention in more than a decade, and the dollar fell to 156.34 yen from above 163 the week before. Our analysis of the joint intervention set out why two treasuries defending a line changes the calculus for the world’s largest funding trade; this week the market began testing how firm that line is, with USD/JPY holding near 156 into the weekend. A softer run of US data, if Friday’s payrolls are the start of one, would do some of the intervenors’ work for them.
5. The Fed starts counting private credit
Away from the tape, the Dallas and New York Feds announced the first official survey of the $1.3 trillion private credit direct lending market, a milestone we examined in The Fed Starts Counting. The timing is pointed: Ares raised a record $36.4 billion in the same quarter its retail credit fund gated redemptions, and private capital signed a $16 billion, 20-year Gulf infrastructure deal mid-conflict. A market this large being measured for the first time says as much about where risk has migrated as any price move this week.
The numbers
| Measure | Level | The week |
|---|---|---|
| S&P 500 | ~7,710 | First record close in two months on Tuesday |
| Dow Jones | ~53,900 | Record 54,349 on Wednesday |
| US 10-year yield | ~4.7% | Fell after Friday’s payrolls |
| Brent crude | ~$84 | Down ~7% from $90 on the Iran stand-down |
| USD/JPY | ~156 | From above 163 before the joint intervention |
| Gold | ~$4,180 | Jumped 1.7% after the jobs report |
| July payrolls | -23,000 | vs +80,000 expected; -103,000 revisions |
What to watch next week
Wednesday 12 August: US July CPI, the last major inflation print before the September FOMC takes shape, now read against a weakening jobs market. Thursday 13 August: UK second-quarter GDP at 7:00am tests the Bank of England’s dovish arithmetic, US PPI follows at 1:30pm, and the 30-year Treasury auction gauges demand for duration at the highest long-end yields in almost two decades. Friday 14 August: US July retail sales ask whether the consumer noticed any of this. The full preview is in the week ahead.
Related reading: The Fed Starts Counting · Amazon’s $3 Trillion Market Cap · Palantir’s 93% Quarter · The Joint Yen Intervention
Leave a Reply