US job growth stalled in August

In focus today

In the euro area, focus turns to the no-confidence vote on French prime minister Bayrou. Bayrou and his government are expected to fall with both the far right and the left-wing parties vowing to vote against his minority administration. President Macron can then choose a new premier or call for a snap election. Macron has expressed a preference to avoid snap elections, with hints of forming a centrist government potentially led by a Socialist prime minister. However, the outlook for a new government remains highly uncertain. We expect political uncertainty in France to persist and view significant near-term improvements in public finances as unlikely.

We also receive the Sentix investor confidence indicator for September.

For the remainder of the week, the key focus is the US CPI release on Thursday, alongside the ECB meeting. Ahead of this, markets will watch the BLS preliminary annual benchmark NFP revision on Tuesday, followed by inflation data from China and Norway as well as US PPI on Wednesday. The week wraps up with the US Michigan survey on Friday.

Economic and market news

What happened overnight

In China, export growth slowed to 4.4% y/y in August (prior: 7.2%), the weakest pace since February and below expectations. While exports have outperformed in recent months, supported by stronger exports to Asia offsetting weaker shipments to the US, the latest data highlights emerging pressures. Import growth, though slightly improved in recent months, remains subdued, reflecting weak domestic demand. Imports rose 1.3% y/y (prior:4.1%), also missing forecasts. Read more in Research China - Domestic economy struggles while exports power ahead, 8 September.

What happened since Friday

In the US, the August jobs report came in very weak, with employment rising by 22k (cons: 75k). Revisions of previous months reveals 21k fewer jobs created. Manufacturing jobs declined further, with 38k fewer than prior to Trump's presidency. Unemployment increased to 4.3% from 4.2%, partly driven by a growing labour force. The data confirms the signs of a cooling labour market, though broader economic indicators remain stable. Read more in Research US - Tariff impact set to intensify towards winter, 5 September. The weak report strengthens the case for a rate cut in September, with inflation data and payroll revisions this week unlikely to change the outlook. Markets reacted by sending yields lower and weakening the dollar.

In the euro area, wage growth, measured as compensation per employee by the ECB, declined to 3.9% y/y in the second quarter of 2025 from 4.0% y/y in Q1. The data follows the higher-than-expected negotiated wage data and is markedly above the ECB's latest staff projection of 3.4% wage growth in Q2. Persistently elevated wage growth means services price pressures are likely to decline less slowly, which on the margin is hawkish. 

In China, tensions with the EU escalated further as China on Friday announced anti-dumping tariffs on EU pork imports ranging from 15.6-62.4%. Although labelled as preliminary, the tariffs are likely to remain if the EU maintains higher tariffs on Chinese EVs. Although the overall economic impact on the EU is limited, the move will hurt EU pork exporters, as China accounts for half of their export market.

In Japan, after less than a year in the seat, PM Ishiba decided to step down yesterday ahead of a vote among party parliamentarians which would have likely forced him out. Ishiba's term has seen headwinds from the start, after a bold move to call a snap election after his election as Liberal Democratic Party (LDP) president backfired. Among candidates for the LDP-leadership are the fiercest competition from last year's elections. Sanae Takaichi, last year's runner-up and an Abenomics-loyalist, has previously been critical of BoJ hiking rates and will likely stand for a looser fiscal policy stance, but many other candidates will likely appear ahead of the election likely taking place in early October. The LDP is currently running an unusual minority government, and thus the new president will not necessarily become the new PM and might call for another snap election. Markets reacted by trading USD/JPY back above 148 levels and investors have increasingly retraced their bets on an October hike from the BoJ amid the political uncertainty.

In the commodity space, OPEC+ announced on Sunday a further oil production increase of 137,000 barrels per day from October. The move is driven by Saudi Arabia's push to regain market share. Although the increase is smaller than recent monthly hikes, it signals a shift towards prioritising market share over prices, amid expectations of weakening global demand in the months ahead.

Equities: Equities were mostly lower on Friday, but not as much as one might think after such a weak US job report. It was a tug of war between growth fears on one side, but lower bond yields on the other, leaving most main indexes only modestly lower but after rallying shortly upon the release. Stoxx 600 closed down -0.1%, S&P 500 -0.3% but Nasdaq was unchanged and interest rate sensitive small cap Russell 2000 even closed 0.5% higher. Sector performance painted a similar picture; yield sensitive real estate and high multiple stocks outperformed while growth sensitive value cyclicals like banks and industrials sold off. Similarly, falling yields and weakening growth tend to favour US equities over Europe. This was the case last week as well, marking another week of underperformance for Europe (-0.5pp). US and European futures are modestly higher this morning.

FI and FX: Friday's session was naturally dominated by the US NFP market reaction with the USD FX selling off and US FI rallying. EUR/USD initially traded as high as 1.1760 before erasing part of the gains now trading at around 1.1710 this morning. Overnight oil prices have traded higher, Brent crude hitting 66 USD/bbl, despite OPEC+ announcements on higher supplies. EUR/NOK trades around 11.75 while EUR/SEK is testing the 11.00 threshold which technically will be important for the near-term direction.