European markets face a session without the direct reference of Wall Street. The NYSE and Nasdaq remain closed in observance of Independence Day, leaving European investors to navigate an environment of tighter liquidity and less guidance from the United States.
The American closure comes after a session already influenced by the US employment data, which changed expectations on the Federal Reserve’s monetary policy. For Europe, the absence of Wall Street amplifies the weight of the indications coming from the macro-data and can make the reading of the price lists more selective.
In this scenario, European stock markets, BTPs, banks and the euro/dollar exchange rate remain exposed to rate expectations. The market is looking above all at the possibility that the slowdown in American employment will reduce pressure on the Fed, with indirect effects also on global yields and risk appetite.
US jobs below expectations, what changes for the Fed
The most relevant data comes from American payrolls. In June the US economy created 57 thousand new jobs, much fewer than market expectations, while the unemployment rate fell to 4.2%. The reading, however, is not entirely positive: the decline in unemployment was accompanied by a decline in labor force participation, a sign that a part of the population has left the job market.
For the Federal Reserve, the data opens a more complex phase. A less robust labor market reduces the urgency of new rate tightening, but does not yet allow the inflation problem to be declared closed. The American central bank must, therefore, balance two risks: on the one hand prices still higher than the target, on the other less solid employment growth.
It is precisely this ambiguity that interests the markets. If the Fed were to adopt a less hawkish tone, Treasuries and the dollar could lose steam, supporting more rate-sensitive assets. If, however, inflation were to remain persistent, the scope for softer monetary policy would remain limited.
Asia recovers after US data and chip rebound
The first market reaction came from Asia, where the stock markets recovered ground after two weak sessions. The MSCI Asia-Pacific ex-Japan index rose, the Nikkei closed positive and the Korean Kospi recorded a stronger rebound, supported by the recovery of semiconductors after the selling of the previous days.
The movement is important because it signals a partial recomposition of global sentiment. The weakness of US employment was seen as an element capable of cooling rate expectations, while the PMI data from the Asian area contributed to improving the perception of international demand. The technology sector, however, remains monitored, after the rotation that hit stocks linked to AI and chips.
For European markets, the Asian signal is useful, but not sufficient. The recovery of chips supports the general tone, but the session remains conditioned by the absence of Wall Street and the need to understand whether the American employment data represents a temporary slowdown or the beginning of a weaker phase of the US economy.
Effect on BTPs, banks and the Italian market
For the Italian market the main channel passes through returns. Weaker US jobs may reduce expectations of an aggressive Fed and help ease pressure on global rates. In this case, BTPs could benefit from a less restrictive climate, with effects also on the spread and cost of debt financing.
Italian banks, however, remain at the center of a more detailed reading. Lower rates can ease the pressure on families and businesses, improving credit quality. At the same time, a normalization of yields can reduce the support for interest margin, which in recent years has represented a decisive component of bank profitability.
This is why investors are already looking ahead to the semi-annual reporting season. Large institutions will be evaluated not only on profits, but on the sustainability of revenues, the evolution of commissions, the cost of risk and the dividend and buyback policy.
European markets between Fed, dollar and upcoming macro data
The day opens, therefore, with a delicate balance. The absence of Wall Street reduces an important reference for operators, while the US employment data changes the reading of the Fed’s next moves. For European stock markets the central theme becomes the direction of yields and the dollar, variables that impact banks, industry, technology and exporting stocks.
The Italian market moves within this framework. On the one hand, a slowdown in the US economy may strengthen the case for less aggressive rates. On the other hand, data that is too weak can reopen questions about global growth and the stability of demand.
For Europe and for Piazza Affari, the test will be to understand whether the slowdown in payrolls opens a phase of relief on rates or whether it anticipates new cautions on growth.
