Sunset Market Commentary

Markets

• Markets also today held a wait-and see modus ahead of Fed Chair Kevin Warsh’s speech at the Jackson Hole Fed symposium tomorrow. Eco data (wider than expected US trade deficit in July, ongoing mild weekly jobless claims at 203k, slightly better than expected German consumer confidence) evidently were no good enough reason for interest rate markets to adjust positioning ahead of tomorrow’s key event risk. US yields are rising less than 2 bps across the curve. Kansas Fed President Jeff Schmid in a Bloomberg interview indicated that he doesn’t see current Fed rates as restraining the US economy at a time when inflation continues to run above the 2% target. He even suggested that short-term rates might be slightly accommodative, concluding that the Fed has work to do. Bunds marginally underperform with German yields rising 1.5-2 bps. Moves are technically irrelevant but especially EMU/German yields are holding within reach of recent peak levels. The ECB published the accounts of the July 22-23 policy meeting. The general conclusion was that the council after the June rate hike was in a good position to wait from more evidence to reassess policy at the September meeting. Some softer incoming data in the run-up to the meeting were seen as supporting the case for a pause as did the evidence of little second effects yet. At the same time, some members indicated already at that time that they wouldn’t have opposed raising rates at the July meeting as the saw a low likelihood of a situation in which a further rate hike would NOT be warranted, referring to the analysis in June which showed that rates needed to increase further under all scenarios conducted in the projection. Amongst several other factors, we also take notice of the fact that the ECB elaborated rather extensively on the issue that crude oil prices are not the only factor when assessing the energy market, as gas and oil derivatives are also important for the inflation outlook. In the meantime, (Brent) oil, gas and for example gasoline prices are substantially above the levels taken into consideration at the time of the July meeting. While holding to a data-dependent approach the ECB still concluded that another rate hike would likely be necessary unless the inflation outlook improved significantly. Markets in this context kept their view that a September rate ECB rate hike is ‘unavoidable’ (97% discounted) and that more follow-up action will likely be needed early next year. On other markets, strong Nvidia results supported the tech sector (Nasdaq 1%) but optimism didn’t really spill over to broader markets (Eurostoxx 50 -0.4%, Dow open little changed). Little to report also in the major USD cross rates (EUR/USD 1.1655, DXY 99.1, USD/JPY 159.4).

News & Views

• The Canadian statistical office today released June employment data according to the Survey of Employment, Payrolls and Hours (SEPH). They showed the number of employees receiving pay and benefits from their employer little changed (+4.8k) following a 45k increase in May. Compared to June 2025, payrolls employment was 155k higher. June gains came especially in public administration and construction and were partially offset by declines led by manufacturing (first since December 2025). On a Y/Y-basis, average weekly earnings were up 3.4%, following an increase of 3.3% in May. Job vacancies edged up by 10.5k to 509.1k and by 13.8k Y/Y (+2.8%). The job vacancy rate was unchanged at 2.8%. Canadian markets didn’t respond to today’s numbers as they come with a lag compared to labour market data based on the Labour Market Survey. June (LMS) figures suggested a 0.6k increase in employment in June.
• Wheat prices surged to a three year high (>750 USd/bu.) and come as another warning for the effect of rising global food prices. The acceleration came after people close to the Kremlin indicated that Russia is preparing to escalate attacks on Ukraine after concluding that negotiations for a peace deal have reached a dead end. Russia and Ukraine account for more than a quarter of global exports. Ukraine’s Agriculture Ministry warned earlier this month that agricultural shipments could fall by more than half this season after Russian attacks disrupted Black Sea ports. The Russian Institute for Agricultural Market Studies (IKAR) expects wheat shipments to fall to less than 2m tons in August, from 4.4m tons a year earlier.