Looking for the silver lining…

Investor optimism returned towards the end of the week, buoyed by the expectation that the major  central banks will remain supportive of financial markets and stronger than expected US economic data. The minutes  from the last US Fed meeting showed that officials were losing confidence in the need to tighten  monetary policy any time soon and that the May slowdown in US employment and Brexit referendum  uncertainty influenced their decision to keep rates on hold. Renewed concerns over Italian banks  resurfaced this week, adding to the fallout from the Brexit decision, but attention was soon  shifted to the US to assess if sustainable economic recovery remained intact.

US data did not  disappoint – both manufacturing and services data improved from the previous month; the much  anticipated US payroll data showed that the economy added 287,000 jobs in June which was well above  market expectations; the unemployment rate increased from 4.7% to 4.9%, but only because more  people joined the labour force; and wages improved modestly and all together, the employment data eased fears over slowing momentum.

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