Resilient Markets Amongst Political Currents and Economic Drift

This week was marked by mixed labor market figures, political tensions and signs of economic slowdown, all in a context of growing uncertainty. The May employment report showed the creation of 139,000 nonfarm jobs, above expectations of 130,000, although below April's revised 147,000. The unemployment rate remained at 4.2%, but revisions to previous months detracted from the strength of the report. Meanwhile, the JOLTS report revealed an increase in vacancies to 7.39 million and a drop in the quits rate to 2%, reflecting lower labor mobility. In line with this data, the Federal Reserve's Beige Book described a slight slowdown in economic activity and a "slightly pessimistic" outlook. It highlighted that businesses expect to pass on the impact of tariffs to consumers in the coming months, while wage growth remains modest and hiring limited by uncertainty. PMI indices also reinforced this view: the manufacturing sector fell to 48.5 points and the services sector fell to 49.9, entering contractionary territory.

On the international front, Trump held a call with Chinese President Xi Jinping. According to Chinese media, both leaders agreed to resume trade negotiations and Xi reiterated that China has complied with the Geneva agreements, although US officials disagree. Trump called the conversation "very good" and mentioned progress on key issues such as rare minerals, in addition to inviting Xi to visit the U.S. Trump also pushed through controversial measures this week: he made official an increase in steel and aluminum tariffs from 25% to 50%, proposed eliminating the federal debt limit, and signed an order banning travel from 12 countries and restricting visas to seven others. In addition, the Senate confirmed Michelle Bowman as Vice Chair of Federal Reserve Oversight.

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