Finimize - ⚓️ Lost at sea

What’s going on here?

The US economy outfoxed pundits, adding fewer jobs than expected last month.

What does this mean?

The 18-month interest-rate hiking spree by the Federal Reserve (the Fed) seems to be having its intended effect, with inflation cooling and the economy still holding its ground. And this latest jobs update marks the second straight month the market’s undershot expectations, with only 187,000 new jobs against the 200,000 forecast – a sign that the Fed’s tightening is starting to bite. But that’s not all: the figures for the previous two months were revised and lowered too. And with the average workweek now at its shortest since the pandemic began, it seems the job market might continue to cool.

Why should I care?

The bigger picture: Easy does it.

The Fed has its eyes on the labor market, seeing it as a key player in the inflation game. But it’s a balancing act: push too hard, and the economy could stumble into a downturn. But move too slowly, and inflation might stick around. Despite that tightrope walk, the US seems to be on track for a soft landing – even with wage growth numbers slightly overshooting the mark. At any rate, markets are still betting that last week’s rate hike was the last one this year. After all, wage growth is slowing, and the full impact of rate hikes might take time to percolate through the country.

For markets: To market, to market.

The US stock market initially gave a nod of approval to the news, with investors upping their bets that there won’t be any more rate hikes this year. And with a solid earnings season in the rearview mirror, there’s even more to cheer about. 84% of firms in the S&P 500 have now reported their results, and 80% of them have outpaced analysts’ expectations – setting the stage for further potential gains in the coming weeks.

What’s going on here?

Shipping giant Maersk sounded the foghorn and warned about a darkening outlook for global trade on Friday.

What does this mean?

Maersk has been navigating choppy waters lately. Despite beating expectations last quarter with some savvy cost-cutting, the company’s revenue was actually 40% lower than the same period last year. The culprit: global consumer demand, which is drying up faster than a Saharan puddle in early August. As a result, companies are playing it safe, choosing to work through their existing stockpiles rather than splashing out on new orders. And that cautious approach is mirrored in shipping rates, which took a 50% belly flop last quarter and are now floating below pre-pandemic levels. Those waves have got Maersk, already steering a cautious course, further trimming its sails: the company is now bracing for global container trade to shrink up to 4% this year, a gloomier outlook than its previous 2.5% contraction prediction.

Why should I care?

Zooming in: Not quite in the same boat.

Not everyone in the shipping industry is on the same page. Consider Maersk’s rival MSC, which used its hefty profit from the last few boom years to launch a fleet of new vessels. But that move might be a case of bad timing: with demand sinking, an oversupply could further depress shipping rates. Meanwhile, Maersk has been diversifying by building up its land-based logistics. But even this strategy is facing headwinds: Maersk saw its first revenue drop in years for the segment, and is now planning job and capacity cuts.

The bigger picture: A rising tide.

Given Maersk ships about a sixth of all containers worldwide, its grim forecast typically carries weight for the outlook of the global economy too. But while things don't look so great for shipping trade, the IMF is actually getting more optimistic about the global economy: it upped its outlook for growth to 3% last week.