Weekly market wrap up

Europe’s record-breaking heatwave has become more than just an uncomfortable start to summer - it is now an economic story. Temperatures climbed above 40°C across parts of Spain, France and Italy, while the UK recorded one of its hottest Junes on record. The human cost has been significant, and the economic effects are becoming harder to ignore. Rail services have slowed as tracks buckle, outdoor construction has been disrupted, tourist attractions have adjusted operating hours, and soaring electricity demand has placed pressure on power grids. Agriculture is also facing another reminder that extreme weather can quickly affect crop yields and food prices. It is a timely example that climate risk is no longer a distant scientific concept, it is increasingly influencing productivity, inflation, insurance costs and investment decisions. 

The US labour market delivered one of the more closely watched numbers of the week, with Non-farm Payrolls rising by just 57,000 in June, well below expectations of around 110,000. April and May were also revised down by a combined 74,000 jobs, reinforcing the sense that hiring has been softer than first thought. The unemployment rate still dipped to 4.2% from 4.3%, but that partly reflected people leaving the labour force, making the headline a little less reassuring than it first appeared. Job gains were concentrated in professional and business services, social assistance and healthcare, while leisure and hospitality went backwards. For markets, the message was not one of alarm, but of a labour market steadily losing momentum. 

New Zealand businesses perked up in June, with ANZ business confidence jumping to 36.6 from 10.0 in May, its strongest reading since February. Even better, firms’ own activity outlook rose to 36.9 from 25.6, while investment and employment intentions also improved. That is not quite a ticker-tape parade, but after the wobble caused by higher oil prices and global uncertainty, it is a useful reminder of how quickly things can change. The catch is that the backward-looking activity measure softened, so the story is more about confidence in what may be ahead than what has already landed in the till. Inflation expectations also eased to 3.36%, while pricing intentions remained elevated, which keeps the picture mixed rather than magical. 

Wall Street wrapped up the second quarter with impressive momentum, delivering its strongest quarterly performance since 2020 despite facing no shortage of challenges. The S&P 500 and Nasdaq both surged to record highs, driven largely by continued enthusiasm for artificial intelligence and the companies supplying the technology behind it, particularly semiconductor manufacturers. What makes the rally particularly striking is that it unfolded against a backdrop of persistent inflation, uncertainty over US interest rates and heightened geopolitical tensions in the Middle East - hardly the ingredients for a carefree market. Instead, investors focused on resilient corporate earnings and the long-term AI story, highlighting the market's ability to look beyond near-term uncertainty.