US stocks ended the holiday-shortened week higher, with the S&P 500 and Nasdaq hitting record highs for the 2nd straight week. Smaller-cap indexes outperformed, and markets saw light trading ahead of the July 4 holiday. Job growth in June exceeded expectations with 147,000 new jobs, pushing unemployment down to 4.1%. While ADP data had signaled weakness, government data showed strong labor demand, especially in services and finance. Manufacturing activity continued to contract, but the services sector rebounded to growth. Bond markets were steady, with high yield and investment-grade bonds posting gains, supported by strong equity performance and favorable economic conditions.
European stocks were almost flat until Thursday, but the STOXX Europe 600 dropped slightly on Friday amid tariff fears. Eurozone inflation rose to the European Central Bank’s 2.0% target in June, while core inflation held steady at 2.3%. Services inflation, a key concern for policymakers, edged up to 3.3%. The eurozone job market remained strong, with unemployment ticking up slightly to 6.3%. ECB President Christine Lagarde struck a cautious tone, signaling that more data is needed before further rate cuts. In the UK, house prices dipped 0.8% in June, but were up 2.1% y/y. Despite the monthly drop, Nationwide expects prices to rise over the summer. Mortgage approvals climbed in May, pointing to a recovering housing market after a brief slowdown.
