European Indices Hit Records as Weak US Jobs Data Lifts Rate Cut Hopes

Broad Rally Sends European Benchmarks to All-Time Highs

Stock markets on both sides of the Atlantic celebrated a week of records. Europe’s Stoxx 600 climbed 1.7% to 660, the S&P 500 surged 3.4% to 7,746, and Japan’s Nikkei 225 added 2.1%. Underpinning the advance were strong corporate results—especially from artificial-intelligence-exposed names—and a relative calming of tensions around the Strait of Hormuz.

The mood was further lifted by the US employment report for July, which badly missed forecasts. Economists had pencilled in 80,000 new jobs; instead, the economy shed 23,000 positions, and revisions erased another 103,000 from the previous two months. Although the unemployment rate dipped to 4.1%, the weak headline number convinced traders that the Federal Reserve is now almost certain to stay on hold at its September meeting, reversing earlier fears of a rate increase.

Commodities stole the spotlight as well. Gold surged 7% to around $4,350 an ounce, propelled by a sliding dollar and Middle East uncertainty, while sister metal silver tracked a similar path toward $64. Copper spiked above $14,000 per tonne on the LME after the Democratic Republic of Congo banned exports of copper and cobalt concentrates. Crude oil had a volatile week, plunging 11% early on hopes of a US-Iran deal to reopen the Strait of Hormuz, then recovering to about $84 a barrel after an Iranian parliamentary committee discussed banning US and Israeli vessels from the waterway.

Standout equity movers included British ad giant WPP and Irish insulation maker Kingspan—both boosted by strong results—while airlines Lufthansa and fashion platform Zalando slumped on disappointing earnings and surging fuel costs. The crypto market stayed quiet, with bitcoin hovering near $65,000 and ether around $1,920.

Why a Bad Jobs Report Became Good News for Markets

The Fed Pivot Narrative Gains Momentum

The -23,000 payrolls print flipped the interest-rate story almost overnight. A week ago a September hike was a live possibility; now markets see a pause as the base case. The logic is straightforward: a cooling labour market reduces the urgency to tighten further, and equities cheer the prospect of a friendlier rates backdrop. Bond yields fell accordingly, feeding the renewed appetite for risk assets.

Gold’s 7% Surge: More Than Just Geopolitics

Gold’s weekly leap—its best in months—was not solely the work of Middle East nerves. The dollar softened in response to the dire jobs data, making the metal cheaper for non-US buyers, while traders reassessed the future rate path. The combination of a weaker greenback, safe-haven demand, and potential supply-chain jolts (Congo’s export ban also lifted copper) created a perfect environment for precious metals. The rally, however, looks stretched by historical standards and will need fresh catalysts to hold above $4,300.

European Record-Breakers Reveal Sector Divergences

The broad European gauge hit new peaks, but the advance was far from even. Companies tied to AI and digital infrastructure, such as chip designer Sivers Semiconductors and building-materials supplier Kingspan (benefiting from data-centre demand), powered ahead. Defense electronics firm Hensoldt rode Europe’s rearmament wave, while investor Eurazeo showed it can monetise holdings at favourable terms. On the losing side, Lufthansa’s EBIT tumbled 56% as fuel costs soared by €750 million, and Zalando’s growth disappointed. These divergences underline that indices are masking acute pain in sectors exposed to commodities and cautious consumer spending.

US Earnings: AI Boosts Outweigh a Few High-Profile Misses

American companies broadly extended the pattern of the past quarters: those with a direct or indirect link to artificial intelligence delivered beats. Timing-semiconductor firm SiTime and neobank Chime Financial both crushed estimates, while defense services provider Caci International posted adjusted EPS of $8.91, well above the $7.26 consensus. Even some misses—like Western Digital’s soft outlook—were attributed to overhyped expectations rather than structural weakness. Morgan Stanley noted that Applovin’s stumble was an “execution problem,” not a sign of sector-wide advertising trouble.

Key Catalysts That Will Define Market Direction in the Weeks Ahead

• Watch the US inflation prints on Tuesday (CPI) and Wednesday (PPI). The Fed pivot narrative now hinges on price data; a hot reading could swiftly reprice rate expectations and sting the rate-sensitive tech and growth segments that have led the rally.
• Monitor the Strait of Hormuz developments closely. Oil’s round-trip from $74 to $84 and back shows how rapidly sentiment can swing. Any formal US-Iran agreement—or breakdown of talks—will directly alter the cost outlook for airlines, logistics firms, and consumer-goods manufacturers.
• Keep an eye on gold’s momentum. A 7% weekly gain often invites profit-taking. The metal’s next moves will be dictated by the dollar’s reaction to the inflation reports and by any escalation in the Congo export ban, which has already fired up copper and could support broader commodity flows.
• Earnings spotlight shifts to Cisco, Applied Materials, Tencent, CoreWeave, Alcon, and Adyen next week. These reports will provide fresh signals on AI capex, Asian tech demand, and European fintech health—key themes that have been driving the rally so far.
• Lufthansa’s €750 million fuel hit is a warning for the entire travel sector. Investors should differentiate between carriers with hedging in place and those fully exposed to spot kerosene; the risk of further negative revisions remains high if oil stays above $80.