London, 11 August 2026 — EBM Newsdesk Analysis — By Anthony Gill
American employers cut 23,000 jobs in July against expectations of around 80,000 additions, the fourth consecutive month of weakening growth, with previous figures revised down again. In the same week, the Nasdaq recorded its strongest run since April, the Dow gained nearly 3%, and the S&P 500 and Russell 2000 set fresh records.
That is not a contradiction. It is the mechanism markets have run on for two years: weak employment implies a less restrictive Federal Reserve, cheaper money lifts valuations, and equities rally on the news that the economy is deteriorating. The ten-year Treasury yield fell from 4.74% to about 4.64% on exactly that logic.
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The detail is worse than the headline. Job openings fell to 7.359 million in June. Private employers added 44,000 in July. Three months of revisions have all gone the same way.
The one genuinely reassuring number is weekly unemployment claims, which remain subdued. That matters, because it distinguishes a hiring freeze from a firing wave. Companies have stopped taking people on; they have not yet started letting them go. Those are different phases and the second is considerably worse.
Europe Improved, Then You Look at Where
European equities had a good week. The STOXX Europe 600 gained 1.70%, Italy’s FTSE MIB 2.96%, Germany’s DAX 2.69% and France’s CAC 40 2.41%. The FTSE 100 managed 0.30%, continuing its own record run at a rather more sedate pace.
The eurozone services PMI returned to expansion at 51.7 from 49.4, a five-month high, with better employment and confidence readings and easing price pressures. Encouraging, and a real recovery from the energy shock earlier in the year.
But France came in at 49.8 and Germany at 49.8. Both improved. Both remain below the line separating expansion from contraction.
So the eurozone’s return to growth is being carried by everyone except its two largest economies. That is a considerably more fragile recovery than the aggregate figure suggests, and it is the sort of detail that gets lost when an index number crosses 50. Britain, for what it is worth, looked better than either: services at 52.1 and manufacturing at 52.8.
The Same Trade, Everywhere
The other pattern worth naming is how narrow the drivers are.
American gains came from renewed enthusiasm for AI-related stocks. Chinese gains came from technology and semiconductor shares, with the Shanghai Composite up 2.81%. Chinese exports rose 23.9% year on year, driven substantially by AI-related electronics. Japan added 1.93% on the Nikkei.
Strip out artificial intelligence and the global rally looks a good deal thinner. That is the same concentration risk we identified in Europe’s equity inflows, where investors buying the continent as a hedge against technology volatility found their best performer was a semiconductor materials company.
The Upshot
My view is that this was a week of markets pricing relief rather than growth, and that the distinction will matter before the year is out.
Nothing in the data describes an economy accelerating. American employment is contracting, Chinese domestic momentum is easing with both PMIs slipping, Japanese household spending is weak despite rising wages, and the eurozone’s two largest economies remain in contraction. What improved was the outlook for interest rates and the possibility of the Strait of Hormuz reopening — one a consequence of weakness, the other a removal of a risk rather than the arrival of a benefit.
Markets can rise on that for some time. They have been doing so. But an index at a record high on the day employers shed 23,000 jobs is not evidence that the economy is strong. It is evidence that the market has stopped watching the economy and started watching the central bank.
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