Group 1 - The U.S. labor market's condition has become a focal point for the Federal Reserve and global markets, with recent soft employment data leading to a significant shift in market assessments [1] - The probability of a "soft landing" scenario remains the most likely outcome in the medium term, despite an increase in the likelihood of a "hard landing" to 20% [1] - The U.S. economy is described as being in a "muddling through" state, with growth not strong but still positive, and the likelihood of stabilization outweighing continued downturns [1] Group 2 - In Europe, the economic environment is improving as tariff uncertainties decrease, and the European Central Bank does not anticipate further rate cuts [2] - The outlook for U.K. bonds is neutral, with the Bank of England's recent hawkish stance and positive growth prospects for the U.K. economy suggesting limited strong performance for U.K. government bonds in the short term [2]

Group 1 - The core viewpoint is that Schroders has adjusted the probability of a "soft landing" scenario for the U.S. economy to 10% and increased the likelihood of a "hard landing" to 20% following weaker employment data in July and downward revisions of May and June data [1] - Despite the changing risk outlook, Schroders maintains that a benign economic "soft landing" is still the most likely outcome in the medium term [1] - The U.S. economy is described as being in a "muddling through" state, with growth not strong but still positive, and the likelihood of stabilization being greater than continued decline [1] Group 2 - Weaker labor market data, including slowing job growth and a narrowing range of new positions, indicates increased economic vulnerability, which may affect the Federal Reserve's willingness to accelerate monetary policy easing [2] - There is currently no sufficient reason for the Federal Reserve to cut rates by 50 basis points in September, but there is now more room for faster rate reductions than previously expected [2] - In Europe, the economic environment is improving as tariff uncertainties decrease, and the European Central Bank has signaled no further rate cuts, providing a positive outlook for the European economy [2]

Employment Data - In May, the U.S. added 139,000 non-farm jobs, exceeding the expectation of 126,000, while the previous two months' data was revised down by 95,000[1] - The unemployment rate remained at 4.2%, matching expectations and previous values[1] - Average hourly earnings increased by 0.4% month-on-month, surpassing the expected 0.3%[1] Market Reactions - The market's perception of a non-recessionary U.S. economy led to a decrease in interest rate cut expectations, with the probability of a September rate cut falling to 68.3%[2] - The 10-year U.S. Treasury yield rose by 10.52 basis points to 4.506% during the week[2] - The S&P 500 and Nasdaq indices increased by 1.50% and 2.18%, respectively, reflecting positive market sentiment[2] Economic Indicators - The ISM manufacturing PMI fell to 48.5, below the expected 49.5, indicating contraction in the manufacturing sector[2] - The ISM services PMI dropped to 49.9, marking the first time it fell below the neutral line in nearly a year[2] - The U.S. trade deficit narrowed to $61.6 billion in April, the lowest level in 2023, compared to a previous value of $138.3 billion[2] Inflation Outlook - The upcoming May CPI is expected to show a month-on-month increase of 0.2% and a year-on-year increase of 2.5%[3] - Analysts predict that inflation will gradually rise due to tariff-induced price disturbances, but the overall increase is expected to be manageable[3] Risks - Potential risks include unexpected policy actions from the Trump administration and excessive rate cuts by the Federal Reserve leading to inflationary pressures[3]