US report mixed data as Europe shows more signs of recovery

US economic data on Friday were mixed.

Consumer spending rose 0.1 percent in July, down from a 0.6 percent increase in June. Income also rose 0.1 percent in July, down from a 0.3 percent gain in June.

Adjusted for inflation, consumer spending was unchanged in July.

A deterioration in consumer sentiment in August also suggests slowing in consumer spending. The Thomson Reuters/University of Michigan final index of consumer sentiment fell to 82.1 in August, a four-month low, from 85.1 in July.

More positively, the Chicago Business Barometer rose to 53.0 in August from 52.3 in July.

Meanwhile, data from Europe on Friday provided more signs of recovery.

The economic sentiment indicator for the euro area rose to 95.2 in August, the highest in two years, from 92.5 in July.

Inflation slowed to 1.3 percent in August from 1.6 percent in July.

The unemployment rate for July was unchanged though at a record high of 12.1 percent.

In the UK, the GfK consumer confidence index rose 3 points to minus 13 in August, the highest in almost four years. Mortgage approvals rose to the highest in more than five years in July and the Nationwide Building Society reported that house prices rose 0.6 percent in August.

Japanese consumer prices and industrial production rise, US growth revised up

Japan's economic recovery appears to be back on track, with even inflation making a return, according to data released on Friday.

Core consumer prices, which exclude fresh food prices, rose 0.7 percent in July from the previous year, the biggest increase since November 2008.

Industrial production rebounded 3.2 percent in July after falling 3.1 percent in June while the unemployment rate fell to 3.8 percent from 3.9 percent in June.

Household spending rose 0.9 percent in July.

The positive data from Japan follows an upward revision to second quarter US GDP growth on Thursday. The US economy is now estimated to have grown at an annual rate of 2.5 percent, up from an initial estimate of 1.7 percent.

Thursday had also seen another emerging economy central bank tighten monetary policy following recent turbulence in emerging markets. In an extra policy meeting on Thursday, Bank Indonesia announced a 50-basis-point hike in its key interest rate to 7.00 per cent, its third hike in three months.

US pending home sales and German consumer confidence fall, Brazil raises interest rate

Following Tuesday's positive economic data from the US and Germany, reports on Wednesday took a negative turn.

In the US, the housing market produced more signs that it has cooled. Pending home sales fell 1.3 percent in July, the most this year and after a 0.4 percent decline in June.

In Germany, consumer confidence has slipped. GfK's consumer confidence index for September fell to 6.9 from 7.0 in August.

Weaker growth in the developed economies may not be the main concern of policy makers in emerging economies at the moment though.

On Wednesday, Brazil’s central bank raised its benchmark interest rate by half a percentage point for a third straight meeting to 9.0 percent. This move came after the real fell 10 percent in the last three months.

Economic data positive, stocks fall

Economic data on Tuesday were positive.

US home prices continued to climb in June despite higher mortgage rates. Prices rose 12.1 percent from a year ago in June, slightly down from the previous month's 12.2 percent gain, according to the S&P/Case-Shiller composite index of 20 metropolitan areas. On a seasonally adjusted basis, home prices rose 0.9 percent.

Meanwhile, US consumer confidence has also been rising. The Conference Board's consumer confidence index rose to 81.5 in August from 81.0 in July.

In Germany, the Ifo business climate index rose to 107.5 in August from 106.2 in July, adding to signs that economic recovery is taking shape in Europe.

However, in the markets, the positive economic data were overshadowed by a jump in oil prices amid concern that the US will take military action against Syria. Crude oil rose 2.9 percent on Tuesday while the MSCI All-Country World Index fell 1.4 percent.

US durable goods orders fall sharply

The outlook for the US economy dimmed a little after a report on Monday showed that durable goods orders fell 7.3 percent in July, the first decrease in four months and the biggest since August 2012.

The fall was mostly due to a 52.3 percent plunge in commercial aircraft orders. However, even excluding transportation equipment, orders fell 0.6 percent.

Orders for non-defense capital goods excluding aircraft fell 3.3 percent in July, the biggest decrease in five months.

Investors mostly shrugged off the weak report though. US stocks fell late on Monday only after Secretary of State John Kerry said the president will hold Syria’s government accountable for using chemical weapons.

The S&P 500 ended the day down 0.4 percent.

Baby Boomers to curb rise in US bond yields

US Treasury yields may have gone up recently in anticipation of the Federal Reserve tapering its bond purchases but over the longer term, this Bloomberg article says that Baby Boomers will help keep yields down.

Baby Boomers’ influence on U.S. Treasuries will help hold yields down as people born in the initial decades after World War II shift to fixed-income assets to prepare for retirement, mirroring a pattern in Japan.

The CHART OF THE DAY shows Treasury yields have gradually declined as the proportion of U.S. citizens over 65 years climbed. The age group will swell to 20 percent of the population by 2030 from 14 percent now, according to the U.S. Census Bureau. The chart tracks a similar trend in Japan, where 24 percent are over 65 years, the world’s highest ratio of seniors, up from 19 percent a decade ago.

Bloomberg's Chart of the Day

Europe shows more signs of recovery but US new home sales fall sharply

There were more signs on Friday that Europe's economy is recovering.

Germany confirmed that its economy grew 0.7 percent in the second quarter, its fastest growth rate in more than a year. Britain's second quarter growth was revised up to show the same increase as Germany's.

Confidence in the euro area is also returning. The consumer confidence indicator for the euro area rose to -15.6 in August, the highest level since July 2011, from -17.4 in July. Belgium's business confidence index rose to -8.6 in August from -12.0 in July.

In contrast, data from the US on Friday were negative.

US new home sales fell 13.4 percent in July even as the government revised its estimates for May and June lower. The sharp fall in July brought the annual rate of sales to 394,000 units, the lowest level in nine months.

US and European markets rise amid positive economic data

Markets rose on Thursday, shrugging off concerns of an impending reduction in monetary stimulus from the Federal Reserve. The S&P 500 rose 0.9 percent while the STOXX Europe 600 rose 1.0 percent.

Earlier on Thursday, however, Asian stocks had fallen. The MSCI Asia Pacific Index declined 0.8 percent, with the Shanghai Composite falling 0.3 percent.

The decline in Chinese stocks came despite a report from HSBC on Thursday showing that its manufacturing PMI for China rebounded to 50.1 in August from 47.7 in July, indicating an end to contraction.

Also showing an end to contraction on Thursday was services activity in the euro area. Markit's services index for the euro area rose to 51.0 in August from 49.8 in July. With the manufacturing PMI also rising to 51.3 from 50.3, the eurozone composite index rose to 51.7 in August from 50.5 in July.

Meanwhile, US manufacturing activity maintained its expansion in August. Markit's US manufacturing PMI rose to 53.9 from 53.7 in July.

Adding to signs of growth in the US, a report from the Conference Board on Thursday showed that its index of US leading indicators rose 0.6 percent in July.

Sustained positive economic data from the US adds to the likelihood that the Fed will taper its bond purchases. Indeed, on Thursday, Dallas Fed President Richard Fisher told reporters on the sidelines of a manufacturing conference: “Personally I think the economy is strong enough to begin the process.”

Fed tapering looms, emerging markets at risk, US stocks show overvaluation

Global markets fell again on Wednesday as the minutes of the last Federal Reserve monetary policy meeting showed support for the reduction of monetary stimulus.

Bloomberg reports the Fed minutes:

“Almost all committee members agreed that a change in the purchase program was not yet appropriate,” and a few said “it might soon be time to slow somewhat the pace of purchases as outlined in that plan,” according to the record of the Federal Open Market Committee’s July 30-31 gathering released today in Washington.

“A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases,” the minutes show. “Almost all participants confirmed that they were broadly comfortable” with the committee moderating “the pace of its securities purchases later this year.”

While the focus has been on the Fed's monetary policy, emerging markets have also been hit. Unsurprisingly as the Fed's tapering is expected to have an economic impact on countries like Turkey, China and other Asian economies.

The focus on the direction of Fed monetary policy has also resulted in the market looking past still-positive economic data. A report on Wednesday showing that US existing home sales jumped 6.5 percent in July did little to prop up the market.

In any case, markets may have outrun fundamentals. Cullen Roche says that the US stock market is looking overvalued based on comparisons between stock prices and several fundamental indicators, including earnings, asset values, revenues and US GNP.

Stocks fall except in US

Asian stocks tumbled again on Tuesday. The Indonesian stock market was again the big loser, falling 3.2 percent, after having fallen 5.6 percent on Monday. Japanese stocks fell 2.6 percent.

Stocks also fell in Europe on Tuesday. The STOXX Europe 600 lost 0.8 percent.

However, US stocks managed to shrug off the losses elsewhere. The S&P 500 rose 0.4 percent on Tuesday as the 10-year Treasury yield fell 6.4 basis points to 2.82 percent.

Despite the gain in the US, the MSCI All-Country World Index still ended the day down 0.2 percent.

Markets have mostly fallen on anticipation of the Federal Reserve tapering its bond purchases.

However, a report from the Chicago Federal Reserve on Tuesday indicated that US economic growth remained relatively weak at the start of the third quarter.

The Chicago Fed's national activity index edged up to -0.15 in July from -0.23 in June. This pushed the three-month moving average also to -0.15 in July from -0.24 in June.

While the three-month moving average rose for the second consecutive month in July, it remained below zero, suggesting, according to the report, that US economic growth was below its historical trend.

Emerging markets lead global stocks down

Emerging markets have performed poorly recently, and that trend continued on Monday. Bloomberg reports:

The MSCI Emerging Markets Index slid 1.4 percent to 944.88. The Jakarta Composite Index dropped by the most since October 2011, while Thailand’s SET Index retreated to a one-month low. India’s S&P BSE Sensex extended a drop from its July 23 high to almost 10 percent and the rupee led losses in 23 of 24 developing-nation currencies tracked by Bloomberg. Brazil’s swap rates climbed as the real touched a level weaker than 2.4 per dollar for the first time in four years.

Indonesia’s current-account shortfall widened to $9.8 billion last quarter, the largest in data compiled by Bloomberg going back to 1989. Thailand cut its 2013 growth forecast as the country entered recession for the first time since the global financial crisis. India’s rupee plunged on speculation a strengthening U.S. economy may prompt the Federal Reserve to pare its $85 billion monthly bond-buying program.

Developed markets were not spared from Monday's declines. The STOXX Europe 600 fell 0.5 percent and the S&P 500 fell 0.6 percent as US 10-year Treasury yields rose six basis points to 2.88 percent, the highest level since 2011.

Chinese stocks managed to rise on Monday though. The Shanghai Composite Index rose 0.8 percent, its first gain in four days.

Also in China, over the weekend, the National Bureau of Statistics reported that home prices rose in July in 62 of 70 cities it monitors, slightly down from 63 in June.

Japan's trade deficit expands as exports weaken

Japan's trade data on Monday provided further signs that its economy has lost some momentum. Bloomberg reports:

Exports rose 12.2 percent from a year earlier, the Ministry of Finance said in Tokyo today, compared with the 12.8 percent median estimate of 23 economists surveyed by Bloomberg News. Imports climbed 19.6 percent, leaving a trade deficit of 1.024 trillion yen ($10.5 billion). The seasonally adjusted deficit expanded from June to 944.0 billion yen.

Indeed, on a seasonally-adjusted basis, exports fell 1.8 percent in July from the previous month even as imports rose 2.7 percent.

On a seasonally-adjusted basis, Japan's trade balance has been in deficit for 29 consecutive months, with the latest deficit in July being the third largest over that period.

US consumer confidence falls but Treasury yields rise with housing starts

US economic data on Friday were mixed.

The preliminary reading of the Thomson Reuters/University of Michigan consumer sentiment index fell to 80.0 in August from a six-year high of 85.1 in July.

Housing starts rose 5.9 percent to an annual rate of 896,000 units in July. This, however, was below economists' forecasts for a 900,000-unit rate.

Building permits rose 2.7 percent in July to a 943,000-unit pace. This, again, was below economists' expectations for a 945,000-unit pace.

Despite the mixed economic data, investors appear to have raised bets on an imminent tapering of bond purchases by the Federal Reserve.

US Treasuries fell on Friday. The 10-year Treasury yield rose six basis points to 2.83 percent, the highest since July 2011.

Markets fall on positive economic data

US stocks tumbled on Thursday with the S&P 500 falling 1.4 percent.

US Treasuries also fell. Ten-year note yields rose five basis points to 2.77 percent, hitting 2.82 percent at one point on Thursday, the highest since August 2011.

The fall in US markets came as relatively positive economic data on Thursday increased the likelihood of the Federal Reserve tapering its rate of bond purchases soon.

The National Association of Home Builders/Wells Fargo housing market index rose three points to 59 in August. This was its fourth consecutive monthly gain and brings the index to its highest level in nearly eight years.

Initial claims for state unemployment benefits fell 15,000 to 320,000 last week, the lowest level since October 2007.

The consumer price index rose 0.2 percent in July. This brought the 12-month increase in the CPI to 2.0 percent, the largest increase since February, from 1.8 percent in June.

Less positive, however, were data on Thursday on manufacturing.

The Fed reported that manufacturing output fell 0.1 percent last month, leaving industrial output unchanged in July.

The New York Federal Reserve reported that its Empire State general business conditions index fell to 8.24 in August from 9.46 in July.

The Philadelphia Federal Reserve reported that its business activity index fell to 9.3 in August from 19.8 in July.

US markets were not the only ones falling on Thursday. The STOXX Europe 600 fell 1.1 percent, with the UK's FTSE 100 in particular falling 1.6 percent.

Like the US, the fall in UK stocks followed good news on its economy. UK retail sales jumped 1.1 percent in July, pushing the annual rise to 3.0 percent, the highest since January 2011.

Europe exits recession

A report on Wednesday showed that the eurozone economy grew 0.3 percent in the second quarter, bringing its recession to an end.

The eurozone economy had contracted 0.3 percent in the first quarter, its sixth consecutive quarterly contraction.

Germany and France, the euro area’s two largest economies, led the region out of recession, growing by 0.7 percent and 0.5 percent respectively. However, Italy and Spain remained in recession.

Elsewhere in Europe, the UK saw its unemployment rate hold steady at 7.8 percent in June.

Other data though indicated improvement in the labour market.

The number of people claiming jobless benefit fell by 29,200 last month, its ninth consecutive decline and bringing the count to the lowest in more than four years. It follows a drop of 29,400 in June, the largest monthly drop since May 2010.

Average weekly earnings growth accelerated to 2.1 percent in the three months through June compared with a year earlier, the fastest growth since late 2011.

US retail sales and eurozone industrial production rise

Economic data on Tuesday were mostly positive.

US retail sales rose 0.2 percent in July, its fourth consecutive increase. While the rise in total sales was less than the 0.6 percent increase in June, retail sales excluding autos, gasoline and building materials, increased 0.5 percent last month, the most since December.

Other reports from the US on Tuesday showed that import prices rose 0.2 percent in July while business inventories were little changed in June.

In the euro area, a report on Tuesday showed that industrial production rose 0.7 percent in June after having fallen 0.2 percent in May.

In Germany, the ZEW index of investor and analyst expectations rose to 42.0 in August from 36.3 in July.

In the UK, a report on Tuesday showed that consumer price inflation slowed to 2.8 percent in July from 2.9 percent the previous month even as a July survey from the Royal Institution of Chartered Surveyors found the fastest growth in house prices since 2006.

Japanese machinery orders fall

There has been yet another negative economic report for Japan.

The Cabinet Office reported on Tuesday that core machinery orders fell 2.7 percent in June.

The fall in orders, however, was less than that estimated by economists and followed a 10.5 percent jump in May.

Of concern, though, is that companies are forecasting core orders in the July-September quarter to fall 5.3 percent from the previous quarter.

Japan's economic growth slows

The Japanese economy slowed in the second quarter and looks likely to slow further in the third quarter.

The Cabinet Office reported on Monday that Japan's economy grew by 0.6 percent in the second quarter of 2013. It was the third consecutive quarter of growth, although the growth rate was down from 0.9 percent in the first quarter.

Second quarter growth was driven by consumer spending, which grew 0.8 percent, and government spending, which grew 1.0 percent. Net exports contributed 0.2 percentage points to growth, its second consecutive quarter of positive contribution.

The second quarter appears to have ended on a weak note though. A report from the Cabinet Office last week showed that the index of coincident economic indicators fell 0.8 point in June, the first decline in seven months.

And pointing to further weakness ahead, the index of leading economic indicators fell an even larger 3.7 points.

Economic indicators for July released last week also point to weakness at the start of the third quarter.

The Cabinet Office's economy watchers survey showed that the current conditions index of service sector sentiment fell to 52.3 in July from 53.0 in June. The future conditions index was unchanged at 53.6.

The Cabinet Office's consumer confidence index fell to 43.6 in July from 44.3 in June, its second consecutive decline.

Markit's composite output index fell to 50.7 in July from 52.3 in June. The manufacturing purchasing managers index fell to 50.7 from 52.3 while the business activity index for the service sector fell to 50.6 from 52.1.

Chinese industrial production accelerates, Japan's national debt hits one quadrillion yen

Concerns of a slowdown in China eased further on Friday after a report showed that industrial production rose 9.7 percent in July from a year earlier compared with 8.9 percent in June.

Retail sales rose 13.2 percent in July from a year earlier, slightly down from 13.3 percent in June.

Fixed asset investment increased 20.1 percent in the first seven months of the year compared with the same period in 2012, the same as in the first six months.

Inflation also held steady at 2.7 percent in July, unchanged from the previous month.

Meanwhile, China's credit growth appears to be easing. New local-currency bank loans fell to 699.9 billion yuan in July, down from 860.5 billion yuan in June. Total social financing aggregate fell to 808.8 billion yuan in July from 1.04 trillion yuan the month before.

Elsewhere, Japan's economic data continue to come in weak. A report on Friday showed that the consumer confidence index fell to 43.6 in July from 44.3 in June, its second consecutive decline.

Meanwhile, Japan's debt burden has continued to climb. Another report showed that Japan's national debt hit 1.008 quadrillion yen at the end of June.

In the US, a report on Friday showed that wholesale inventories fell 0.2 percent in June. This was weaker than the government had assumed in its advance estimate of second-quarter gross domestic product released last week, suggesting that growth could be revised downward.

BoJ leaves monetary policy unchanged, OECD sees divergence in global growth

The Bank of Japan left monetary policy unchanged after its meeting on Thursday. “Japan's economy is starting to recover moderately,” the BoJ said.

A recovering economy would allow tighter fiscal policy as well, and on cue, the Japanese government announced on Thursday spending cuts of 8.0 trillion yen between April 2014 and March 2016.

Recent economic data for Japan, however, have not been impressive, and that trend continued on Thursday.

While bank lending rose 2.3 percent in July from a year earlier, up from a 2.2 percent increase in June, its current account surplus fell to 336.3 billion yen in June from 540.7 billion yen in May.

Also, a report on Thursday based on the economy watchers survey showed that the current conditions index of service sector sentiment fell to 52.3 in July from 53.0 in June. The future conditions index was unchanged at 53.6.

Trade data elsewhere on Thursday, however, were more positive.

In China, exports rose 5.1 percent in July from a year earlier and imports rose 10.9 percent. Both exports and imports had fallen from a year earlier in June.

In Germany, exports rose 0.6 percent in June. However, imports fell 0.8 percent.

The Organisation for Economic Co-operation and Development released its composite leading indicators for June on Thursday. In its report, the OECD said that the indicators point to diverging growth patterns, with moderate improvements in growth in most major OECD countries but stabilising or slowing momentum in large emerging economies.

Nikkei plunges, German industrial production jumps

Japanese stocks fell sharply on Wednesday. The Nikkei 225 plunged 4.0 percent after the yen touched a six-week high against the US dollar.

Stocks elsewhere also mostly fell on Wednesday, although by smaller amounts. The S&P 500 fell 0.4 percent while the STOXX Europe 600 fell 0.2 percent.

Bank of England Governor Mark Carney’s attempt on Wednesday to restrain expectations of higher interest rates seemed to have had little effect on markets.

“We're not at escape velocity right now,” he said at his first BoE news conference. “This remains the slowest recovery in output on record.”

“The forward guidance contained in the inflation report was broadly expected but what was unexpected were the get-out clauses,” said Lena Komileva at consultancy G+ Economics. “The BoE's pre-commitment to keeping rates at a record low is not as conclusive as it first appeared.”

Indeed, economic data from the UK and the rest of Europe have become more positive recently. On Wednesday, Germany continued that trend by reporting that its industrial production jumped 2.4 percent in June after a 0.8 percent decline in May.

Australia cuts interest rate to record low, European economy shows improvement

The Reserve Bank of Australia cut its official interest rate by 25 basis points to a record low of 2.5 percent on Tuesday. RBA Governor Glenn Stevens cited recent muted inflation and retail sales data for the cut.

Low inflation is also a reason for economists expecting more monetary stimulus from the Bank of Japan.

Data from Japan on Tuesday added weight to the case for more stimulus. The Cabinet Office reported that its index of coincident economic indicators fell 0.8 point in June, the first decline in seven months. The index of leading economic indicators fell an even larger 3.7 points.

However, economic data from Europe on Tuesday were more positive.

In the UK, industrial production rose 1.1 percent in June. Manufacturing output jumped 1.9 percent.

Other data from the UK on Tuesday showed that house prices rose in July at their fastest annual pace in nearly three years, retail sales were 3.9 percent higher than a year earlier and car sales grew 12.7 percent from a year earlier.

In Germany, factory orders rose 3.8 percent in June, the biggest increase since October.

Italy's economy shrank 0.2 percent in the second quarter, better than the 0.6 percent contraction in the first quarter. Italian industrial output rose 0.3 percent in June after having risen 0.1 percent in May.

Meanwhile, in the US, the trade deficit narrowed in June to the smallest in almost four years after exports rose 2.2 percent and imports fell 2.5 percent.

Global services improve in July

A report from the euro area on Monday showed that retail sales fell 0.5 percent in June, the first decline in three months.

Notwithstanding that report, results of global purchasing managers surveys in the services sector released on Monday were mostly quite positive.

In the euro area, Markit's services index for the euro area rose to 49.8 in July from 48.3 in June. This helped push the composite index up to 50.5 from 48.7, the first time it has risen above 50 since January 2012.

In the UK, the Markit/CIPS services PMI jumped to 60.2 in July, its highest level since December 2006, from 56.9 in June.

The Institute for Supply Management’s US non-manufacturing index also jumped to 56.0 in July from 52.2 in June.

In China, the HSBC/Markit services PMI stayed unchanged at 51.3 in July. Over the weekend, the government had reported that its non-manufacturing PMI rose to 54.1 last month from 53.9 in June.

Mixed picture for the major economies

The latest global economic data showed a mixed picture for the world's major economies.

In the United States, economic data last week showed that the economy accelerated in the second quarter and maintained growth at the start of the third quarter.

The US economy grew at an annual rate of 1.7 percent in the second quarter. This was slow growth by historical standards but was nevertheless an improvement over the 1.1 percent growth rate in the first quarter.

Sluggish growth in the US may have continued at the start of the third quarter. Nonfarm payrolls increased by 162,000 in July, the smallest increase in four months.

However, manufacturing data last week showed improvement for the sector. Factory orders rose 1.5 percent in June. The Institute for Supply Management's manufacturing PMI jumped to 55.4 in July from 50.9 in June while Markit's US manufacturing PMI rose to 53.7 from 51.9.

In the euro area, economic data last week indicated that the region's recession may be coming to an end.

Markit's manufacturing PMI for the euro area rose to 50.3 in July from 48.8 in June, indicating that the sector is no longer contracting.

Also, the European Commission's economic sentiment indicator for the euro area rose to 92.5 in July, the highest reading in 15 months, from 91.3 in June.

Meanwhile, concerns over a slowdown in China's economic growth were slightly allayed after the latest economic data.

Purchasing managers surveys on China's manufacturing sector showed a mixed picture. The official PMI from the National Bureau of Statistics and the China Federation of Logistics and Purchasing rose to 50.3 in July from 50.1 in June. However, the HSBC PMI compiled by Markit fell to an 11-month low of 47.7 from 48.2.

Purchasing managers data for the services sector were somewhat more encouraging. The official PMI rose to 54.1 in July from 53.9 in June while the HSBC/Markit PMI was unchanged at 51.3.

However, Japan's economic recovery is looking shaky after last week's data.

The Markit/JMMA Japan manufacturing PMI fell to 50.7 in July from 52.3 in June. Industrial production had fallen 3.3 percent in June.

Japan's unemployment rate did fall to 3.9 percent in June, the lowest in more than four years, from 4.1 percent in May. Still, household spending also fell 0.4 percent in June from a year earlier.

US job growth slows, S&P 500 hits record high

The US employment report on Friday showed that the economy added 162,000 jobs in July.

Last month's increase was less than the 188,000 jobs added in June and the least in four months. It was also less than the 185,000 jobs estimated by economists surveyed by Bloomberg.

Nevertheless, the unemployment rate fell to 7.4 percent from 7.6 percent in June.

Average hourly earnings fell 0.1 percent in July from the prior month and the average workweek for all workers fell to 34.4 hours from 34.5 hours.

Another report on Friday showed that US consumer spending rose 0.5 percent in June while income rose 0.3 percent.

Consumer prices rose 0.4 percent though, so real consumer spending rose just 0.1 percent.

A third report on Friday showed that US factory orders rose 1.5 percent in June, boosted by a 12 percent jump in transportation orders. Excluding transportation, orders fell 0.4 percent.

Durable goods orders rose 3.9 percent while orders for non-defense capital goods excluding aircraft rose 0.9 percent.

Despite the weaker-than-expected employment numbers, investors shrugged off early losses in the market and pushed the S&P 500 up 0.2 percent by the end of the day to another record high.

Stocks rally as ECB and BoE hold and global manufacturing improves

Global stock markets rallied on Thursday. The S&P 500 rose 1.3 percent to a new record high of 1,706.87. The STOXX Europe 600 rose 1.2 percent.

There were no new measures from the European Central Bank's monetary policy meeting on Thursday. ECB President Mario Draghi reiterated that interest rates will stay low for the foreseeable future even as economic indicators signal that the worst is over for the eurozone economy.

Indeed, a report from Markit on Thursday showed that eurozone manufacturing returned to expansion in July. Markit's manuacturing PMI for the region rose to 50.3 last month from 48.8 in June.

There were also no new measures announced by the BoE after its monetary policy meeting on Thursday.

The Markit/CIPS UK manufacturing PMI had risen to 54.6 in July from 52.9 in June.

US manufacturing also improved in July. The Institute for Supply Management’s manufacturing PMI jumped to 55.4 last month from 50.9 in June.

Markit's US manufacturing PMI also improved in July, rising to 53.7 from 51.9 in June.

Dampening the mood somewhat was another report on Thursday showing that US construction spending fell 0.6 percent in June.

Earlier on Thursday, there had been mixed data on China's manufacturing activity. The official PMI published by the National Bureau of Statistics rose to 50.3 in July from 50.1 in June but the HSBC PMI compiled by Markit fell to an 11-month low of 47.7 from 48.2.

Fed sees risk of low inflation as economy accelerates

The Federal Reserve's monetary policy meeting ended on Wednesday with only a slight change to its stance. Reuters reports:

Wrapping up a two-day gathering, the central bank said it would keep buying $85 billion in mortgage and Treasury securities per month in an effort to strengthen an economy that it said was still challenged by federal budget-tightening.

The Fed made three notable adjustments to its post-meeting statement, which economists said gave it a dovish tilt.

First, it slightly downgraded its view of the recovery, calling the pace of growth "modest" rather than "moderate," as it had consistently for most of the past year.

It also noted that mortgage rates had risen, implicitly flagging this as a potential headwind to the housing recovery.

And, importantly, it nodded to the potential dangers of inflation running too low...

Investors noted the dovish tilt and acted accordingly. Treasuries rose, with the 10-year yield falling three basis points to 2.58 percent, and the US dollar fell.

The moves in Treasuries and the US dollar were despite positive US economic data on Wednesday.

The US economy grew at an annual rate of 1.7 percent in the second quarter, accelerating from a 1.1 percent pace in the first quarter.

ADP reported that private employers added 200,000 jobs in July after having added 198,000 in June.

Another report from the US on Wednesday showed that the Institute for Supply Management-Chicago business barometer rose to 52.3 in July from 51.6 in June.

Meanwhile, reports from Europe on Wednesday provided further signs that the economy may be stabilising. Unemployment in the euro area was unchanged at 12.1 percent in June. The inflation rate held steady at 1.6 percent in July.

Japan's economy, though, may have lost some momentum. The Markit/JMMA Japan manufacturing PMI fell to 50.7 in July from 52.3 in June.