ORLANDO, Florida, Aug 4 (Reuters) - TRADING DAY

Making sense of the forces driving global markets

By Jamie McGeever, Markets Columnist

Investors shrugged off last week's worries over the U.S. economy

to drive a powerful, tech-led rebound across global stocks on

Monday, although U.S. Treasuries prices held onto Friday's

gains, suggesting a fair degree of caution persists.

More on all that below. In my column today I look at why

rather than firing the head of the Bureau of Labor Statistics,

President Donald Trump could have claimed that the weak jobs

data and dramatic market reaction vindicated his stance that the

Fed should cut rates.

If you have more time to read, here are a few articles I

recommend to help you make sense of what happened in markets

today.

1. Brexit's parallels with Trump tariffs tell a

tale: Mike

Dolan

2. Never mind Wall Street records, investors rethink

US

market supremacy

3. Latest Trump tariffs unlikely to budge, top

negotiator

says

4. BOJ gears up to hike rates again but leaves free

hand on

timing

5. BP makes its largest oil and gas discovery in 25

years

offshore Brazil

Today's Key Market Moves

* FX: Most emerging currencies rise against a soft

dollar.

MSCI's LatAm FX index has biggest 2-day rise in 2 months.

* STOCKS: Main Asian, European, U.S. global indices

all

rise strongly. Nasdaq and the Russell 2000 lead U.S. rally, both

up 2%.

* SHARES/SECTORS: S&P 500 communications index +2.6%

and

tech index +2.2%. Nvidia shares +3.6%, Tesla +2.2%.

* BONDS: Treasuries prices rise, pushing 2-year

yield to a

3-month low of 3.66%. Yields down 2 bps across the curve.

* COMMODITIES: Oil falls around 1.5% to its lowest

in a

week after OPEC+ agrees to another large output increase.

Stocks bounce back, bonds more cautious

After getting slammed on Friday by unexpectedly poor U.S.

employment figures, U.S. and world stocks rebounded on Monday.

Whether this is a short-term technical recovery or the

resumption of the bull run of recent months remains to be seen.

In isolation, the positive start to the week has been pretty

impressive. Wall Street more than recovered the ground it lost

on Friday, led by the Nasdaq and Russell 2000, as investors bet

that both tech and small caps would be among the big winners in

a lower interest rate world.

The global recovery was probably overdue. The MSCI All

Country index's rise on Monday snapped a six-session losing

streak, its worst run in nearly two years.

While Friday's slump in U.S. bond yields reflected deepening

growth fears and contributed to the huge equity selloff, the

further drift lower in yields on Monday supported equity

sentiment.

The feel good factor could prove fleeting though. The

U.S.-centric issues that drove last week's selloff - growth

fears, tariff concerns and unusually high levels of policy

uncertainty - haven't disappeared.

Trump said on Monday he will substantially raise tariffs on

goods from India over its Russian oil purchases, while

Switzerland says it is ready to make a "more attractive offer"

to Washington to avert the steep 39% tariffs it is facing.

Investors are increasingly nervous about political

interference in independent U.S. institutions after Trump fired

Bureau of Labor Statistics Commissioner Erika McEntarfer for

allegedly rigging the jobs data. This comes amid Trump's verbal

attacks on Fed Chair Jerome Powell for not cutting interest

rates, and as he prepares to announce his nomination to replace

Fed Governor Adriana Kugler, who surprisingly resigned on

Friday.

Looking ahead to Tuesday, the U.S. earnings calendar heats

up again and purchasing managers index data will give an insight

into how the service sectors in many of the world's major

economies fared in July.

Trump scores major own goal with labor official firing

U.S. President Donald Trump's decision to fire a top labor

official following weak jobs data obviously sends ominous

signals about political interference in independent

institutions, but it is also a major strategic own goal.

Trump has spent six months attacking the Federal Reserve,

and Chair Jerome Powell in particular, for not cutting interest

rates. The barbs culminated in Trump branding Powell a "stubborn

MORON" in a social media post on Friday before the July jobs

report was released.

The numbers, especially the net downward revision of 258,000

for May and June payrolls growth, were much weaker than

expected. In fact, this was "the largest two-month revision

since 1968 outside of NBER-defined recessions (assuming the

economy is not in recession now)," according to Goldman Sachs.

This sparked a dramatic reaction in financial markets. Fed

rate cut expectations soared, the two-year Treasury yield had

its steepest fall in a year, and the dollar tumbled.

A quarter-point rate cut next month and another by December

were suddenly nailed-on certainties, according to rate futures

market pricing. This was a huge U-turn from only 48 hours

before, when Powell's hawkish steer in his post-FOMC meeting

press conference raised the prospect of no easing at all this

year.

Trump's constant lambasting of "Too Late" Powell suddenly

appeared to have a bit more substance behind it. The Fed chair's

rate cut caution centers on the labor market, which now appears

nowhere near as "solid" as he thought.

Trump could have responded by saying: "I was right, and

Powell was wrong."

Instead, on Friday afternoon he said he was firing the head

of the Bureau of Labor Statistics, Commissioner Erika

McEntarfer, for faking the jobs numbers. Trump provided no

evidence of data manipulation.

So rather than point out that markets were finally coming

around to his way of thinking on the need for lower interest

rates, Trump has united economists, analysts and investors in

condemnation of what they say is brazen political interference

typically associated with underdeveloped and unstable nations

rather than the self-proclaimed 'leader of the free world.'

"A dark day in, and for, the U.S.," economist Phil Suttle

wrote on Friday. "This is the sort of thing only the worst

populists do in the worst emerging economies and, to use the

style of President Trump, IT NEVER ENDS WELL."

UNCERTAINTY PREMIUM

It's important to note that major - even historic -

revisions to jobs growth figures are not necessarily indicative

of underlying data collection flaws. As Ernie Tedeschi, director

of economics at the Budget Lab at Yale, argued on X over the

weekend: "BLS's first-release estimates of non-farm payroll

employment have gotten more, not less, accurate over time."

It should also be noted that the BLS compiles inflation as

well as employment data, so, moving forward, significant doubt

could surround the credibility of the two most important

economic indicators for the U.S. - and perhaps the world.

Part of what constitutes "U.S. exceptionalism" is the

assumption that the experts leading the country's independent

institutions are exactly that, independent, meaning their

actions and output can be trusted, whatever the results.

Baseless accusations from the U.S. president that the BLS,

the Fed and other agencies are making politically motivated

decisions to undermine his administration only undermine trust

in the U.S. itself.

"If doubts are sustained, it will lead investors to demand

more of a risk premium to own U.S. assets," says Rebecca

Patterson, senior fellow at the Council on Foreign Relations.

"While only one of many forces driving asset valuations, it will

limit returns across markets."

This furor comes as Fed Governor Adriana Kugler's

resignation on Friday gives Trump the chance to put a third

nominee on the seven-person Fed board, perhaps a potential

future chair to fill that slot as a holding place until Powell's

term expires in May. Whoever that person is will likely be more

of a policy dove than a hawk.

Policy uncertainty, which had been gradually subsiding since

the April 2 'Liberation Day' tariff turmoil, is now very much

back on investors' radar.

What could move markets tomorrow?

* China, Japan, euro zone services PMIs (July)

* South Korea inflation (July)

* U.S. services PMI, ISM (July)

* U.S. trade (June)

* U.S. Treasury auctions $58 bln of 3-year notes

* U.S. earnings including Caterpillar, AMD and Pfizer

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