ORLANDO, Florida, Aug 11 (Reuters) - TRADING DAY

Making sense of the forces driving global markets

By Jamie McGeever, Markets Columnist

World markets got the week off to a subdued start on Monday,

although the Nasdaq nudged a new high, as a light earnings and

data calendar allowed investors to digest the latest

tariff-related news and look ahead to Tuesday's U.S. inflation

figures.

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

blizzard of U.S. labor market data - often conflicting,

sometimes distorted - and ask which number best shines a light

through the fog. Could it now be continuing jobless claims?

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. Fed structure may be in flux, not just rates:

Mike Dolan

2. Trump's Fed pick wanted to upend its protection

from

politics

3. Trump opens door to sales of version of Nvidia's

next-gen AI chips in China

4. Debt market jitters signal caution for

high-flying

stocks

5. China's July factory-gate prices miss forecast,

deflation concerns persist

Today's Key Market Moves

* FX: Dollar index rises 0.4%. Bitcoin hits

one-month high

above $122k to close in on record peak, but ends day lower.

* STOCKS: Nasdaq and Australian stocks hit new

highs. But

Wall Street's big three indices fall 0.3-0.5%.

* SHARES/SECTORS: Nvidia hits new record but ends

lower,

Intel gains 3.6% and TKO spikes 10%. The S&P 500 energy index

slides 0.8%.

* BONDS: Treasury yields barely move more than 1 bp

across

the curve. One of the quietest sessions in a while.

* COMMODITIES: Gold slips 1.4%, soybean futures rise

2.5%

- both related to tariff-related comments from Trump.

Tariffs, CPI nerves soften sentiment

Wall Street closed lower on Monday, even as the Nasdaq

touched fresh highs, with the latest news related to U.S.

President Donald Trump's tariff war generally sapping risk

appetite rather than strengthening it.

Trump signed an executive order on Monday extending the

China tariff deadline for another 90 days, with only hours to go

before U.S. tariffs on Chinese goods were due to snap back to

triple-digit rates.

This came after a U.S. official told Reuters over the

weekend that chip companies Nvidia and Advanced Micro Devices

have agreed to give the U.S. government 15% of revenue from

sales of advanced chips to China.

The news was surprising and confusing.

"It's wild," said Geoff Gertz, a senior fellow at Center for

New American Security, an independent think tank in Washington,

D.C. "Either selling H20 chips to China is a national security

risk, in which case we shouldn't be doing it to begin with, or

it's not a national security risk, in which case, why are we

putting this extra penalty on the sale?"

A rise for Nvidia shares this week would mark a

record-breaking 12 consecutive weekly gains. The stock now

accounts for 8% of the entire S&P 500 market cap, the biggest

weight of any individual stock in the wider index since the data

began in 1981, according to Apollo's Torsten Slok.

The so-called "Magnificent Seven" megacap stocks, of which

Nvidia is one, now account for a record 35.3% of the S&P 500's

total market cap. The top 10 stocks make up a record 40% of the

index's market cap.

This concentration risk is nothing new, of course, but the

steady advance deeper into uncharted territory is bound to

unnerve some investors.

Meanwhile, U.S.-Brazil relations show no sign of improving.

Brazil's Finance Minister Fernando Haddad said on Monday that

his virtual meeting with U.S. Treasury Secretary Scott Bessent

scheduled for later this week has been canceled, a blow to

Brasilia as it attempts to get the 50% tariff on many Brazilian

exports to the U.S. reduced.

Speculation continues to swirl around who Trump will

nominate to replace Fed chair Jerome Powell, whose term

officially ends next May. As of Monday, no fewer than eight

names appear to be under consideration, according to media

reports.

The main economic indicators on Monday were from China,

which showed producer prices fell more than expected in July and

no change in consumer prices. Deflation still stalks China, in

contrast to the U.S. where tariffs are putting upward pressure

on prices.

Attention on Tuesday turns to Australia, where the central

bank is expected to reduce its cash rate by a quarter point to

3.60%, and then to CPI inflation figures for July from the U.S.

Which data point may shine light through U.S. jobs fog?

Amid a blizzard of contradictory signals, it's becoming

increasingly difficult to get any visibility on the U.S. labor

market. But of all the numbers that feed into the all-important

unemployment rate, the one worth paying most attention to may be

continuing weekly jobless claims.

Federal Reserve Chair Jerome Powell has said that while he

and his colleagues look at the "totality" of the data, the best

gauge of the health of the labor market is the unemployment

rate. That's currently 4.2%, low by historical standards, and

consistent with an economy operating at full employment.

But it is a lagging indicator, meaning that once it starts

to rise sharply, the economy will probably already be in a very

precarious position. And it is also being depressed by labor

demand and supply factors unique to the U.S.'s current high

tariff, low immigration era.

LOW FIRE, LOW HIRE

Economic growth is slowing. Broadly speaking, it is running

at an annual rate of just over 1%, half the pace seen in the

last few years. Unsurprisingly, firms' hiring is slowing too.

The latest Job Openings and Labor Turnover Survey, or JOLTS,

showed hiring in June was the weakest in a year, while July's

nonfarm payrolls report and previous months' revisions were so

disappointing that President Donald Trump fired the head of the

agency responsible for collecting the data.

But the unemployment rate isn't rising, largely because

firms aren't firing workers. Why? Perhaps because they are

banking on tariff and inflation uncertainty lifting in the

second half of the year. It's also possible that firms are still

scared from the post-pandemic labor shortages.

Whatever the reason, the pace of layoffs simply has not

picked up, the monthly JOLTS surveys show. Layoffs in June

totaled 1.6 million, below the averages of the last one, two and

three years.

Meanwhile, lower immigration, increased deportations, and

fewer people re-entering the labor force are offsetting weak

hiring, thus keeping a lid on the unemployment rate. The labor

force participation rate in July was 62.2%, the lowest since

November 2022.

And what about weekly jobless claims, another key variable

in the labor market picture? In previous slowdowns, rising

layoffs would be reflected in a spike in the number of people

claiming unemployment benefits for the first time.

That's not happening either. Last week's 226,000 initial

claims were right at the average for the past year, and only a

few thousand higher than the averages over the past two and

three years.

"It's a low fire, low hire economy," notes Oscar Munoz, U.S.

rates strategist at TD Securities.

REGULAR CHECK-UP

One high-frequency number that has gone under the radar, but

which merits more attention is continuing jobless claims, which

measures the number of workers continuing to file for

unemployment benefits after losing their jobs. Rising continued

claims suggest people actively looking for a job are struggling

to get one, a sign that the labor market could be softening.

That figure spiked last week to 1.97 million, the highest

since November 2021, which in theory should put upward pressure

on the unemployment rate.

Using the 'stock' versus 'flow' analogy, continuing claims

are the 'stock,' and weekly claims are the 'flow'. Everyone will

have their own view on what's more important, but right now

initial claims are offering no guidance while continuing claims

are pointing to softening in the job market.

Fed officials are on alert, but what would move them to cut

rates?

Munoz and his colleagues at TD Securities estimate that

continuing claims of around 2.2 million would be consistent with

an unemployment rate of 4.5%, a level of joblessness most

economists agree would prompt the Fed to trim rates.

That's also the year-end unemployment rate in the Fed's last

economic projections from June, a set of forecasts which also

penciled in 50 bps of easing by December.

An unemployment rate of 4.4% would probably tip the balance

on the Federal Open Market Committee, while 4.3% would make it a

much closer call, perhaps a coin toss.

Further muddying the picture, other indicators suggest the

labor market is ticking along nicely. July's payrolls report

showed that average hourly earnings last month rose at a 3.9%

annual rate, consistent with the level seen in the past year.

And the average number of hours worked was 34.3 hours, right at

the mean for the past two years.

These numbers and the JOLTS data are released monthly, and

there will be one more of each before the Fed's September 16-17

policy meeting.

But if the increased focus on the unemployment rate means

investors want a more regular labor market temperature check,

they should keep a close eye on weekly continuing claims.

What could move markets tomorrow?

* Australia interest rate decision

* India CPI inflation (July)

* UK employment, earnings (July)

* Germany ZEW sentiment index (August)

* Brazil inflation (July)

* U.S. CPI inflation (July)

* U.S. federal budget data (July)

* U.S. Fed officials on the stump: Richmond Fed President

Thomas

Barkin, Kansas City Fed President Jeffrey Schmid

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