Weekly US employment data shocked markets overnight. Initial jobless claims (1.416 million) came in above forecasts (1.3 million) and the previous week (1.307 million), calling into question the quick economic recovery that investors are pricing at current levels. Gold rallied to a fresh 11 year high, crude oil and copper dropped and share indices retreated, lead by high-flying tech stocks.

Bond and precious metal markets have largely followed macroeconomic releases over the past six weeks, rising as the evidence of economic damage piled up. The notable change overnight was the impact on share markets, which so far have “looked through” the dire data, in anticipation of a quick recovery over the second half of 2020.

The US economy faces challenges as emergency fiscal support expires. At the end of July special measures to support the unemployed come to an end. The Democrat controlled House of Representatives has passed extension programs worth $3.5 trillion, but the Republican controlled Senate is looking at a package closer to $1 trillion. This gap between the two US political parties is potentially the greatest risk to global markets in the short term.

If the world’s largest economy, and its share markets, fall off a cliff, the damage will affect the globe.

Tech stocks were the worst performers overnight. The Nasdaq index fell 2.3%, and the S&P500 dropped 1.2%. Twitter was 1 of only 2 misses from the 34 S&P500 stocks that reported overnight. Twitter still rose 4% on record user growth, although the stock finished well below the day’s high. Of greater concern to the US outlook was 2% to 4% falls in Alphabet, Apple, Amazon, Facebook and Netflix. These five stocks account for almost all of the gains in the Nasdaq and the S&P 500 this year, and a change in fortunes for the five would signal a change in direction for US stocks generally.

Futures indicate negative sentiment across the Asia Pacific region today. This morning New Zealand trade data fell broadly in line with consensus expectations, and Australian PMIs were mixed, with manufacturing beating but services missing forecasts. Singapore industrial production numbers are expected to show a 5.5% bounce back in June this afternoon, although this would still mean a 2.6% contraction year on year.