Muzinich Weekly Market Comment: Don't forget the economic data

June 8, 2026

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Strong economic data continues to challenge expectations of a slowdown, with activity indicators, labour markets and inflation all proving more resilient than anticipated. As geopolitical risks begin to feed through into prices, investors are increasingly focused on whether central banks are approaching a new tightening phase.

For the second consecutive week, markets continue to trade sideways (at least until the nonfarm payrolls report was released). Month-to-date, government bonds are slightly higher and high-yield corporates are outperforming their investment-grade counterparts – carry remains king. Energy prices have drifted higher as another week passes without the reopening of the Strait of Hormuz, but prices do remain below US$100 per barrel. The US dollar is marginally stronger against major currencies, and equities remain range-bound within a ±1% band, but with a distinctly softer tone in technology-oriented indices.

The first week of the month typically sets the tone for the weeks ahead, as a concentration of tier-one economic data releases gives investors the opportunity to confirm or recalibrate their expectations ahead of upcoming central bank meetings and reassess their near-term outlook across asset classes. Yet investors are currently caught in the crosscurrents of geopolitical negotiations, the evolving implications of AI, and uncertainty surrounding the incoming Federal Reserve Chair. And in this noise, the risk is that economic data is mistakenly relegated to the shadows, at a time when it may matter most.

In Asia, China released its May Purchasing Managers’ Index (PMI) reports, which are particularly significant given that external demand has been the primary engine of recovery this year. The official PMI, more heavily weighted toward state-owned enterprises – and therefore the better gauge of domestic industrial conditions – slipped back to the 50.0 threshold, the line between expansion and contraction, easing 0.3 percentage points from April. A detailed breakdown of the sub-indices suggests that oil shock-driven price spikes are beginning to impose a tangible cost on domestic demand. New orders are weakening relative to production, input prices continue to rise materially faster than output prices, compressing margins and raw material inventories are drawing down much faster than finished goods inventories, a classic sign of softening domestic demand.¹ 

Conversely, RatingDog PMI, widely regarded as the more reliable barometer of China's export-oriented private sector, printed 51.8 in May, surprising to the upside, comfortably above the consensus of 51.3. The divergence between the two surveys remains the most instructive signal. The private, export-facing sector continues to outperform, underpinned by resilient overseas demand, even as domestic conditions stay visibly soft.² Taken together, the reports suggest that China would be vulnerable should international demand falter.

In Japan, the key data release was April real wages, which rose 1.9% year-over-year (YoY), ahead of the 1.7% forecast, extending the run of positive real wage growth to its longest since late 2021. Nominal wages gained 3.5%, also beating expectations.³ The wage report, alongside BOJ Governor Kazuo Ueda’s hawkish comments this week, suggests that investors and the Monetary Policy Committee see upside price risks as more pressing than downside risks to growth. The overnight interest rate swap market now prices a 94% probability that the committee will hike rates by 25 basis points (bps) at its June meeting.⁴ 

In Europe, the European Central Bank’s (ECB’s) consumer price survey shows households expect prices to rise by 4.0% over the next twelve months, before easing back to 2.9% over a three-year horizon, both comfortably above the ECB’s 2% medium-term target, suggesting that inflation expectations remain weakly anchored.⁵ That backdrop was reinforced by the May flash HICP (Harmonised Index of Consumer Prices) print, which accelerated to 3.2% YoY from 3.0% in April, in line with consensus. Core inflation also offered no comfort, jumping to 2.5% from 2.2% and coming in above the consensus. Services inflation was the primary driver, surging to 3.5%, likely driven by airfares and package holidays where higher oil prices appear to have passed through more forcefully.⁶  

The ECB is now expected to tighten policy by 25bps at its upcoming meeting, with the overnight interest rate swap market pricing a 98% probability of such a move and a total of three 25bps adjustments now expected by the end of Q1 2027.⁴

For the US it was a key week for activity data, which collectively cemented the view that the economy remains robust. The manufacturing PMI hit a four-year high of 54.0 in May, beating expectations, with the strength broad-based across new orders and production.⁷ The ISM (Institute for Supply Management) Services index similarly surprised to the upside, rising to 54.5, again with new orders as the primary driver of the headline beat.⁸

On the labour market front, the picture was uniformly strong. The ADP (Automatic Data Processing) private payrolls print came in at a 16-month high of 122k,⁹ while the April JOLTS (Job Openings and Labor Turnover Survey) report showed job openings rising to 7.618 million, their highest level since May 2024, and well above the 6.866 million expected.¹⁰ Meanwhile, nonfarm payrolls rose 172k in May; combined with upward revisions to the prior two months, this marked the strongest three-month advance in more than two years, leaving little doubt that the US labour market continues to defy gravity.¹¹ See Chart of the Week.

Market event risks have a natural lifespan of 8–12 weeks, roughly 90 days, beyond which they may morph into something more structural, namely economic risk. This week, the clock on the Iran military operation ticked past that 90-day mark, making it a timely moment to review the key economic data, which globally paints a clear picture that growth and activity are holding up, but the consequences of the conflict are clearly feeding through into pricing.

Central banks are definitively signalling that anchoring inflation takes precedence over supporting growth, with June very likely to mark a key inflection point across key central banks and the tightening of monetary policy. This coincides with investors getting their first meaningful read on how the new Federal Reserve Chair is reshaping the Committee.

The new Chair’s approach represents a deliberate and principled break from institutional drift and mission creep. The Federal Open Market Committee’s mandate is being narrowed back to its statutory core of price stability and maximum employment. There is a possibility of no dot plot or forward guidance, and we should expect fewer speeches. For markets accustomed to being hand-held through every policy turn, this is a significant adjustment, just as economic uncertainty is rising.

Chart of the Week: The peculiar behaviour of employment

In nearly every case – except 2020 (COVID) and 2023 – the unemployment rate climbs significantly in the 36 months after a local minimum. 2020 was exceptional because the huge COVID-related spoke in unemployment rose and fell within 36 months. The past three years (2023-2026) have also been exceptional in that unemployment has risen very modestly and slowly from a very low level, but there has been no recession and no sharp untick in unemployment.

Source: Federal Reserve Bank of St. Louis, The FRED Blog as of May 11, 2026. For illustrative purposes only.

References

1.Deutsche Bank China Macro, “May PMI: rising prices affecting demand,” June 1, 2026
2.Dow Jones Institutional News Feed, “China PMI Signals Manufacturing Held Up While Cost Pressures Rose—Update,” June 1, 2026
3.Bloomberg, “JAPAN REACT: Stronger Wages Add to Case for BOJ June Hike,” June 4, 2026
4.Bloomberg, as of June 5, 2026
5.Bloomberg, “ECB Says Consumer Price Expectations Ease But Stay Elevated,” June 1, 2026
6.Bloomberg, “EURO-AREA REACT: Core Jump Cements June Hike, Flags Another,” June 2, 2026
7. Bloomberg, “US Manufacturing Activity Expands by Most in Four Years,” June 1, 2026
8. Bloomberg, “US May ISM Services PMI Rises to 54.5, Est. 53.8,” June 3, 2026
9. Bloomberg, “US Companies Add 122,000 Jobs, Most Since January 2025,” June 3, 2026
10. Bloomberg, “US REACT: Surge in Vacancies to Reduce Fed’s Job-Market Concerns,” June 2, 2026
11.Bloomberg, “US Hiring Surged in May, Boosting Bets on Fed Rate Hike,” June 5, 2026

All sources are Bloomberg unless otherwise stated.

Past performance is not a reliable indicator of current or future results.

References to specific companies is for illustrative purposes only and does not reflect the holdings of any specific past or current portfolio or account.

This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed by Muzinich & Co. are as of June 5, 2026, and may change without notice. All data figures are from Bloomberg, as of May 29, 2026, unless otherwise stated.

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