Our base case scenario assumes a US growth acceleration in the second half of this year while we do not foresee a first rate hike by the Fed before the summer of 2015. 

## Main equity markets in 2014 (in euro)


## Strong US growth figure fed rate hike expectations

Equity markets had a disappointing week. Surprisingly, one of the drivers of the somewhat bearish mood on the markets was the strong growth of the US economy in the second quarter. Gross Domestic Product (GDP) growth in the US came in at an annualised 4%, well above the 3% consensus growth estimate. The strong growth figure, a sharp rebound from the 2.9% GDP contraction in the first quarter, sparked speculation among investors about a sooner-than-expected interest rate hike by the Federal Reserve. The sharp rise in consumer confidence, measured by the Conference Board, to the highest level since October 2007, added to the early rate hike concerns. 

## Labour market report somewhat weaker than expected

It was therefore some kind of relief that on Friday the labour market report came in somewhat softer than expected. Payrolls rose by 209,000 in July which was below the consensus estimate of 230,000. Moreover, the unemployment rate did not fall further but actually rose to 6.2% from 6.1%. Part of this is probably due to the rise in the participation rate to 62,9%, indicating previously disenfranchised workers returned to the labour market in search of a job. 

All in all the July figures were a tad disappointing, but labour market slack continues to shrink and the improving growth outlook will keep that trend in place. Together with the rise in consumer confidence and the encouraging consumption component in the GDP number – personal consumption rose 2.5% in the second quarter – this bodes well for the US consumer, the most important actor in the US economy.