The disappointing U.S. jobs report sent European stock market indices and the euro higher, as investors took solace in the fact that the number is still too weak for the Federal Reserve to dare raise interest rates at its meeting later this month.
The world's biggest economy created 151,000 jobs last month vs. expectations of around 180,000, while wage growth moderated. The number is enough by itself to stop the Fed in its tracks, but there are other factors adding to it as well.
One area that the Fed is likely to look at before any decision on interest rates, even though policymakers are not keen to admit it, is the international arena.
Emerging markets are absolutely the most-closely watched area. Over the years, the share of these countries in the world economy has increased -- they are more and more interlocked with developed economies, so the world's most important central bank is unlikely to ignore them.
Besides, in the current geopolitical context, with Russia making a big push to assert itself as an international power again, China creating discomfort among maritime neighbors and Brazil in the grip of a deep political crisis, economic crises are the last thing that developing countries need.
Even without a Fed rate hike, the outlook for emerging markets is cloudy. Yes, they have seen a strong advance since the spring, and it is true that in May, when talk about a Fed rate rise was intensifying, emerging markets stood strong.
But their economies are far from recovering at a brisk pace. Manufacturing PMIs in Asian countries such as Thailand, Malaysia, South Korea and Myanmar contracted last month, while China stagnated. In Brazil, manufacturing registered its 19th consecutive month of contraction in August, whereas Russia posted a return to growth -- but only just, at 50.8 in August.
Among the BRICs, India was a lone bright spot, with manufacturing rising to a 13-month high of 52.6 last month. But that positive data point is too little to justify hopes of a strong revival of emerging markets.
Export destinations for these countries are, of course, the developed economies -- and there, the picture is not much clearer.
In the U.K., after the Brexit vote in June, things looked better than many had expected, with the weakness of the pound sending the manufacturing PMI to a 10-month high in August.
However, signs of softening abound in the building sector: Construction PMI was still in contraction territory last month, after plunging to an 85-month low in July.
In the eurozone, the data are mixed as well. Manufacturing PMIs released yesterday by IHS Markit showed final PMI in the single-currency area slipping in August to 51.7 from July's 52 level. Manufacturing in Germany and the Netherlands expanded strongly.
In France, manufacturing continued to contract, with the PMI descending to a two-month low of 48.3 while in Italy, it contracted to a 20-month low, coming in at 48.9 in August. Spain's was unchanged at 51, while Greece posted only very slight expansion, with PMI at 50.4.
Besides the tepid jobs report, the international context says it is still too early for the Fed to raise interest rates. Too much monetary tightening by the U.S. risks sucking liquidity out of the rest of the world, especially emerging markets, at a time when the recovery is still very fragile. The Fed has been patient so far. It might be prudent to remain patient for a while yet.