 a year. Mark Bailey from Fixed Security is joining me now to take us through those numbers in particular to break it down and to see why the markets behaved in the way they did. Mark, thank you so much for your time. Now, the headline figure smashed all expectations. You had differing about 170, 180 seem to be consensus coming through from both Bloomberg and Thomson Reuters. This was well above it, but if you average out the last two months with that downward revision that we saw back in May down to just 11,000, the average isn't all that awe-inspiring, is it? How do you see this number playing out? Yeah, that's right, Carrington. I mean, I guess if we can just rewind and recap in terms of what actually happened in both the bond and the equity markets on Friday, you saw the S&P 500 equity rallies and now that's 200 points below its all-time record high of June last year. If you look at the bond markets, whilst the short end did sell off a bit, you still saw another kind of very strange rally in the 10-year part of the curve and that yield traded down to 136 and that's a record all-time low in data going back to 1962. So the bond market and the equity market are both telling you very different things in terms of their views of where the U.S. and global economy is going to in the future. And in terms of that the payroll figure, you're right in terms of it was a stellar one for the 287 that came in, but if you do average it out, and as you say there was downward revisions as well, there is a bit of weakness there, but I think the bond market as well is keenly watching that average earnings figure, which again came in below consensus very weak at 0.1% versus consensus of 0.2%. And some people say, well, also you saw the unemployment figure tick up slightly, I think it was to 4.9, consensus was 4.8, but that was largely driven by an increase in participation rate, which is actually seen as a positive. But in terms of where the bond market is seeing the U.S. economy, and as you rightly point out, they're not seeing a fed hike for at least a year, it's very, very slow growth and very, very kind of tepid interest rates and environment that's likely to continue. And that is also playing out in terms of the shape of the yield curve, the U.S. Rosary yield curve, the 2 to 10s is the flattest that it's been since 2007, since November 2007, which again indicates the bond market's overriding view of very low growth, low inflation, and very tepid consumer spending and retail sales, which we'll obviously get a print on later this week, whereas the equity market is seeing blue sky as is fairly typical, and they're very much more optimistic and positive in terms of the outcome. But if you look at any of the PE ratios or sales to price ratios, they're trading at pretty optimistic and aggressive levels, and you could potentially argue that they're overpriced and maybe you're waiting to see a correction coming in in the equity side of things. Mark, I'm fascinated by the reshuffling of the importance of some of these key economic data points, both here in Australia, but also overseas. We've got the jobs unemployment number coming out this week. Normally, this would be seen as the key indicator, I think, for the Reserve Bank's timeframe on our interest rates. But because of that last shock inflation number, all attention seems to be firmly on what happens when that inflation number comes towards the end of this month. Very little attention on that jobs number. When we compare what's happened with this non-farm payrolls number coming from the US, it seems the focus really was on the wage inflation. The fact that we're basically seeing earnings go up, seeing people actually earning more money is more of an indicator than necessarily what the unemployment rate is. Do you think it's the same for both countries at the moment that it's all about inflation, it's all about price pressures, as opposed to just the number of people employed? I think so, Carrington, because in terms of the employment figures that are coming out from both Australia and from the US, they're pretty healthy. They're reasonably strong. Yes, sometimes some months they're stronger than expected. Last month was weaker than expected. But overall, where they are in terms of the unemployment figures and the employment data, it's pretty robust. So what the central banks and investors are looking for is any kind of indication that you're going to see inflation coming through. And that potentially would mean that the central banks would have to move on interest rates. So they keenly watch the wage data, the average earnings in the States, and the wage data in Australia. And in terms of those inflation figures, as you rightly point out, the July 27th in Australia will be the figure that the RBA probably does want to see before it does move on the interest rates potentially in August or September. And that seems to be the key figure going forward at the moment rather than the employment data, which yes, there's movements over the months. But generally speaking, it's a fairly robust market, but the key indicator for central banks, as you rightly point out, seems to be on the inflation side of things. Let's turn our attention to Europe, Mark. In particular, what seems to be slow moving trainwreck of Italian banks? Monte DiPasci, the oldest bank in the world, saddled with huge amounts of debt, this argument between the ECB and Italian authorities about whether or not to effectively give a haircut to junior bondholders. How do you see this playing out? They look to be a bit of a spur of confidence on Friday, reinvesting a reevaluated optimistic outlook for Italian banks that a deal could be done. What does this mean, though, for those people holding the bonds? How do you think this will actually play out? Yeah, I mean, it's a hugely fluid situation that we're seeing over there in terms of the Italian banking sector. And it's widely believed that that Italian banking sector will need around about 40 billion euros of capital injected into that sector. Now, the important part for investors is whether that capital can come in from the government before any of the bondholders and before any of the current equity holders are written out or bailed in. And that is hugely important as to where those bonds trade and how that works out. And unfortunately, it's very difficult to analyze that. It's pretty much a binary decision. It's a government decision that will take with the European Commission in terms of what they're actually allowed to do. But again, Italy has got a fairly similar type of structure in terms of their additional tier one, their COCOs are hybrid market in the fact that a lot of those investors in that space are retail investors, very similar to Australia. So if they do get written down and we have some hugely volatile trading, I think we saw some of the Montipaschi COCOs trading down at 13 cents to 62, 64 cents in the dollar on Thursday last week. And maybe they bounced a bit back on Friday depending on whether they believe that the government is going to be allowed to inject that equity capital underneath them so they don't have to take that haircut. And I think as well over the weekend, you saw a Deutsche Bank analyst commenting in a German newspaper that the overall European banking sector would probably need around about 150 billion of capital. So it's not just an Italian banking sector problem, but it's more broadly because as we saw in the Anglo-Saxon system of the US and the UK banks, they took their pain, they wrote down the assets, they got the capital injections, whereas as it's fairly typical in the European situation, stick their heads in the sand, hopefully growth will come through, hopefully inflation will come through, help to reduce the nominal debt pile on banks balance sheets and to a lesser extent government's balance sheets, but that hasn't happened. So in terms of the implications for the domestic market and Australian retail hybrid holders, it's just an important goal kind of point that that regulatory environment is continually changing, it hasn't been decided. So in terms of the risks that they're taking on board when they're buying those instruments, it's still very much unknown. And whether this provides a kind of a template to blueprint for global recapitalization of banking systems as and when they need to be will wait to see. But at the moment, it's still very much up in the air in terms of how this will play out. Mark Bailey, thanks for your time. Thanks, Kerrington.