Asian financial markets got excited by the strength of the U.S. economy for the employment report on Friday that signaled reasons to hope for domestic demand growth in the States.

At a time when the world economy is facing some political shocks, domestic demand growth in the States is understandably seen as a welcome antidote.

Getting that that level of optimism could perhaps be too premature, but things are what they are and, after all, markets wanted good news and they got it.

In the details there were some vague signals of the growing inflation problem in the United States, but the employment report is no longer the place to really look for these pressures.

Beyond the fact that the labor market, or at least the skilled and semi-skilled labor markets look to be tight, economists must look elsewhere for cost pressures. The Bureau for Labor Statistics just released the latest employment cost index for civilian workers that rose by 1.9 percent year-on-year in Q1, but was down from 2.0 percent in Q4 of 2015.

Japan has perhaps fewer signals of domestic demand with the machinery orders data weaker than expected by declining by 1.4 percent month-on-month in May and missing market consensus of a 2.6 percent gain. Compared to a year earlier, machinery orders decreased by 11.7 percent. Notwithstanding this is a volatile series, the trend is certainly not good at all.

The Bank of Japan saw money supply growth remaining weak on the broad measure as it is measured in the M3. The frantic activity of the Bank of Japan in their money supply is not doing a great deal to change things as far as the broad money supply is concerned.

This is of some global interest because other Central Banks, most actually the ECB have also been rather frantic in their policy prescriptions.

The G20 has been trying to take the shine off things a bit with global trade ministers gathering together.

The G7 is bad enough at making decisions. The last notable G7 decision was in 1987 when at the 13th G7 meeting it was decided to meet at least semi-annually instead of annually and the G20 has never been known for taking a decision that was collectively acted upon.

So, nothing was really expected to be decided at the G20 Trade Ministers’ 2-day meeting in China’s capital. However, there were pronouncements. One of those pronouncements was an expectation of cross border investment falling by up to15 percent (Ref. http://www.bloomberg.com/news/articles/2016-07-10/g-20-trade-ministers-see-global-investment-falling-up-to-15?cmpid=google).

Interestingly, global trade in real terms is at a record high as a share of global GDP.

Global capital flows however collapsed in 2008 and have never really recovered.

The globalization of capital has also been less severely damaged during the aftermath of the global financial crisis. Foreign Direct Investment (FDI) has been less severely affected.

Long-term investors could do well paying attention to this as that situation may be about to change.

One reason for a probable change in FDI trends is of course the behavior of the UK, which is by the way the largest FDI recipient in Europe and one of the largest FDI recipients in the world.

The Bank of England meets this week to contemplate the aftermath of the EU referendum and as experts agree that an economic slowdown is likely and the Bank of England is expected to ease policy. The advantage of conducting a rate cut is that it diverts money from the older generation to the younger, from savers to borrowers in effect and as the younger generation is more affected by the EU referendum result, that is probably helpful.

Gibraltar incidentally is lobbying for a second referendum on the terms of a UK exit, although once article 50 is invoked, I understand that as things stand today, the choice would simply be out on negotiated terms or out with no terms whatsoever. Any third way would have to be negotiated with the EU.

Interestingly, more than one thousand barristers have sent on July 9 a letter to the British Prime Minister wherein they ask for a free vote in Parliament before article 50 of the EU Lisbon Treaty can be triggered.

Yes, it looks like uncertainty/volatility could stay with us longer than many think at present.

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments. To read more of his articles, GO HERE NOW.