This week kicks-off with eurozone retail sales. The ECB’s Lagarde will testify to lawmakers, and we will also hear from Guindos and Lane at separate events, and the BoE’s Bailey delivers a keynote speech. China FX reserves, German factory orders, and US trade data are due on Tuesday. We will hear from the Fed’s Miren, Bostic and Kashkari and the ECB’s Nagel. The FOMC’s September minutes will be released on Wednesday, and central bank commentary comes from the Fed’s Barr, Musalem and Kashkari and the BoE’s Pill. US wholesale inventories and initial jobless claims (if released) will garner market interest on Thursday, and we will hear from the Fed’s Powell, Bowman and Barr. The University of Michigan sentiment release will be key on Friday, as will remarks from the Fed’s Goolsbee.
Although significant to the labour market, the US shutdown, the first since 2018/2019 was largely ignored by markets. The yield on the 10-year UST closed 5bps stronger at 4.12%, while the S&P Index soared to new highs, up 1.09% on the week. Meanwhile, the dollar, DXY Index, fell 0.44%, and Brent crude fell 7.99% to $64.53pb amid oversupply concerns.
The key event for markets last week was the US employment report which was delayed due to the closure of the BLS amid the government shutdown. Other data remained largely mixed. The Conference Board’s US Consumer Confidence Index fell to a five-month low in September. Crucially, the measure of expectations for the next six months remains below the 80 threshold that has historically signalled a recession. This weak sentiment is rooted in job worries, with the gauge of present conditions dropping to a year-low and the difference between “jobs plentiful” and “jobs hard to get” narrowing to the smallest since early 2021.
Ahead of that, the MNI Chicago PMI fell further into contraction at 40.6. Although the August JOLTS jobs data surprised to the upside, the September ADP employment change fell by 32k. The ISM manufacturing remained in contraction, with prices paid and new orders lower, and while the employment component was marginally higher, it was still below the 50 level. The ISM services, fell to 50 with employment remaining subdued.
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