Highlights this week include UK Chancellor Reeves’ budget (Wed) and further earnings reports. Today’s Germany IFO business climate and the ECB’s Lagarde’s keynote address will be of interest. Germany GDP, US retail sales, PPI and Conference Board confidence figures follow on Tuesday. We also have Alibaba earnings, and we will hear from the ECB’s Cipollone, Makhlouf, Sleijpen and Galhau. US durable goods and initial jobless claims will garner market focus on Wednesday, as will the Fed’s Beige Book, given the extended US government shutdown. The ECB’s Vujcic and Lane speak at separate events. China industrial profits and eurozone consumer confidence figures are due on Thursday, and we will hear from the BoE’s Greene. Eurozone CPI expectations feature on Black Friday. The National Retail Federation expects holiday sales to exceed $1tn, setting a new high.
Asset classes witnessed a mixed week amid a raft of stale US data, mixed fed rhetoric and AI-rout. US Treasuries enjoyed a rally into the close of the week, the 10-year benchmark strengthened 8bps to 4.07%, following the Fed’s Williams dovish remarks. Meanwhile, US equities broadly closed lower, the S&P Index fell 1.95%. The dollar, DXY Index, gained 0.89%. Brent crude plummeted 2.84% to $62.56pb on hopes for a Russian-Ukraine peace deal.
In terms of key US data, further signs of a cooling labour market came from the late initial jobless claims figures. The delayed non-farm payrolls exceeded expectations with 119k jobs added, although August readings were revised downs (from +22k to -4k). Crucially, the unemployment rate increased to 4.4%. Despite a slight rise from its preliminary reading after the government shutdown ended, the Michigan Consumer Sentiment Index for November remains at its lowest level since June 2022. The Bureau of Labor Statistics (BLS) cancelled the release of the closely watched CPI for October; the prolonged government shutdown prevented the agency from collecting the necessary price data. The cancellation heightens uncertainty for both the Fed and the markets, as policymakers will be missing crucial, timely inflation data when considering their next interest rate decision.
The FOMC minutes following the October cut revealed deep divisions among officials regarding the future path of interest rates. While the majority supported the most recent rate cut, “many” participants indicated that they felt it would be appropriate to keep the target range unchanged for the rest of the year. Futures markets are pricing a 69% chance of a cut in December, while swaps markets are currently forecasting a ~80% probability.
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