Inflation prints around the world will garner market focus this week, as will the COP 29 climate conference and earnings reports from Chinese e-commerce giants. A fairly quiet start to the week with US markets shut for Veterans Day today. UK employment figures are due on Tuesday, and we will hear from the Fed’s Waller, and ECB’s Rehn. US CPI takes centre stage on Wednesday, current estimates are a 0.2%mom and 0.3%mom increase in the headline and core prints, with the year-on-year figures forecast at 2.6% and 3.3%, respectively. Also on Wednesday, the Fed’s Schmid and Logan speak at an energy conference, while their counterpart Musalem discusses the US economy and monetary policy. Eurozone GDP and US PPI and jobless claims readings follow on Thursday, and we have Walt Disney’s earnings. Central bank chatter includes the Fed’s Powell, Williams and ECB Schnabel and BoE’s Bailey. China’s retail sales, industrial production and fixed-asset investment, the UK’s GDP and industrial production, and US retail sales, Empire manufacturing and industrial production end the week.
Last week markets experienced a whirlwind amid the US presidential elections and the FOMC meeting. Global bonds witnessed a sharp sell-off as market concerns of a Trump-fuelled deficit and inflation risks ramped up. However, bonds settled into the end of the week. The yield on the 10-year fell 8bps to 4.31%, the benchmark traded as high as 4.48% during the week. Meanwhile, the S&P Index rallied 4.66%, to new all-time highs. The dollar also gained momentum following Trump’s unexpected early win, the DXY Index was up 0.69%.
The FOMC voted to cut rates by 25bps. The unanimous vote to ease rates to a range of 4.50-4.75%, was widely expected. The Committee struck a balanced tone, stating “The economic outlook is uncertain, and the committee is attentive to the risks to both sides of its dual mandate.” Powell described the latest rate cut as a “further recalibration”, warning of dual risks: aggressive cuts could threaten inflation progress, whilst excessive caution risks dampening economic activity unnecessarily.
Earlier the Bank of England delivered a hawkish cut of 25bps to 4.75%, in an 8-1 vote, the outlier preferred to hold at 5%. The central bank reiterated that “a gradual approach to removing policy restraint remains appropriate.” Bank Governor Andrew Bailey also noted rates were likely to “continue to fall” but that they could not be cut “too quickly or by too much.” The BoE warned that the measures announced in Autumn Budget 2024 expected to boost the level of GDP and CPI inflation. The bank now sees inflation rising by 0.5%, more than previously forecast, to hit a high of around 2.75% next year before falling back to its 2% target. Growth, meanwhile, could rise a further 0.75% in a year’s time.
Over the weekend China’s consumer prices maintained positive growth at 0.3%mom. This modest increase comes alongside Beijing’s proactive monetary policies and fresh government initiatives to boost domestic spending. Factory-gate prices fell below expectations, but this could, however, enhance China’s export competitiveness in global markets. The latest measures announced at the NPC gathering included a comprehensive plan to manage local government debt, notably, a CNY10tn five-year package to address “hidden debt”. Though market response was tepid, these measures are crucial for local governments to implement stimulus and maintain growth. This matters as China could face weaker external demand in 2025 and needs to strengthen domestic economic activity through property stabilisation and consumption support.
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