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Hello and welcome back. In a world that now expects everything delivered yesterday we noticed last week an interesting collaboration between Not on the High Street and Deliveroo to offer gifts to your door within 25 minutes. For any of those reading this that are prone to forgetting important dates and anniversaries (we can admit this as I’m pretty sure my wife doesn’t read these updates), this is welcome news! Financial markets level of patience is somewhat similar to that of the modern day consumer and this week is just another week where investors are falling over each other to interpret the latest from US jobs markets.
The week ended with US yields lower post the PCE inflation figures from the US on Friday afternoon (slightly softer 0.1% MoM versus expectations of 0.2%) but dollar holding some ground.
Some resilience in the Greenback is likely to reflect the markets priority of the jobs market over inflation currently across the pond, and a risk environment looking increasingly shaky with events unfolding in Lebanon meaning that the dollar will hold some ground as a safe-haven. GBPUSD remains elevated in the high 1.33’s and EURUSD above 1.1150 but as things stand these markets are struggling a little to continue the rally higher.
Elsewhere in markets, moves in Asian equity markets caught the eye. They are relatively easily explained away but a drop in the Japanese Nikkei equity market of 5% is a telling reflection of political concerns in Japan, whilst markets in Shanghai traded the other way post the string of stimulative measures announced in China last week. Domestically the economic calendar has already kicked into life with UK GDP released first thing morning, coming in a little softer than expected at 0.70% YoY versus expectations of 0.90%.
Interestingly the Nationwide House Price Index bumped up to 0.70% MoM versus expectations of 0.320% so that component of the UK economic continues to look healthier.
In mainstream news it’s difficult to look beyond the escalating conflict in Lebanon with the major development being Isreal’s forces killing Hezbollah leader and many of the highest chain of command in an airstrike on Friday. With Israel tanks and troops grouping on the Lebanon border as Iran have responded that recent strikes have ‘changed the game’ the threat of a broader conflict across the Middle East remains as high as it’s been in years. Markets will react extremely quickly to any further notable escalations, whilst for now there is still little significant influence on asset pricing.
As we’ve mentioned at the top, the markets obsession with the US job market will dominate the week ahead. JOLTS, ADP and ISM employment components will all be tasters for the main event of Non-Farm Payrolls on Friday. Market expectations remain at 50/50 for a 50 basis point cut in November from the Fed but by the end of this week this will almost certainly provide more conviction on the next move. Accompanying the string of jobs numbers we also have Fed speakers once again with Fed Chairman Jerome Powell speaking later today.
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