Head of Macroeconomic Research
Summary: This is the new version of "Chart of the Week", including the macro calendar for the week ahead. Your feedback is always welcome.
Due to ongoing uncertainty, US companies have cut CAPEX but not jobs yet. The latest payroll published on last Friday is rather encouraging regarding the state of the US economy.
The headline was a big surprise for most market participants, as the NFP beat consensus at 128k vs 85k expected. The figure is even more impressive considering that the General Motors strike had a very negative impact on employment and subtracted 41k from the figure according to the BLS.
On the top of that, the net 95k upward revision for August and September tends to confirm that the economy is more resilient than most expected.
There is not much market slack as the number of “people not in the labor force but still wanting a job” is back to pre-crisis level.
Unless a macro accident happens in November, the latest NFP report supports the view that the Fed could pause in December, after three consecutive cuts.
However, it is not all good as there are still some signs of weakness, especially in more cyclical sectors (chart below):
It is too early to talk about risk of contagion to other sectors and our view is still that the US labor market remains well-oriented in the short and medium term, despite the impact of the trade war and China’s slowdown.
Week ahead
Nov. 5: RBA to hold rates at 0.75%.
Nov. 6: Macron-Xi formal meeting. One of the main goals of Macron’s trip is to increase French agricultural exports to China. In other news, the Bank of Thailand may cut rates by 25bps to 1.25% as the THB real effective exchange rate is way too strong.
Nov. 7 to Nov. 20: Privatization of France’s national lottery games (FDJ, for Française des Jeux). It is part of the so called Pacte law aimed to privatize some key French entities and increase business growth and transformation of companies to face international competition. The FDJ is a very profitable company: revenue increased by an average of 5% over the past 25 years and, last year, it distributed 130 million euros in dividends. The French government’s purpose is to reduce its stake in the company from 72% to around 20%. It is considered by investors as the privatization of the year for the French stock market.
Nov. 11: General election in Spain. The most recent polls indicate there is no clear coalition emerging. The PSOE is still leading the polls, but support in its favor is slightly declining to levels close to April election, whereas the PP is gaining more support. Podemos is stable. As of now, the only viable coalition would be a grand coalition gathering the PSOE and the PP, which would be a first in Spain’s history.
The end of the road
Emboldened by surging crude oil prices, Saudi Arabia makes waves on the international stage, as Crown Prince Mohammed bin Salman manages to create a World Champions League, after buying the UEFA Champion League franchise.
As the world embraces GLP-1 obesity wonder drugs, the people next in line to get a prescription stop caring about dieting and exercising, figuring that the drug will later solve all of their weight-related health problems.
With the US budget deficit spiraling above 10% of the GDP, the government is desperate to foster demand for US Treasuries. Under intense pressure from the White House, Congress makes income from government bonds tax-free.
After a criminal group deploys the most deceptive AI deepfake ever seen, generative AI becomes a national security threat. With public distrust soaring, governments crack down with harsh new laws, puncturing the AI hype.
To fix the divergence in the global trade and financial system, the largest deficit countries unite to negotiate new world trade terms. For surplus countries, the reset of the global economic model is a painful adjustment.
As discontent with Biden and Trump rises to fever pitch, Robert F. Kennedy Jr sees his support rising inexorably in the polls. On November 5, Kennedy wins the US presidential election, ushering in a new era in US politics.
Stepping up Japan's economic transformation in 2024, PM Kishida brings in a host of populist policies to boost domestic demand. As the GDP growth rate hits 7%, the BoJ is forced to abandons its yield curve control policy.
As people wake up to how little tax Europe’s billionaires are actually paying, the EU Commission implements a wealth tax of 2%. The tax sends shockwaves through Europe's luxury industry, with luxury giant LVMH plunging 40%.
