Nov 6, 2017 - Market Update. Week 45: 06 November ... further gains in the labour market. Eurostat's most ... Bank of En
Market Update Week 45: 06 November 2017
UK Monetary Policy Meeting
USA Employment
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More than expected
Super Thursday passed off more or less without incident. It’s true that we did get the first rate rise in a decade, but that was already old news. Rather, the potential for new excitement was to be found in the Bank’s coincident publication of the quarterly Inflation Report. Had the report contained, say, a forecast for a more prolonged period of above-target inflation, we may have seen some adverse movements in asset prices. In the event, the Bank’s projection for CPI growth in Q4 next year was lowered from 2.5% to 2.4%. And so, the yield on the 10-year gilt finished the week at a lower level than at the beginning and sterling too lost a little of its shine.
Rebounded
The huge headline increase in the non-farm payroll numbers from 18,000 in September to 261,000 in October actually represents something of a disappointment. A rebound from last month’s hurricane hit report was a certainty but it didn’t get close to the consensus forecast for an increase of 315,000. And while the unemployment rate fell to a 17-year low at 4.1%, we are left feeling a little flat by the broader tone. More specifically, wage growth remains subdued at 2.4% and the labour force participation rate eased a little. Still, we see nothing in this month’s report which is likely to stall a December rate rise.
Last Week In Markets 3.0
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3.0 2.4
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1.2 0.7
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0.6
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UK Value UK Large UK Mid UK Small
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USA Europe Japan
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-2.6
Brazil Russia India China
Other Developments
China Manufacturing Output, EU Economic Output and Employment Good news; both the official and the unofficial Purchasing Managers’ Index (PMI) surveys point to sustained increased output in the Chinese manufacturing industry. The official PMI registered 51.6 in October, down from 52.4 in September. Meanwhile the unofficial Caixin/Markit index repeated September’s reading at 51.0. We expect both of those measures to soften in the months ahead as policymakers’ attempts to cool house price growth have the effect of dampening demand for the products of heavy industry. Still, we’re happy for as long as those numbers come in a little above the neutral 50.0 mark.
Elsewhere, Eurostat estimates that output across the Euro zone increased during Q3 by around 0.6% compared with the previous quarter. That brings the year-on-year growth rate to 2.5%. That’s faster than that in the UK and US. Faster output growth has probably been fuelled by further gains in the labour market. Eurostat’s most recent unemployment survey, also released last week, puts September’s jobless rate at 8.9%, down from 9.0% in August. That’s more than double the comparable rate in the UK and US.
This Week
In recent years, there have been two kinds of Fed chairmen: commanding personalities such as Paul Volcker and Alan Greenspan, whose views on inflation and interest rates dominated central banking from the 1980s through the mid-2000s; and the consensus-driven leaders, Ben Bernanke and Janet Yellen, who guided the central bank toward more open decision-making and de-emphasized the power of the chairman. Mr. Powell, judging by his nearly 40year career in government, law and banking, is likely to be in the latter group. That means a Powell Fed might look a lot like it has since Mr. Greenspan retired in 2006. Such continuity would be welcome in the markets, which don’t like uncertainty, and at the Fed, one of the world’s most powerful economic policy-making bodies. It also could please Mr. Trump, who has spoken approvingly of record stock prices and declining unemployment. Wall Street Journal 02 November 2017
Monday Germany manufacturing survey Euro zone producer price index Australia monetary policy meeting Tuesday Taiwan consumer price index Germany industrial production Euro zone retail sales Russia consumer price index China trade Wednesday France trade Spain industrial production USA oil inventories New Zealand monetary policy meeting Japan machinery orders China consumer price index Thursday Germany trade OECD composite leading indicator Friday France industrial production Brazil consumer price index UK trade India industrial production Russia trade
Market Dashboard Bank Base Rate
▲
0.50%
Market Data Equity Index Levels
– 3.0%
Inflation (Y-o-Y)
Unemployment Rate – 4.3%
J F M A M J J A S O N D
£210,085
House Prices
▼
3 Month Trade (£B)
– -10.8
GDP (Y-o-Y)
– 1.5%
▲
7,560
S&P 500
▲
2,588
Stoxx Euro 600
▲
396
Nikkei 225
▲
22,539
10 year UK Gilt
▼
1.27
10 year US Treasury
▼
2.33
10 year German Bund
▼
0.36
10 year Japanese GB
▼
0.05
Brent Crude
▲
55.7
Gold Bullion (per t oz)
▼
1,270
Bond Yields
– 2.1%
Wage Growth
FTSE 100
Commodity Prices ($)
UK Interest Rates and Gilt Yields Bank of England Base Rate
10 Year Gilt Yeild
6.0 5.0 4.0 3.0 2.0 1.0 0.0
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