HIGHLIGHTS
US equities continue to hit new highs. Nonfarm payroll came in higher than expected. Unemployment rate increased slightly, lead to higher odds of a 25bps rate cut. 10Y treasury yields dropped.
Strong Data: Economic data prints in the US have been strong recently, including consumer sentiment and manufacturing data. Although Fed officials mentioned that the economy is stronger than expected and would allow them to take more time to cut rates, the likelihood of a December rate cut is still high. BoJ: Markets do not have a consensus on whether the Bank of Japan will hike rates in the coming meeting. Officials are aware of the uncertainties around the policies in the US but have not ruled out the probability of a rate hike. It is pricing a 35% likelihood of a hike in the futures market. France: There was a no-confidence vote against the new French Prime Minister. French equities went up and the OAT/Bund (French bond/German bond) spreads were wider, implying a higher risk premium.
MARKETS
19,859.77 | +3.34% | |
S&P 500 | 6,090.27 | +0.96% |
Dow | 44,642.52 | -0.60% |
10-Year | 4.15% | -3bps |
Brent | 71.06 | -1.09% |
DXY | 105.97 | -0.22% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
Goldman Sachs: Uber and Lyft dropped almost 10% after Google-owned Waymo announced its expansion of autonomous ride-hailing service to Miami. Markets believe that this could enable self-driving firms to expand in more cities without relying on ride-sharing marketplaces.
UBS: Despite the political turmoil in France, German and South Korea, equities still hit all-time highs supported by the strong macroeconomic backdrop, including the strong US economy, supportive monetary policies in Eurozone and the continuous uptrend in AI.
Fixed Income
Barclays: We expect a 25bps rate cut in December Fed meeting. However, we think there would be disagreements about the neutral rate, which make a consensus more challenging in the upcoming meetings. In Japan, we believe they prefer to hike rate in January.
Standard Chartered: European government bonds (FX hedged) are attractive, given the current volatility can be seen as an opportunity to add exposure.
Economy
UBS: The personal consumption expenditures price index increased while it is aligned with expectation. We expect inflation will continue to move toward the 2% Fed target. Potential tariffs could cause a one-time increase in price level but not a sustained higher inflation.
J.P. Morgan: US GDP growth is strong amid the dimming labor market outlook. The productivity growth is robust, with upward revisions to the highest level in more than two decades. Although labor market looks fragile, overall economy remains solid.
KNOWLEDGE TRANSFER
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DISCLOSURE
This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.
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