📅 Market Report.
👷 Last Friday, Nonfarm payrolls increased by just 12,000 in October, the weakest pace since late 2020, below estimates of 100,000. October jobs report showed the weakest growth in recent months, but likely distorted by weather and strikes. The unemployment rate held steady at a low 4.1%. Hourly earnings rose 0.4% as expected while the 12-month gain of 4% was in line with estimates. Previous months’ estimates were revised down by a combined 112,000 jobs. PCE inflation was near 2% target in September while core remains elevated at 2.7%. Fed expected to cut rates 25 bps at each of next two meetings in November and December.
📉 The data, which a priori could have supported the continuation of the rate cut and stimulated the market, was not well received. Markets retreated on Friday afternoon. SP500 closed around 57555, Nasdaq 100 at 20,170 points. Uncertainty ahead of this week’s election result seems to outweigh employment data.
🇬🇧 UK gilt market calm restored, lowering EURGBP risk premium, but budget may still weigh on sterling if yields rise gradually. The 10-year british bond continues to trade at a high yield of 4.45%, uncertainty and risk are driving down demand for the british bond. The pound has recovered a little against the dollar and a big gain against the euro. Bank of England expected to hike 25bps on Thursday but focus will be on comments about last week’s budget.
🇺🇸 Markets still broadly pricing a Trump win but dollar may sell more on a Harris victory while impact of Trump win depends on Congress results. Fed meeting on Wednesday may see limited market impact given proximity to election result which is still uncertain. Expect volatility in dollar crosses today and tomorrow as liquidity tightens ahead of the vote.
🏛️ A split or divided government after the US election could be positive for stocks by restraining deficit growth and uncertainty. Financial stocks and bond yields rising signal markets expect tax cuts and spending under a Republican sweep. Gridlock maintains the status quo better than an overhaul under a single party in full control. Trump campaigning in New Mexico shows importance of Congressional control. Republican Senate control could block corporate tax hikes if Harris wins presidency.
🇨🇳 China: Investors await details on China’s fiscal stimulus at NPC meeting ending Friday, expected to be larger if Trump wins to offset higher tariffs. Trump has threatened higher China tariffs, while Harris’ approach is less certain but may be less confrontational than Biden’s tech restrictions. The forecasts for additional debt issuance over 3-5 years range from over 10 trillion yuan to over 4 trillion yuan. Outcome and policies of the US election will shape China’s economic outlook and stimulus response.
🇪🇺 Last week, the eurozone manufacturing PMI showed some signs of stabilization in October, contracting at a shallower pace of 46.0 vs the preliminary estimate of 45.9. The new orders index bounced to a 4-month high of 44.2, still signaling an ongoing decline in demand but at a slower pace. There were positive signs that the pace of contraction in the manufacturing sector did not deepen further in October. Attention turns to the composite PMI due Wednesday for the overall eurozone economic picture.
⏰ Key events this week: US elections on Tuesday night, UK and US interest rate decisions on Thursday.
📈 Market View:
📉 Mini S&P 500 futures continue to trade weak ahead of the US election results. The Mini S&P 500 is currently trading at 5,765 points. The Nasdaq 100 index is also showing weakness, currently trading at 20,165 points.
💲 Today, the dollar index DXY is losing the 104 points of support it has held for the last two weeks, currently trading at 103.65 points. The EUR/USD takes advantage of the momentum to regain levels and rises above 1.09. US bond yields remain particularly high, with the 10-year bond reaching almost 4.30% return.
🇪🇺 In Europe, stock markets stabilise after last week’s sharp fall at the close. The DAX 40 trades at 19,335 points after falling to the 19,100 point area. The Eurostoxx 50 rises to 4,890 points.
🛢️ The crude oil spread that we pointed out at the beginning of last week has finally closed. The WTI barrel has risen sharply, regaining tone and symmetry with the Brent barrel, reaching 71.35 dollars for the former and 75.91 dollars for the latter. Gold remains strong at $2,750 an ounce after hitting $2,800 last week. Bitcoin also remains strong, although it slips back to $69,125 from over $73,000 last week.
🌍 Geopolitics:
📰 WSJ: Trump Isn’t Perfect, but He’s the Better Choice. If you like his policies but are put off by his tone or his excesses, consider the cost of the past four years.
🇲🇩 Pro-Western incumbent Maia Sandu claimed victory in Moldova’s presidential election against pro-Russian candidate Alexandr Stoianoglo. With 98% of ballots counted, Sandu led with 54.35% supporting her push to take Moldova out of Russia’s orbit and into the EU. However, Stoianoglo dominated in parts of the country, showing Sandu faces challenges in parliamentary elections next year. Sandu portrayed the vote as between the EU and uncertainty, while Stoianoglo said she failed ordinary Moldovans. The results suggest Moldova remains politically divided as geopolitical pressures intensify.
🇭🇺 Hungarian PM Viktor Orbán said Europe will need to rethink its Ukraine support if Donald Trump is elected US president. He backs Trump to beat Kamala Harris, saying a “pro-peace” US president means Europe can’t remain “pro-war.” Orbán sees Trump as a “chance for peace” and his team assisted Trump on migration policies.
🇷🇺 Russia says Trump will not be able to stop the war in Ukraine if he wins, and if he tries, he may be assassinated.
🇷🇺 Russia’s foreign secretary Lavrov has said: ‘The United States and the United Kingdom are preparing Europe for a suicidal adventure in the form of a direct military conflict with Russia. Such a scenario is seen in the US as a backup in case the Kiev regime fails to cope.
