A look at the day ahead in European and global markets by Kevin Buckland
What a difference a payroll report makes.
From concerns about a U.S. economic “hard landing,” the debate has shifted to the possibility of a so-called “no landing,” where the labor market remains hot even as inflation cools.
The story is so compelling that it completely absorbed the attention of traders and investors even as Israeli bombs fell in Gaza and Lebanon, with Monday marking the one-year anniversary of the Hamas attack that sparked the war.
Asian shares picked up where Wall Street left off, with Japan’s Nikkei leading the charge with a 2% gain, getting extra help from a sharply weaker yen.
The American exceptionalism narrative, which was on shaky ground last month, is standing — and the king’s dollar is on its shoulders.
The yen, euro and sterling all fell, although the return of the Japanese Finance Ministry’s jaw pain helped put a floor under the yen. Trader scars from the latest round of Japanese currency intervention may have begun to tingle as top currency diplomat Atsushi Mimura said he was watching speculative moves “with a sense of urgency.”
Sterling has, of course, been caught on the backlash of a shock easing by Bank of England boss Andrew Bailey, which was countered by BoE chief economist Huw Pill last week less than 24 hours later.
However, the euro continues to suffer from that sinking feeling as more and more ECB officials join their president, Christine Lagarde, in signaling a strong pace of further easing. ECB policymaker Francois Villeroy de Galhau was the latest, saying the central bank will “very likely” cut spending this month due to the risk of sub-par inflation.
There will be no shortage of additional central bank speakers on Monday.
ECB chief economist Philip Lane and board member Piero Cipollone will both give speeches in Frankfurt, and colleague Jose Luis Escriva will speak in Madrid.
There is also a Eurogroup meeting in Luxembourg, at which Lagarde is present.
From the United States, we will hear Fedspeak from Governor Michelle Bowman and no fewer than three regional heads: Neel Kashkari from Minneapolis, Raphael Bostic from Atlanta and Alberto Musalem from St. Louis.
Chicago Fed President Austan Goolsbee already had his say on the jobs figures on Friday. In successive interviews on Bloomberg and Yahoo! He called the Treasury numbers “fantastic,” giving the Fed “both the time and space to figure out where the settlement point is.” However, he added that interest rates still need to fall “a lot” from here.
Additional developments that could impact markets on Monday:
-German industrial orders, manufacturing production, consumer goods (all in August)
-UK Halifax house prices (September)
-Italian retail sales, trade balance (both August)
– Euro area Sentix index (October), retail sales (Aug)
(by Kevin Buckland; editing by Edmund Klamann)
