Global Summary News -28 October to 1 November 2024

United States

The economy showed resilience with Q3 GDP growth at 2.8%, though slightly below forecasts. Tech stocks saw a turbulent week, with significant sell-offs impacting the S&P 500. However, the index staged a late-week recovery, boosted by strong earnings from industry leaders such as Amazon and Intel. US job openings dropped to their lowest level since early 2021, reflecting some cooling in the labour market, while September PCE data showed inflation at 2.7% year-over-year. Treasuries showed volatility with the 10-year yield reaching 4.37%, as traders anticipate potential Fed rate cuts in November and December. Hedge funds are increasingly bullish on the dollar, holding $17.8 billion in positions amid rising election tensions.

United Kingdom

Chancellor Reeves announced a minimum wage increase of 6.7% to £12.21 in April, supporting low-income workers. The recent Labour Budget outlined ambitious borrowing plans, causing a gilt sell-off and pushing borrowing costs to their highest this year. The Office for Budget Responsibility highlighted this as one of the most significant fiscal expansions in recent history. Businesses expressed concern that higher taxes could lead to job losses. Consumer confidence declined in October to -21 as households brace for tax rises. Public sector borrowing increased to £16.6 billion in September, pointing to financial pressures ahead.

Eurozone

Inflation rose slightly to 2% in October, with economists expecting a smaller rate cut from the European Central Bank by December. Concerns remain over the bloc’s ageing workforce and low productivity, with IMF projecting slower GDP growth of around 1.45% annually through 2029. French inflation rose to 1.5% in October, driven by a decrease in energy costs. German fiscal forecasts anticipate a shortfall in tax revenues of €58.2 billion through 2028, adding pressure on Chancellor Scholz’s coalition.

Japan

The yen weakened amid uncertainty following the ruling coalition’s loss of a parliamentary majority. The job-to-applicant ratio rose slightly, while the jobless rate fell to 2.4%, suggesting tight labour conditions. The Bank of Japan held its rate steady and signaled possible future increases, depending on economic performance. Consumer prices in Tokyo rose 1.8% in October, mainly due to higher energy prices, with inflationary trends suggesting possible central bank action.

China

Industrial profits dropped by 27.1% year-over-year in September, impacted by deflation and weak corporate finances. Meanwhile, stimulus efforts are focusing on boosting domestic demand, and there are plans to raise around 2 trillion yuan through special government bonds to support local economies. Capital inflows were boosted by shifting funds from US assets back into China, showing confidence in yuan stability.

Switzerland

Swiss National Bank President Martin Schlegel hinted at potential rate cuts in response to slowing inflation, underscoring a shift towards a more accommodative monetary policy.

New Zealand

The central bank indicated that previous liquidity injections during the pandemic dampened the impact of subsequent rate hikes, leading to the recent half-point rate cut. The New Zealand dollar dropped to its lowest level since August, reflecting growing investor concerns about the economy.

AI

On the AI front, Amazon and Microsoft reported strong earnings, attributing growth partly to the boom in generative AI. However, Microsoft warned of cooling growth. Data centre start-up Crusoe Energy raised $500 million to expand its AI-related facilities, and OpenAI rolled out new ChatGPT search features. Meanwhile, Musk’s xAI is seeking new funding at a valuation of approximately $40 billion, underscoring high expectations in the AI sector.

ESG

In the ESG sector, oil prices experienced a volatile week, influenced by geopolitical tensions in the Middle East. Crude initially rose but ultimately closed the week lower, while gas and oil companies closely monitor these developments for potential market disruptions.

Summary

Overall, the economic picture across these regions presents a mix of steady growth, cautious optimism, and looming fiscal challenges, with inflation moderating but still influencing central bank policies. In the US, investors are bracing for potential volatility amid the upcoming Fed decisions and a closely contested presidential election, while Europe and the UK face challenges from higher borrowing costs and fiscal pressures. Japan and New Zealand are adjusting monetary policies to balance growth and inflationary pressures, and China continues with targeted stimulus to maintain economic stability amid international tensions.