Summary
United States: Labor Market Cooling Jolts Markets
- Total payrolls rose by 263K in September, a shade above consensus. The unemployment rate fell to 3.5%, while average hourly earning increased 0.3%. Job opening plummeted by 1.1 million vacancies, according to September’s JOLTS. The ISM manufacturing survey fell to 50.9 in September, while ISM services slipped to 56.7. During August, the U.S. trade deficit narrowed to $67.4 billion, while construction spending fell 0.7%.
- Next week: NFIB (Tuesday), CPI (Thursday), Retail Sales (Friday)
International: RBA Slows Down While RBNZ Keeps Constant
- The RBA delivered a smaller-magnitude 25 bps rate hike at its October monetary policy meeting, bringing its Cash Rate to 2.60%. This was in line with our forecast, but fell short of consensus and market expectations. The central bank signaled that it expects to further increase the policy rate in the period ahead, and said it remains “resolute in its determination” to bring down inflation. Also this week, the RBNZ delivered its fifth consecutive 50 bps rate hike, bringing the OCR to 3.50% and signaling more to come as well.
- Next week: Norway CPI (Monday), U.K. Monthly GDP (Wednesday), Sweden CPI (Thursday)
Credit Market Insights: Treasury Market Turbulence Intensifies
- A bout of volatility has taken a hold of Treasury markets. Global recession fears, aggressive rate hikes from the Fed and market intervention in the U.K. and Japan have intensified financial market volatility. Bond prices often rise when recession fears mount. Yet persistent inflation and the expectations for tighter monetary policy have pushed yields up, straining the inverse relationship commonly seen between bond and equity prices.
Topic of the Week: Cashed Out? A Look at Household Savings
- The U.S. consumer has shown incredible resilience, though cracks are starting to appear. If the differential from the pre-pandemic saving growth rate continues to decline at the same rate that it has over the past three quarters, the excess savings accumulated in 2020 and 2021 will be wiped out by Q3-2023.
