Busy September
- 09 September 2024 (10 min read)
In the US, the employment report for August has confirmed that the labour market is cooling, but by historical standards this still retains all the features of a very soft landing: job creation remains positive, and wage growth remains robust. Still, this was enough to re-ignite the discussion in the market on the possibility the Fed resorts to a 50-bps cut next week. We remain unconvinced. Starting the easing phase with such a big move would set the tone for the entire trajectory – in terms of market pricing – while we do not think the FOMC has made up its mind on the severity of the incoming downturn. Keeping to a 25-bps cut while making it plain in the press conference that the Fed would not hesitate to cut “big” and/or “fast” should the need subsequently arise would be simpler in our view.
The ECB needs to decide before the Fed. While there is little suspense on cutting by 25 bps this Thursday, the market will focus on any hints of “forward guidance” on the next steps from Christine Lagarde. We think she will keep her cards close to her chest, since the debate at the Governing Council is still in full flow. The very latest dataflow plays in the hands of the doves though: the details of the Euro area national accounts for Q2 confirm that businesses are increasingly offsetting the push from labour costs by reducing their margins.
With poor demand in Europe and the beginning of a slowdown in the US, cyclical developments in China – as a potential “consumer of last resort” for the world economy – take a specific importance. We add to our generally cautious Chinese outlook an exploration of another policy issue for Beijing: the need to expand the tax base, now that land-use sales can no longer fund a large share of public investment, while household spending is already weak.
Finally, the appointment of a Prime Minister in France does not fully bring clarity to policymaking in Paris. The budget bill may have to be postponed by a few weeks to allow for delicate compromises to be drawn.
Pre-emptive vs Reactive
- by Gilles Moëc
- 02 September 2024 (10 min read)
Falling into Place
- by Gilles Moëc
- 05 August 2024 (10 min read)
July Op-Ed - Reconvergence
- by Chris Iggo, Gilles Moëc
- 24 July 2024 (10 min read)
Disclaimer
This website is published by AXA Investment Managers Asia (Singapore) Ltd. (Registration No. 199001714W) for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation or particular needs of any particular person and may be subject to change without notice. Please consult your financial or other professional advisers before making any investment decision.
Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested. Past performance is not necessarily indicative of future performance.
Some of the Services and/or products may not be available for offer to retail investors.
This publication has not been reviewed by the Monetary Authority of Singapore.