Archive

October 31, 2024
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EA Reflation Squeezes Out 50bps

  • September’s disinflationary Euro area news broadly unwound in October, with the HICP rate’s surprising rise to 2% y-o-y adding to hawkish GDP and unemployment news.
  • Co-movement in inflation and activity surprises reinforces the hawkish signal’s strength, especially as the news was broad-based across countries and core measures.
  • The case for a 50bp cut in December has evaporated before forming in the data. A 25bp cut remains likely before resilience urges a more gradual and limited easing cycle.

By Philip Rush

October 30, 2024
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UK Intensifies Tax, Spend, Borrow, Hope

  • The new Labour government announced a substantial increase in the size of the state, with taxes, spending, and borrowing all up and crowding out the private sector.
  • New fiscal rules are unsurprisingly met by design. Using them to accommodate new investment plans risks creating an inefficient political slush fund.
  • Markets tolerate Labour’s plans, but implied issuance is up by about 10% (£142bn) over 5yrs. If the global regime changes, the UK’s raised fiscal vulnerability will matter.

By Philip Rush

October 27, 2024
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US Election: If Donald Trump Loses…

  • In this toss-up presidential election, investors should be mindful of the path by which Donald Trump would contest a Harris victory and how he might, this time, ultimately succeed in overturning the outcome at the end of a protracted period of market-unsettling uncertainty.

By Alastair Newton

October 24, 2024
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PMI Shows Structural Over Cyclical Story

  • Flash PMIs for October extended the US outperformance to the UK and Euro area with more opposing moves and surprises. Such resilience sits uneasily with rate cuts.
  • Modest rises in US unemployment suggest monetary policy is nearly neutral, but slight falls in Europe are more consistent with loose than excessively tight conditions.
  • Slowing European supply growth is not disinflationary unless demand is even worse. Europe’s labour market resilience should not be discounted so much relative to the US.

By Philip Rush

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