Daily update
Daily update
- Market reactions last week highlight the dangers of central banks bleating about data dependency without explaining their medium-term framework or how they expect policy to transmit to the real economy. It leaves investors tending to react very strongly to individual data items, even when (as with the US employment data) the figures are not precise and will likely be revised significantly.
- This is not to say that markets are wrong to assume an economic slowdown and the peak of interest rates. “Higher for longer” for interest rates was always more of a media catchphrase than policy analysis. However, the Powell Federal Reserve may not start to reverse policy errors with rate cuts before the middle of next year, and reacting forcefully to every single data release between now and then is going to be exhausting.
- The data calendar is very light today, which does make markets vulnerable to political commentary. There are some business sentiment opinion polls due.
- Global trade is getting some attention again, with China’s Premier Li Qiang suggesting the country will increase imports and open market access further. Increasing imports depends less on grand announcements of special international purchases and more about raising the role of the Chinese consumer in the domestic economy. That has proved difficult to do.
