Reassessing markets, not economics

Daily update

Markets have reassessed what the shifting US political landscape means for the shiny new toy of artificial intelligence. This does not mean much economically—households are not likely to change consumption patterns because the Nasdaq had a bad day. Data-center builders might have to offer more “inducements” to local communities, raising project costs. Such “inducements” are economically positive—building a school generates economic activity.
The oil price has been moving higher with shifting expectations about what happens next in the Gulf. The oil price is a significant force for income redistribution (between oil consumers and producers). Central banks’ dilemma is that they need to sound tough against perceptions of inflation, while knowing there is nothing they can do to correct an oil supply shock—hence the Bank of England’s hawkish rate rise, with accompanying shoulder-shrug from Governor Bailey.
The US employment report has become less precise in real time but still has a disproportionate impact on investors (who remember when the data was accurate). Average earnings numbers are not wage growth, far less household income growth, but the overall idea of wages failing to grow faster than inflation is likely to be reinforced.
The US Michigan business sentiment poll, and Eurozone retail sales might attract minor interest.