LAST ONE TURNS OFF THE LIGHTS
Last week, the US government shutdown led to concerns over potential federal job cuts - threatened by Trump - while data releases were delayed. As a result, markets put more weight on private-sector data releases, some of which showed signs of an economic slowdown, which would support the case for further Fed rate cuts.
Developments around the US government shutdown are set to remain in focus this week, with the scheduled data releases by federal agencies unlikely to be published unless a funding bill is passed. Eurozone retail sales (today) and German industrial data over the next couple of days may also be of note.
The US government entered a shutdown on 1st October as Republicans and Democrats disagreed on how to fund the federal government over the next 12 months. Negotiations took place aimed at agreeing a funding bill that could be passed by both the House of Representatives and the Senate, though little progress appeared to be made.
The shutdown meant that data was not released by government agencies, including the crucial September employment report. More importance was given to a private sector estimate of job creation (ADP), which showed 32K of job losses last month compared to an expected addition of 51K.
The Supreme Court rejected President Trump's demand for Fed Governor Cook's immediate dismissal and arguments in the case will be heard in January 2026.
Eurozone headline consumer-price inflation accelerated to 2.2% y/y in September while core inflation (which exclude volatile items like food and energy) was unchanged from August at 2.3%. Inflation above the ECB's 2% target rate reduces the likelihood of further rate reductions from the central bank in 2025.
Equity markets rebounded from losses in the previous week with sentiment boosted by expectations of supportive policy from the Fed should economic activity deteriorate. The S&P 500 ended the week up by 1.1% while the Stoxx 600 rose by 2.9%.
Bond yields fell last week in the US (bond yields fall as bond prices rise) as the potential for a growth slowdown bolstered the case for further Fed rate cuts. The 10-year US Treasury yield declined by 6bps over the week to 4.12% while the German bund equivalent was down by 4bps at 2.70%.
- Mon 6th Eurozone - Retail sales
- Tue 7th Germany - Manufacturing orders
- Wed 8th US - Fed meeting minutes • Germany - Industrial production
- Thu 9th US - Initial jobless claims
- Fri 10th US - University of Michigan consumer sentiment and inflation expectations
This is intended as a general review of investment market conditions. It does not constitute investment advice and has not been prepared based on the financial needs or objectives of any particular person.