Via the excellent Damian Boey at Credit Suisse:
With the Fed recently suggesting that it is done cutting rates for now, it was interesting to observe the market reaction to October payrolls and ISM data. To re-cap:
- US non-farm payrolls came in above expectations, rising by 128K in October, with 95K worth of upward revisions to prior months’ data. The unemployment rate ticked higher to 3.6% from 3.5%, while average hourly earnings rose by 0.2%, leaving year-ended wage inflation steady at 3%.
- The ISM manufacturing index came in slightly below expectations, picking up to 48.3 in October from 47.8. New orders picked up to 49.1 from 47.3, but have remained below the neutral 50 level for 3 consecutive months. The good news was that new orders continued to outpace inventories, because firms have been de-stocking at a brisk pace.
On Friday night, we also saw several attempts at verbal intervention in markets, with:
- The US Treasury and Chinese officials jointly announcing continued, constructive trade talks. The US Treasury said that the two sides are in the process of resolving outstanding issues, with Secretary Mnuchin suggesting that talks we constructive, and that they were working hard, and Kudlow also suggesting that there had been enormous progress on intellectual property theft, and that the agricultural and foreign exchange components of the deal had been virtually completed. The Chinese Ministry of Commerce stated they have achieved consensus in principle. These comments follow recent reports suggesting that the Chinese were not optimistic about progress on even phases of the trade deal. They also come ahead of pre-scheduled tariff increases in December.
