Digest
Yesterday’s markets felt like a roller‑coaster with half the cars on the dip and the others hurling up the board. Stocks finally bounced for a day straight after four days of trying to find meaning in the madness, while the dollar threw a spectacular mid‑air flip and clawed back a chunk of its recent gains. The end of the week looks like a quiet sprint, but the big shoes are still building up for the next run.
Where we Stand
We’re at the finish line of what has been a week that read more like a puzzle than a business report. There were no headline‑shattering catalysts, but we did get a few data nuggets to chew on.
Eurozone and the UK: The Five-Year‑Old Strain
- Eurozone PMI – The flash surveys show the economy still contractionary, nothing as surprising as a flatline.
- UK PMI – Services and composite numbers both slipped to their lowest in almost a year, yet still sitting in the expansionary zone, which is good news for those who simply want the numbers to stay positive.
Policy Slip‑Ups and Fiscal Overhauls
Voters already know that Chancellor Reeves keeps tightening the economic leash, even while cutting winter fuel allowances for the elderly. But yesterday, the real plot twist was an attempt to re‑write the fiscal rulebook.
New Fiscal Rule: “Public Sector Net Financial Liabilities” – This fancy term adds assets such as student loans to the equation, giving the government more breathing room. In plain talk: the Treasury can borrow more, potentially for infrastructure or something else, and the rule change could open doors for up to £70 billion of borrowing over five years.
But the gilts market didn’t take the news lightly. The 10‑year yield jumped 5 bps back to 4.25%, the highest since early July, while 2‑ and 5‑year swap rates also ticked up. Predictions for mortgage rates pulling higher are already on the radar, and a couple of pre‑budget leaks are likely to keep the short‑term risk alive.
US Jobless Claims and Dollar Dynamics
US weekly jobless claims were a mixed bag: initial claims fell to a month’s low, but continuing claims rose to a near 3‑year high—right in the middle of the October jobs survey that’s due next Friday. This brushed the dollar against a slight downside but likely didn’t scare the bulls for long. The DXY remains above its 200‑day moving average, and the upside still looks a bit appealing pre‑election.
The treasury yields were a treat. The 10‑year and 30‑year curves fell around 6 bps, flattening for the first time in a week. The long‑end gains could grow as the polling day nears.
Equities Finish on a High Note
With the drop in yields, both the S&P 500 and Nasdaq 100 closed in the green, ending a three‑day losing streak and finally grabbing a win. It took a bit, but the market gave in.
Looking Ahead
Things look serene on the docket, but the week’s last mile is packed with quiet but potentially impactful data.
Daily Data Highlights
- German IFO Sentiment – The Business Climate metric nudged up to 85.6, the first month‑over‑month rise since April, though the German economy still has more surprises ahead.
- US Durable Goods Orders – Dropped 1% last month, a decline that may be partly blamed on Boeing’s recent hiccups.
- UMich Consumer Sentiment – The final readings for the month will be released later, with a mild upward revision to 69.1 anticipated.
Stay tuned. In the meantime, grab a coffee, keep the newsfeed on, and remember: a quiet market doesn’t mean there’s nothing brewing underneath.
