Morning Macro 10th November
A breakthrough as progress is made towards ending the government shutdown, while Trump proposes US $2,000 ‘tariff dividend’ for up to 85% of the population. A reopening would resume key data releases and return focus to the deteriorating US fiscal outlook, with rising spending increasingly funded by additional borrowing. With last week’s dismal election performance and his disastrous ratings the $2,000 dividend would clearly help Trump’s ratings temporarily and the weakening economy but $400 billion in stimulus payments will also support inflation, support equities, support gold, weaken long end bonds on debt concerns and reduce expected Fed cuts.
Unsurprisingly gold is up 2% today, Nasdaq +1.2%, US 30-year yields up 5basis points and the dollar lower. Chart 1, Gold resumes its uptrend, Bloomberg). Paul Tudor Jones “all roads lead to inflation”.
Chart 2, US National debt, US Tsy Dept, @Kobeissi Letter, WolfStreet.com))
Borrowing for AI data centre building (Chart 3, BofAGlobal research) and we wonder how OpenAI will fund its $1.4 trillion spending commitments. Hartnett: The AI Bubble “Watch Out” Metric Just Snapped
Financial Times “US companies’ earnings are growing at the fastest pace in four years…
Median earnings growth year-on-year across the Russell 3000 index — a benchmark for the entire US stock market — hit 11 per cent in the third quarter, up from 6 per cent in the previous three months, according to Morgan Stanley. That is the fastest growth rate since the third quarter of 2021.”
US layoffs are spiking. US-based employers announced 153,074 job cuts in October, the highest for any October since 2003. This even exceeds the pace seen during the Financial Crisis. Year to date, over 1 MILLION layoffs have been announced. (Chart 4, Challenger, Gray & Christmas)
US consumer sentiment fell to 50.3 points in October, the 2nd-lowest EVER. It’s now ~10 points BELOW the Great Financial Crisis low and below all recessions. (Chart 5, Uni of Michigan Consumer Sentiment, @GlobalMktObserv)
COMMERCIAL MORTGAGE-BACKED SECURITIES JUST HIT THE HIGHEST DELINQUENCY RATE IN HISTORY.
Data this week
Tuesday – UK BRC retail sales and employment data, German ZEW, US ADP & NFIB Small Business Index data
Wednesday – German inflation, OPEC Monthly Report
Thursday – UK GDP & IP, Aussie employment, Federal Budget Balance data
Friday – French inflation, US PPI
9 Fed Speaker Events This Week
