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Morning Macro 6th November:
We are officially in the longest US shutdown in history – consensus estimates are that shutdown would cost the economy around $15 billion each week; we have now entered the 6th week of the shutdown! Meanwhile, the US Department of Transportation announces mandatory flight cuts at major airports from Friday. The US may cut air traffic by 10% if no deal is reached to end the shutdown.
The US Supreme Court heard arguments this week on the legality of Trump’s sweeping tariffs, and many justices looked sceptical. Polymarket is now pricing only a 30% chance of the Court ruling in favour of Trump! If the tariffs are ruled out, this would cost the US around $30 billion per month in lost revenue!
But elsewhere the party is still going – the question is how long until the music stops? Globally the proportion of stock indexes at an all-time high is the highest since 1999! (Graph 1, Macrobond)
Now with lacking data in the US, everyone’s attention was on the ADP employment data, which showed that in October, private sector employment rose by 42k, marking the first monthly gain since July and surpassing expectations of 25k. Despite the positive data, US treasury yields didn’t even flinch, showing the little importance ADP data have in the market.
In the Eurozone, PMI data were positive for Spain (56) and Italy (53.1), recording their strongest expansions in over a year, driven by resilient services, new orders, and easing cost pressures. Germany (53.9) showed its fastest growth since mid-2023, supported by a rebound in services despite softer sentiment. Meanwhile France (47.7) remained mired in contraction, reflecting weak domestic demand. Overall, Europe’s private sector recovery is being powered by services strength amid lingering manufacturing weakness. Outside continental Europe, the UK (52.2) also regained momentum, but the expansion was driven by the services sector as the manufacturing side remains in contraction!
And the US showed steady growth on the PMI front too; the S&P Composite PMI rose to 54.6, driven by solid gains in both manufacturing and services activity. New business strengthened and employment edged higher, though confidence slipped to a six-month low. Inflation pressures continued to ease, with costs and prices rising at their slowest pace since April. Meanwhile, the ISM Services PMI climbed to 52.4, signalling the strongest expansion since February. Business activity and new orders rebounded sharply, though employment remained weak amid uncertainty linked to the shutdown.

Data today – Bank of England interest rate decision

Bitcoin is now down 20% since October 6th (Chart 1, TradingView) – yesterday’s selloff, saw it reaching the lowest point since June! The move was driven by an almost $1.3 billion liquidation in leveraged crypto positions.

In the stock market, global equities slumped yesterday and have continued this morning in Asia, as investors are unwinding positions in overheated AI and tech stocks. The Nasdaq fell sharply, with Nvidia, Palantir, and other chipmakers leading declines amid fears that valuations had run far ahead of earnings and both S&P and Nasdaq e-mine futures even traded lower post New York’s close (Chart 2, Bloomberg). Meanwhile, the Nikkei closed 2.5% lower on the day.
China’s private RatingDog General Services PMI declined to 52.6 in Oct 2025 though still above expectations. This is the softest reading in the services PMI since July, pressured by a slight decline in foreign sales and a decline in employment. Input cost inflation rose to a year high due to higher wages and increasing prices of raw materials, while selling prices fell slightly amid higher competition. Taking this with the reported decline in manufacturing PMI earlier this week, the RatingDog Composite PMI stood at 51.8.

But China’s 10-year yields dropped near its lowest level in three months at 1.73%. The PBoC announced it will resume its government bond purchases after a 9-month hiatus, net injecting 20 billion yuan ($2.8 billion) of liquidity via buying government bonds.

What Fed rate cut? When a central bank cuts short-term borrowing rates but interbank lending remains at the same levels, something already screams in the money markets. SOFR was seen yesterday trading at a 32bps above the IOER set by the Fed (Chart 3, Bloomberg) – banks are screaming for cash, hence no surprise the Fed is restarting the printers at a current balance sheet of $6.6 trillion! Last week, the spike was attributed to fiscal year ends etc, but when a $4-5 trillion market in daily flow experiences these widening rates, something is about to crack.
Gold prices remain pressured around the $4,000/oz marker, with the 10-day MA now presenting near-term resistance (Chart 5, TradingView). A wave of persistent ETF withdrawals has driven gold’s pullback. Short-term support now sits around $3,940/oz, with more significant support at the $3,900/oz handle.

2025 has now been the year with the most job cuts since COVID! YTD approximately 950k jobs have been cut (Chart 4, Challenger, Gray & Christmas) – although the US government has contributed to nearly a third of those cuts. “We’re not just in a low hire, low fire environment anymore. We’re firing.” – Dan North, Allianz Trade. Amazon, Target, Starbucks and Paramount have all announced recently that they are cutting jobs!
Meanwhile, German factory orders rose 1.1% m/m in September, marking the first increase in orders since April. This rise was driven by increases in the manufacture of electrical equipment (9.5%), aircraft, ships, trains, military vehicles (7.5%), and the automotive sector (3.2%). Orders for metal products fell 19% following large orders in August. Still, on a Q/Q basis, factory orders declined 3.3% in Q3 2025.

And French industrial production surprised to the upside, as it came at 0.8% higher m/m in September, driven by strong recoveries in transport equipment and electronics manufacturing.

Data releases today – Euro Area PMI, GB Services PMI, ADP Employment, US ISM PMI

Morning Macro 4th November
UK long-end yields extended their rally, with the 30-year gilt dropping 6bps to 5.144% – the lowest since April – as Chancellor Rachel Reeves reaffirmed her “iron-clad” commitment to fiscal discipline ahead of what’s expected to be a tough, tax-heavy budget later this month. Her three priorities are lofty – cutting NHS waiting lists, reducing the national debt and improving the cost of living.
It’s not going to be cheap – UK Chancellor Rachel Reeves should boost her fiscal buffer to £20 billion by implementing around £26 billion in tax increases in the November 26 budget, the Resolution Foundation said Tuesday. (Figure 1)
The pound weakened further, down 0.3% to hover near $1.31. Meanwhile, the FTSE 100 slipped 0.7%, though its heavy weighting of global exporters provided some cushion, leaving it faring better than most European peers as sterling’s slide helped offset domestic market weakness.

Amazon continues its surge, up another 4% (Figure 2) yesterday on $38 billion deal with OpenAI for access to AWS cloud infrastructure and Nvidia graphics processors (Nvidia climbed 3%), as the circle of AI investment continues. S&P 500 is beginning to move sideways, just below 6,900 points and its all-time high of last week and Emini futures are down 1% this morning.

Palantir earnings saw it gain 7% beating expectations, but profit taking immediately meant it dropped and is now 5% lower than before the report. (Figure 3)
Bitcoin has fallen to $104,430, its lowest since 17 October – if it falls another $1k it will be at a new low since 23 June!
RBA kept rates in line at 3.6%. The board anticipates one additional rate cut in 2026, projecting underlying inflation to climb above 3% in the near term before easing back to around 2.6% by 2027.
Data today: France budget balance, Lagarde speech, Bowman speech, Redbook.