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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

Breaking: The US is set to ban Nvidia’s scaled-down AI chips from being sold to China! Washington’s move targets B30A chips – used to train large language models when efficiently arranged in large clusters – designed to bypass earlier sanctions. But this would create a big opportunity for China to build its own chips domestically, as Nvidia CEO Jensen Huang warned: “China is going to win the AI race.”

Equities are having a rough time. The S&P 500 dropped more than 1.1% and Nasdaq 1.7% yesterday, with futures consolidating this morning. Big tech stocks suffered with Amazon down 2.8%, Nvidia down 3.6% , Microsoft down 2%, Palantir tumbled 6.8%! Meta is now down over 22% from its August high!
China’s exports unexpectedly fell 1.1% y/y in October, the first drop in eight months, as a sharp 25% slump in shipments to the US outweighed gains elsewhere. The decline, driven by weakening global demand and fading export resilience, signals mounting pressure on China’s slowing economy amid weak consumption and a prolonged property slump – a triple whammy to growth. Meanwhile, modest tariff relief from the US may offer only limited support. Exports still exceeded $3 trillion year-to-date, though momentum is fading.
The Bank of England held rates stable at 4% – as expected – before the Nov 26 budget announcement; however the committee was split 5-4. The OIS market is now pricing over 70% chance for a cut in the December meeting, while its fully expecting a cut in the Early February meeting.

US travel stocks are in focus after upbeat updates from Expedia and Airbnb. Expedia lifted its full-year outlook on resilient holiday demand, with shares up 18%, while Airbnb forecast strong Q4 bookings, rising 5.5%. UK-listed IAG reported Q3 revenue and profit slightly below estimates but noted solid travel demand and strong Q4 bookings despite some North American softness.

European peers didn’t face the same fate with Air France down almost 15% on the day, even despite good earnings!
Japanese household spending rose 1.8% y/y in September, missing expectations of 2.5% and slowing from August’s 2.3%. The data point to a steady yet fragile recovery in consumer demand, with weaker spending on essentials like food, housing, and utilities offset by gains in medical care and household items. On a monthly basis, personal spending fell by 0.7% – marking the first fall since June.

Data today – US Michigan Consumer Expectations, Canada Employment

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