Weekly Macro Matters
Macro Matters – Weekly review, w/c October 9-2
Bond markets experienced significant turmoil last week as U.S. and global yields surged to multi-year highs, weighing on equities. While PMI and employment data surprised to the upside, inflation concerns persist, with the U.S. CPI release later this week expected to dominate market focus.
Macro Matters – Weekly Review, w/c October 9
Macroeconomic / Geopolitical Developments
• U.S. and Global Bond Markets Free Fall, as Yields Surge to Multi-Year Highs
• U.S. and Global PMI Data Broadly Better than Expected
• U.S. Employment Data Surpasses Expectations
• China on Pause with Golden Week, but Asian Markets Still Nervy
• What’s Ahead
U.S. and Global Bond Markets Free Fall, as Yields Surge to Multi-Year Highs
U.S. Treasury securities experienced significant volatility, with longer-dated bond prices falling by 46% from their pandemic peak. Driving this were rising interest rates, persistent inflation pressures, and increased government borrowing. Treasury yields hit 16-year highs, sending shockwaves through global equity markets and propelling the U.S. Dollar higher.
European and Japanese bonds were not spared, with Germany’s 10-year yield surpassing 3% for the first time since 2011 and Japan’s 10-year yield reaching decade highs. Equity markets globally faced declines, reflecting investor uncertainty and concerns over prolonged higher interest rates.
U.S. and Global PMI Data Broadly Better than Expected
The S&P Global U.S. Manufacturing PMI for September rose to 49.8, beating expectations, though still indicating contraction. Increased hiring and capacity expansion drove marginal output growth, while inflationary pressures remained subdued. Globally, PMI data signaled improving conditions, hinting at an eventual recovery for the manufacturing sector.
U.S. Employment Data Surpasses Expectations
The U.S. added a robust 336,000 jobs in September, nearly double expectations. Revisions to July and August also added 236,000 and 227,000 jobs, respectively. Wage growth moderated, rising by 0.2% for the month and 4.2% year-over-year, its lowest since June 2021. Despite challenges, a steady labour force participation rate and increased hiring suggest a more balanced inflationary environment.
China on Pause with Golden Week, but Asian Markets Still Nervy
China’s Golden Week holiday provided mixed signals. Domestic tourism surged, with nearly 900 million trips and a 138% YoY rise in tourism revenue. Meanwhile, September manufacturing PMI climbed to 50.2, its first expansion since April. Improvements in property sector data also reflect the early impacts of Beijing’s stimulus measures. However, Asia-Pacific stocks remained subdued, reflecting broader investor caution.
What’s Ahead
Central Bank Watch:
• A quiet week for central banks, with the FOMC minutes release on Wednesday as the primary highlight.
Macroeconomic Data Watch:
• Key data includes German and EU Industrial Production, UK GDP, and Thursday’s critical U.S. CPI release.
Major Macro Data:
• 10/09/2023: U.S. Columbus Day (cash bond markets closed), Canadian Thanksgiving, German Industrial Production
• 10/10/2023: Little of note
• 10/11/2023: German CPI, U.S. PPI, FOMC Minutes released
• 10/12/2023: UK GDP, Industrial and Manufacturing Production, U.S. CPI
• 10/13/2023: China CPI and Trade Data, EU Industrial Production, Michigan Consumer Sentiment Index
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