Ahead of the game: 11 November 2024
US markets soared after a red sweep in the election and a Fed rate cut, sparking a global rally that lifted the ASX 200 by 2%, despite steady rates from the Reserve Bank of Australia.
US election and Fed rate cut drive global market rally
United States (US) equity markets soared this week following a red sweep of the US presidential election. The rally was also supported by the Federal Reserve's (Fed) 25 basis point (bp) interest rate cut, which lowered the Federal Funds rate into a range of 4.50% to 4.75%.
Closer to home, the ASX 200 surged approximately 2% this week. The rally was supported by tailwinds from the US, despite the Reserve Bank of Australia (RBA) keeping rates on hold at 4.35% and reiterating its concerns about elevated core inflation.
The week that was: highlights
- The Institute for Supply Management (ISM) services purchasing managers' index (PMI) increased to 56 in October from 54.9 previously, marking its highest level since August 2022
- The Federal Open Market Committee (FOMC) lowered the Federal Funds rate by 25 bp, as widely expected, to a range of 4.50% to 4.75%
- Initial jobless claims increased by 3000 last week to 221,000
- In the United Kingdom (UK), the Bank of England (BoE) cut its official bank rate by 25 bp to 4.75%
- The Bank of Japan (BoJ) left its monetary policy settings unchanged, as widely expected
- In China, the Caixin services PMI increased to 52 in October from 50.7 previously
- China's (CN) trade surplus increased to $95.27 billion in October from $56.13 billion in the same period a year ago
- In Australia (AU), the RBA kept rates on hold at 4.35% for an eighth straight meeting
- In New Zealand (NZ), the unemployment rate for the third quarter (Q3) rose to 4.8%, its highest level since the December quarter of 2020
- Crude oil rose by 4.13% this week to $72.36
- Gold fell by 1.17% this week to $2704
- Wall Street's gauge of fear, the volatility index (VIX), plunged to 15.19 from 21.87
Key dates for the week ahead
Australia & New Zealand
- AU: Westpac Consumer Confidence (Tuesday, 12 November at 10.30am AEDT)
- AU: NAB Business Confidence (Tuesday, 12 November at 11.30am AEDT)
- AU: Wage price index (Wednesday, 13 November at 11.30am AEDT)
- AU: Employment Report (Thursday, 14 November at 11.30am AEDT)
China & Japan
- CN: New Yuan loans (Wednesday, 15 November, no set time)
- JP: Gross domestic product (GDP) Q3 (Friday, 15 November at 10.50am AEDT)
- CN: House price index, industrial production (IP), fixed asset investment (FAI), and retail sales (Friday, 15 November at 1.00pm AEDT)
United States
- US: consumer price index (CPI) (Thursday, 14 November at 12.30am AEDT)
- US: producer price index (PPI) (Friday, 15 November at 12.30am AEDT)
- US: Retail sales (Saturday, 16 November at 12.30am AEDT)
Europe & United Kingdom
- UK: Employment (Tuesday, 12 November at 6.00pm AEDT)
- UK: GDP Q3 (Thursday, 14 November at 6.00pm AEDT)
Key events for the week ahead
-
US
CPI
Thursday, 14 November at 12.30am AEDT
In September, the annual headline inflation rate in the US slowed for a sixth consecutive month to 2.4% year-on-year (YoY), down from 2.5% previously. This marked the lowest level since February 2021. Core inflation, excluding volatile food and energy sectors, edged up to 3.3% YoY from a three-year low of 3.2%. This increase was driven by monthly inflation, which rose by 0.3%, ahead of expectations of a 0.2% increase.
The preliminary expectation for October is an increase in annual headline inflation to 2.6%, with core inflation forecasted to remain stable at 3.3% YoY. The US rates market is currently pricing in a 23 bp probability of a 25 bp Fed rate cut at the FOMC meeting on 18 December.
US core inflation rate chart
-
AU
Employment report
Thursday, 14 November at 11.30am AEDT
In September, the Australian economy added 64,100 jobs, significantly above the market expectation of a 25,000 gain. The unemployment rate held steady at 4.1%, while the participation rate increased to a record high of 67.2%.
Bjorn Jarvis, Australian Bureau of Statistics (ABS) head of labour statistics, commented; 'With employment rising by around 64,000 people and the number of unemployed falling around 9000, the unemployment rate remained at 4.1 per cent, where it has generally been over the past six months.'
Last month's robust employment data means job growth has exceeded expectations in seven of the past eight months. In the RBA’s statement accompanying its recent decision to hold rates steady, it noted that 'labour market conditions remain tight, and while conditions have been easing gradually, some indicators have recently stabilised.'
The strength of the labour market, coupled with core inflation that 'remains too high,' has prompted analysts and the rates market to push back expectations for the first RBA rate cut to 2025. The preliminary forecast for October is that the Australian economy will add 20,000 jobs, with the unemployment rate expected to edge up to 4.2%. The Australian interest rate market is pricing in a modest 3 bp of RBA rate cuts for December, with the first 25 bp RBA rate cut anticipated in May 2025.
AU unemployment rate chart
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JP
GDP Q3
Friday, 15 November at 10.50am AEDT
Japan's second quarter (Q2) GDP expanded by an annualised 2.9%, slightly below the preliminary reading of 3.1% but still reflecting a strong recovery from the 2.4% contraction in the first quarter (Q1). Growth has been driven by positive wage-spending trends and increased business investment, though external demand remains a key risk.
Looking ahead, Japan’s Q3 GDP is expected to slow to 0.2%, down from 0.7% in Q2. On an annualised basis, Q3 GDP may decelerate to 0.7% from the prior 2.9%, with anticipated declines in private consumption and capital expenditure. This slowdown may be partly due to temporary disruptions caused by Typhoon Shanshan and earthquake alerts during the quarter, which could distort the underlying growth trend. Focus will likely shift to fourth quarter (Q4) data, where a rebound is expected.
JP GDP growth rate chart
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CN
House price index, IP, FAI and retail sales
Friday, 15 November at 1.00pm AEDT
China’s PMI improved in October, with manufacturing returning to expansion for the first time in six months and the services sector growing beyond expectations. This has fuelled hopes that recent stimulus measures may be taking effect. Market participants are now looking to Chinese authorities for further details on fiscal plans to support consumer spending.
Looking ahead, forecasts indicate that China’s October retail sales could increase to 3.8% from 3.2% previously, while FAI may rise slightly to 3.5% from 3.4%. IP is expected to hold steady at 5.4% YoY. This economic data will be monitored closely for signs that policy measures are helping to achieve the 'around 5%' growth target set by year-end.
CN house price index, IP, FAI and retail sales chart
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US
Q3 2024 earnings season
The Q3 earnings season continues next week, with scheduled reports from major companies, including Home Depot, Cisco, and Walt Disney.
Q3 2024 earning chart
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