Please see below article received from Brooks Macdonald yesterday afternoon, which provides a global market update and a review of the third quarter of 2023.
- The 3rd quarter of 2023 saw significant rises in oil prices which impacted market inflation expectations
- While a US government shutdown has been avoided, negotiators only have six weeks to forge a new deal
- The US jobs report on Friday will be vitally important given the Fed’s focus on labour market data
Markets have now closed out the third quarter of 2023, a quarter which saw oil prices rise by almost one third and 10-year US Treasury yields rise by more than 0.7%. At the same time, US equities lost ground with the index off almost 5% in September. Last week was challenging for risk assets however some positive inflation data on Friday helped mitigate the negative tone with the US personal consumption expenditures (PCE) inflation measure coming in below market expectations.
Another factor driving the risk off tone from last week was fears over an imminent US government shutdown. Just before the deadline on Saturday night, a deal was agreed which will keep the government operating until mid-November. This is a stop-gap measure which allows both sides to continue negotiations without the economic impact of a temporary shutdown. The news has supported equity indices today with the US futures market pointing to gains when the market opens. The avoidance of a shutdown also means we will receive US economic data on time this week with the most important of these being the US employment report on Friday.
The US jobs report on Friday arrives as markets debate the future path of inflation given signs of slowing economic growth but still robust US labour data. The market is expecting a slowdown in the number of new jobs created with September showing gains of 156.5k new jobs compared to 187k in August. Before we get to this data, today’s Institute for Supply Management (ISM) manufacturing data, followed by the services equivalent on Wednesday, will focus market attention. The market is expecting a slight improvement in the manufacturing survey which remains stubbornly in contractionary territory, but for the pace of US services sector expansion to moderate slightly.
With much of the volatility of the last few weeks stemming from bond markets, this week’s range of central bank speakers will be closely watched. With US Treasury yields surging recently, the question is whether the US Federal Reserve (Fed) speakers look to calm the bond market and imply that there is a certain level of bond yields which the Fed is uncomfortable with. The longer yields remain at elevated levels, the higher the likelihood that ‘something breaks’ and the Fed will be keenly aware of this risk after the Silicon Valley Bank (SVB) saga earlier in the year.
Please check in again with us soon for further relevant content and news.
Chloe
03/10/2023