Daily update
Daily update
- Investors have some time to assess this week’s exciting events. The economic data in the US are very much signalling a soft landing. US goods prices are in deflation (politically relevant in vote that could be decided in the aisles of Walmart). Middle-income households are experiencing inflation barely above 1% y/y. The Federal Reserve is late in cutting rates, but this data points toward several rate cuts, rather than a large initial cut. Cutting 0.5 percentage points might look like panic.
- Today’s US data adds little to our stock of knowledge. The Michigan consumer sentiment poll will reflect political partisanship (Democrats may be more optimistic, given polling trends earlier this month). Inflation expectations are similarly biased by partisan political views.
- The ECB cut rates as expected. ECB President Lagarde did not give signals as to future rate cuts, though she did suggest disinflation and specifically cited pressures on profit-led inflation. Markets are not necessarily bothered by the lack of guidance as investors tend to believe that they know more than does the ECB president.
- Political noise is still more entertainment than substance. Former US President Trump refused a further debate with US Vice President Harris. The emergence of opinion polls in the wake of the last debate may generate some interest from investors.
