Daily update
Daily update
- Financial markets dislike any increase in uncertainty. Politics in Europe was judged to have increased uncertainty, and markets responded accordingly. It is the change in uncertainty that matters. The outcomes of the thousands of US elections held this November are also a source of considerable uncertainty, but, perceptions of that level of uncertainty are not changing very much.
- ECB President Lagarde spoke yesterday (she last spoke on Friday, so we were overdue some remarks). She indicated that rates would not necessarily be cut in a linear fashion, deliberately adding uncertainty into markets. In fact, if the ECB is following inflation lower, rates should be cut in a regular rhythm. Many ECB speakers are scheduled today, no doubt offering “clarification” of Lagarde’s policy remarks.
- UK May labor market data was unexciting in the whole. Externally, advertised vacancies fell, but this is consistent with declining job hopping. Employment does seem to have declined. The Bank of England needs to consider whether an increasingly restrictive real interest rate policy is appropriate as employment weakens.
- The US NFIB small business sentiment poll is due. This is subject to the normal errors of sentiment data, with the added problem of being vulnerable to acute political polarization.
