Gilles Moec Macrocast: Busy September
- 09 September 2024 (10 min read)
In the US, the employment report for August has confirmed that the labour market is cooling, but by historical standards this still retains all the features of a very soft landing: job creation remains positive, and wage growth remains robust. Still, this was enough to re-ignite the discussion in the market on the possibility the Fed resorts to a 50-bps cut next week. We remain unconvinced. Starting the easing phase with such a big move would set the tone for the entire trajectory – in terms of market pricing – while we do not think the FOMC has made up its mind on the severity of the incoming downturn. Keeping to a 25-bps cut while making it plain in the press conference that the Fed would not hesitate to cut “big” and/or “fast” should the need subsequently arise would be simpler in our view.
The ECB needs to decide before the Fed. While there is little suspense on cutting by 25 bps this Thursday, the market will focus on any hints of “forward guidance” on the next steps from Christine Lagarde. We think she will keep her cards close to her chest, since the debate at the Governing Council is still in full flow. The very latest dataflow plays in the hands of the doves though: the details of the Euro area national accounts for Q2 confirm that businesses are increasingly offsetting the push from labour costs by reducing their margins.
With poor demand in Europe and the beginning of a slowdown in the US, cyclical developments in China – as a potential “consumer of last resort” for the world economy – take a specific importance. We add to our generally cautious Chinese outlook an exploration of another policy issue for Beijing: the need to expand the tax base, now that land-use sales can no longer fund a large share of public investment, while household spending is already weak.
Finally, the appointment of a Prime Minister in France does not fully bring clarity to policymaking in Paris. The budget bill may have to be postponed by a few weeks to allow for delicate compromises to be drawn.
Disclaimer
The information on this website is intended for investors domiciled in Switzerland.
AXA Investment Managers Switzerland Ltd (AXA IM) is not liable for unauthorised use of the website.
This website is for advertising and informational purpose only. The published information and expression of opinions are provided for personal use only. The information, data, figures, opinions, statements, analyses, forecasts, simulations, concepts and other data provided by AXA IM in this document are based on our knowledge and experience at the time of preparation and are subject to change without notice.
AXA IM excludes any warranty (explicit or implicit) for the accuracy, completeness and up-to-dateness of the published information and expressions of opinion. In particular, AXA IM is not obliged to remove information that is no longer up to date or to expressly mark it a such. To the extent that the data contained in this document originates from third parties, AXA IM is not responsible for the accuracy, completeness, up-to-dateness and appropriateness of such data, even if only such data is used that is deemed to be reliable.
The information on the website of AXA IM does not constitute a decision aid for economic, legal, tax or other advisory questions, nor may investment or other decisions be made solely on the basis of this information. Before any investment decision is made, detailed advice should be obtained that is geared to the client's situation.
Past performance or returns are neither a guarantee nor an indicator of the future performance or investment returns. The value and return on an investment is not guaranteed. It can rise and fall and investors may even incur a total loss.
AXA Investment Managers Switzerland Ltd.