Pictet Group
Weekly house view | SpaceX soft landing, US economy next?
The week in review
US growth is proving buoyant, tempering expectations about the pace of further interest rates cuts by the Federal Reserve as evidence mounts that the economy is on track for a soft landing. SpaceX achieved a soft landing of its own last week, launching its Starship rocket and catching the booster for future use. On the data front, US retail sales came in stronger-than-expected, manufacturing proved robust and the labour market resilient. Given the strong economy, Fed Governor Christopher Waller called for a more gradual pace of rate cuts. The stronger numbers kept US market rates at high levels while European rates declined further. The IMF said the world’s total public debt is set to exceed USD100 tn this year for the first time and may grow more quickly than forecast. The ECB cut its deposit rate by 25 bps to 3.25% as euro zone inflation slows and growth concerns grow. Gold broke above USD2,700/oz for the first time on concerns about escalating tensions in the Middle East, Canada and India each expelling their respective ambassadors, and China’s military drills around Taiwan. In equities, US markets rose but semis lagged after a market leader announced a fall in orders intake. European equities rose marginally.
Quote of the week
“To me," said Republican presidential candidate Donald Trump, “the most beautiful word in the dictionary is ‘tariff’. It’s my favourite word.”
Key data
US headline retail sales rose 0.5% month-on-month in September, above consensus expectations, and core retail sales increased 0.7%. The Philadelphia Fed’s manufacturing index increased by more than expected in October, and initial jobless claims declined in the week ended October 2. In China, GDP accelerated in Q3 to around 4% quarter-on-quarter on an annualised basis, up from 2% in Q2. The rebound was mostly due to the industrial sector, with consumption and housing still weak. In Europe, the latest ECB Bank Lending Survey provided the first evidence of a rebound in the credit cycle in Q3. In the UK, annual inflation fell more than expected to 1.7% in September, down from 2.2% in August.