Another day another dollar
Predicted by almost everyone who predicts these things anyway, as the headline rate of inflation fell below 2% and growth in the region is stalling, the ECB cut interest rates by another 25 basis points at yesterday’s meeting. Sterling dipped after the better-than-expected inflation data on Wednesday; the odds must be increasing slightly of a 50 basis point cut in November from the Bank of England when they next meet on the 7th of November. The severity or otherwise of Ms Reeves’s budget may further influence the decision. 25 basis points at least seems nailed on, there may be some specualtion start about could the Bank cut by 50bp. Our economy is hardly on a tear. Having said all that, wage inflation running at almost 5% and the pace of rising prices slowing, along with interest rates on a downward path, Mr Starmer’s working person is starting to feel the benefit as the monthly retail sales data out of the UK blew away analyst expectations.
The decision for the ECB and the upcoming one for the Bank of England looks pretty straightforward. After the bumper cut from the Fed at their last meeting, the picture must be less clear for Mr Powell and his team. Unlike Europe, both the rate of inflation remains above the Fed’s 2% target as the indicators suggest the US economy remains pretty resilient, justifying another cut in November comes harder. However, to be fair, the commentary from any Fed members still suggests that at least 25 basis points are on the cards at the next meeting. We may know more later today as several Fed members are giving public speeches during the day, one of whom favoured 25 basis points rather than the 50 announced at the last Fed meeting.
In other news, earnings reports have been influencing sentiment, particularly over the past couple of days, the semiconductor chip makers. The sector took a hit as ASML missed estimates by some mark for various reasons, then was given a boost as TSMC confirmed that demand remains strong for at least anything AI-related. The TSMC news once again gave Nvidia shares a lift. Last night, Netflix confirmed that we still watch plenty of their shows as subscriber numbers increased, and the shares rose in aftermarket trading.
Chinese stocks have been boosted recently as the world’s second-largest economy has been aided by announcements from the government to help support the economy. The latest China GDP data recorded growth of 4.6% in the third quarter, above analysts’ expectations but below the 4.7% achieved in the second quarter. On the plus side, factory output and retail sales were stronger than forecast, but property remains the issue. Chinese stocks seemed happy with the report as the index gained over 2% in the day trading. Stocks in Europe appear to be starting the day on a mixed note.