US ‘No Landing’ Scenario Boosts Markets, Reports Reuters

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A look at the day ahead in European and global markets from Kevin Buckland

What a difference a payroll report makes.

Concerns regarding a potential “hard landing” for the U.S. economy have shifted towards the possibility of a “no landing,” where the labor market remains robust while inflation eases.

This narrative has captivated traders and investors, overshadowing other events such as the ongoing conflict in Gaza and Lebanon, particularly as Monday marks the one-year anniversary of the Hamas attack that escalated the war.

Asian markets followed the bullish trend set by Wall Street, with stocks experiencing a 2% increase, bolstered by a significantly weaker yen.

The narrative of U.S. exceptionalism, which had faltered in the previous month, is now stronger than ever as the dollar remains dominant.

The yen, euro, and pound have all declined, although the Japanese finance ministry’s recent comments provided some support for the yen. Traders may be feeling cautious due to memories of previous currency interventions, particularly after top currency diplomat Atsushi Mimura expressed his urgency in monitoring speculative activities.

The pound has faced volatility following a surprising dovish shift from Bank of England Governor Andrew Bailey last week, which was quickly countered by a more hawkish stance from Chief Economist Huw Pill.

Meanwhile, the euro continues to face challenges, with more European Central Bank (ECB) officials, including President Christine Lagarde, indicating a potential for swift easing. ECB policymaker Francois Villeroy de Galhau suggested the central bank will “quite probably” implement cuts this month amid concerns about inflation falling below target.

Monday will feature several central bank officials speaking publicly. ECB Chief Economist Philip Lane and board member Piero Cipollone are scheduled to speak in Frankfurt, while peer José Luis Escrivá will address an audience in Madrid. Additionally, a Eurogroup meeting will take place in Luxembourg with Lagarde in attendance.

From the U.S., insights will be shared by Federal Reserve Governor Michelle Bowman and three regional Fed presidents: Neel Kashkari from Minneapolis, Raphael Bostic from Atlanta, and Alberto Musalem from St. Louis. Chicago Fed President Austan Goolsbee has already commented on the recent jobs data, labeling it “superb” and suggesting that it provides the Fed with time to assess the economic landscape. However, he noted that interest rates still have a significant way to fall.

Additional developments to watch on Monday include:

– German industrial orders, manufacturing output, and consumer goods data (all for August)
– UK Halifax house prices for September
– Italian retail sales and trade balance (both for August)
– Euro area Sentix index for October and retail sales (August)

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