07/10/2024 Daily Reports
The dollar index soared on Friday, heading for its best week in two years, after a strong U.S. jobs report for September showed a higher-than-expected increase in non-farm payrolls, a decline in unemployment, and faster hourly earnings growth. The report erased the odds of another large Federal Reserve rate cut in 2024, with markets now expecting two 25 basis point reductions by year-end.
Chicago Fed President Austan Goolsbee urged caution in response to the data, emphasizing the need to keep rates restrictive. Meanwhile, the yen slumped, set for its worst weekly performance since 2009, and Treasury yields climbed.
Other key developments included Canada’s Ivey PMI indicating growth, and Bank of England Chief Economist Huw Pill advocating for a gradual approach to rate cuts. Israel targeted Hezbollah in Lebanon, and the U.S. struck Houthi targets in Yemen.
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Investor Focus Shifts to U.S. Economic Resilience Amid Global Market Volatility
The focus of investors has shifted from concerns about a U.S. economic “hard landing” to a potential “no landing” scenario, where the labor market remains strong while inflation cools. Despite escalating tensions in the Middle East, traders are primarily focused on U.S. economic resilience, with the dollar gaining strength against other major currencies. Asian markets followed Wall Street’s lead, with Japan’s Nikkei index surging 2%, aided by a weakening yen. Japanese officials are closely monitoring currency movements, hinting at possible intervention to stabilize the yen.
Meanwhile, the euro and sterling have faced challenges. The euro has weakened as European Central Bank (ECB) officials, including President Christine Lagarde, signaled upcoming rate cuts due to concerns over inflation undershooting targets. In the UK, the pound remains volatile after a dovish shift by the Bank of England was countered by its chief economist. Investors also anticipate further insights from U.S. Federal Reserve officials speaking later in the week.
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Japan’s PM Ishiba Orders New Economic Package to Combat Inflation and Boost Growth Ahead of Election
Japan’s Prime Minister Shigeru Ishiba has instructed his cabinet to draft a new economic package aimed at mitigating inflation’s impact and supporting growth ahead of the upcoming general election. The plan includes cash handouts for low-income households and regional economies, with funding sourced from an additional budget to be submitted after the October 27 election.
Despite concerns about Japan’s rising debt—already at 255% of GDP—the package aims to alleviate high energy prices, promote energy efficiency, and support disaster-hit regions. Economic Revitalization Minister Ryosei Akazawa will lead the efforts.
