1. Asset market trends and major economic indicators
The number of new unemployment claims closed last week was 213,000, the lowest since April, compared to 215,000 the previous week and lower than expected, suggesting that the job market remains strong.
The number of long-term unemployed people continuously claiming unemployment benefits was 1.907 million, an increase from 1.898 million the previous week and the highest since November last year.
In France, market confidence has declined due to political turmoil and concerns about fiscal deficit, and the 10-year government bond spread relative to Germany has surged to the highest since 2012. Growing concerns about a repeat of Europe’s fiscal crisis.
The US gross domestic product (GDP) in the third quarter was 2.8%, the same as the previous estimate. Consumer spending increased by 3.5%, driving growth. Non-residential investment and government spending were strong, while residential investment fell -5%.
The yen strengthens due to expectations of a possible interest rate hike by the Bank of Japan (BOJ). The strength of the yen is based on expectations of interest rate hikes rather than expectations about the Japanese economy. The US dollar turned weak, losing ground to the strong yen.
2. PCE inflation remains stubborn, suggesting a slowdown in the Fed’s interest rate cut cycle
The Fed’s preferred personal consumption expenditures (PCE) core price rose 2.8% compared to the previous year, exceeding the Fed’s 2% target. Compared to the previous month, the standard rose 0.3%, suggesting the possibility of it becoming fixed.
While product prices did not change significantly, service prices increased by 0.4%, which was the main cause of the increase. In particular, the upward trend in the non-residential service sector is evident.
As the job market remains strong and inflation remains stubborn, the analysis suggests that the Fed’s monetary policy, that is, the pace of interest rate cuts, is likely to slow down further compared to before.
October’s PCE report supports the Fed’s gradual rate-cutting approach, so it is not expected to be in a hurry to cut rates. Market volatility increases as expectations of interest rate cuts decrease.
Meanwhile, real consumer spending slowed to a 0.1% increase, down from 0.5% in September. Real disposable income increased 0.4%, the largest increase since January.
💡 Increase in income and savings rate during the year-end shopping season Positive signs that leave open the possibility of a recovery in consumptionOn the other hand, high cost of living and credit risk threaten the sustainability of consumer sentiment.
3. Goldman Sachs, “Trump tariff policy will have a serious impact on energy.”
With President-elect Trump threatening 25% tariffs on Mexico and Canada, the largest trading partners with the U.S., Goldman Sachs, contrary to most Wall Street analysts, warned of a “serious impact.”
Goldman stated that Canada and Mexico supply the crude oil equivalent to about 25% of the U.S. refining process, and predicted that if tariffs were implemented, it would have a significant impact on U.S. consumers and oil refineries.
U.S. refineries are designed to accommodate crude oil from Canada and Mexico, making alternative supply difficult and tariffs expected to increase crude oil prices, increasing inflationary pressure across the economy.
💡 Goldman warned that the 25% tariff would lead to increased fuel costs and chaos in the energy sector, but assessed that the threat of this tariff was likely a means of political pressure. but Potential negative impact on market participants due to policy uncertaintyAnalyze that there is this.
