US inflation came in at the high end of expectations last week, as core inflation rose 0.31% MoM, against expectations of around 0.25%. Moreover, a look at the upcoming US Elections, and support for local governments in China.
US Economics – Stronger CPI but Cuts Coming
US inflation came in at the high end of expectations last week, as core inflation rose 0.31% MoM, against expectations of around 0.25%. Contributions came from both core goods and services, while shelter importantly slowed to 0.2%. Energy prices fell -1.9% MoM, dragging the CPI headline YoY figure down to 2.4%, while core was 3.3% YoY. Jobless claims spiked to 258k, against expectations for 230k, following strikes and poor weather. The market initially assigned more importance to the weaker labour market print, but then added term-premium to the longer-end of the curve. Pricing stands at just under 50bp of cuts by December.
US Elections – Trump comeback
Betting odds for Donald Trump to win the presidency have improved by 4%-points over the past week, who now leads 53/49 according to Polymarket. The RCP polling average still sees Harris in front at 49/47, but Trump also gained 0.4% over the past week here. The odds of a Republican sweep, whereby the Republicans control both the House and the Senate, have risen to 40%. In our view this would likely be the most impactful scenario for markets, as Republicans will have more power to determine policies like tax cuts, immigration and spending. Accordingly, markets will likely refocus on “Trump-Trades” like stronger USD vs. Tariff-targets like China/Eurozone, and steeper US interest-rate curves.
China – No boost just yet
On Saturday, the Chinese Ministry of Finance announced support for local governments, the property market and major banks, and hinted at a higher government debt ceiling to allow for fiscal stimulus in the future. It fell short however of measures for the consumer, and announcing a specific stimulus package amount, disappointing investors who were eagerly expecting circa 2trn RMB. Focus now shifts to the NPC Standing Committee later in October, which has the capacity to greenlight material fiscal stimulus, to complement the previously announced monetary easing.
Algebris Investments’ Global Credit Team
This document is issued by Algebris (UK) Limited. The information contained herein may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of Algebris (UK) Limited.
Algebris (UK) Limited is authorised and Regulated in the UK by the Financial Conduct Authority. The information and opinions contained in this document are for background purposes only, do not purport to be full or complete and do not constitute investment advice. Under no circumstances should any part of this document be construed as an offering or solicitation of any offer of any fund managed by Algebris (UK) Limited. Any investment in the products referred to in this document should only be made on the basis of the relevant prospectus. This information does not constitute Investment Research, nor a Research Recommendation. Algebris (UK) Limited is not hereby arranging or agreeing to arrange any transaction in any investment whatsoever or otherwise undertaking any activity requiring authorisation under the Financial Services and Markets Act 2000.
No reliance may be placed for any purpose on the information and opinions contained in this document or their accuracy or completeness. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained in this document by any of Algebris (UK) Limited , its members, employees or affiliates and no liability is accepted by such persons for the accuracy or completeness of any such information or opinions.
The distribution of this document may be restricted in certain jurisdictions. The above information is for general guidance only, and it is the responsibility of any person or persons in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. This document is for private circulation to professional investors only.
© 2024 Algebris (UK) Limited. All Rights Reserved. 4th Floor, 1 St James’s Market, SW1Y 4AH.
