With France looking down the barrel of political instability, we may be in for a bumpy ride. This rocky navigation follows the resignation of Prime Minister Sébastien Lecornu after just 26 days in office. The quick turnover within the French government led to fears of a truly unstable administration. As she wrestles with huge domestic and international crises, these uncertainties only multiply. At the same time, the United States continues to deal with its own partial government shutdown, which is increasingly impacting key economic data releases.
Lecornu’s brief tenure as Prime Minister proved to be a key moment with high aspirations for changing the game across multiple sectors. His resignation has set off a scramble within the French government as they seek a successor able to chart a steady course through stormy socio-economic waters. Critics argue that this abrupt move would seriously compromise France’s ability to tackle more urgent priorities, such as curbing rising inflation and high unemployment.
The ongoing government shutdown in the United States continues to impact critical data releases. This predicament uniquely impacts the Bureau of Labor Statistics (BLS). The shutdown has delayed reports that are essential for understanding the current economic climate, including employment figures and inflation statistics. Consequently, investors and policymakers are deprived of the essential insights they require to make better informed decisions.
Meanwhile, over the Atlantic, the closely followed German ZEW index, an indicator of economic sentiment, is due out on Tuesday. This survey provides the best perspective we have into the German economy’s forward-looking opportunities. It deals with persistent worries about inflation and economic expansion in the eurozone. Market participants are looking forward to the last inflation preview for the euro area, due on Friday. Second, they want to take stock of how effective the recent monetary policy measures have been.
In a second major development, a hostage-prisoner exchange is set to begin within days. Israeli soldiers are beginning to leave the Palestinian enclave of Gaza City. This agreement is an important step to gauge if geopolitical tensions will diffuse in a region, one long known for its volatility. Recent reports have suggested a ceasefire agreement could be between Israel and Hamas in the immediate future. If successful, this agreement may even lead to a long-term cessation of the multi-year, destructive war.
Global oil prices have jumped around dramatically in recent days. At first, prices skyrocketed as a reaction to geopolitical unrest. By Friday, as the market reactions began to stabilize, Brent crude dropped below USD 65 per barrel. This shift mirrors larger worries over economic growth and demand amid continued geopolitical and overall uncertainty.
Economic predictions indicate that the United States’ September headline inflation rate will be 0.4%. This figure is mo-mo and SA. Core CPI numbers, stripping out food and energy prices, are due, expected to come in at 0.3% MoM. These numbers will be watched carefully by economists as they seek to measure the inflationary pressures in the U.S. economy.
The European Central Bank (ECB) has hinted at a dovish stance in its recent minutes from the September meeting, suggesting that “a further rate cut in the coming months would better protect the inflation target both under the baseline and across a range of adverse scenarios.” This declaration highlights the integrity and development in economic stability within the euro area by the ECB against inflation – increasing price instability adverse impact.
Yesterday, the FOMC released the minutes from their September meeting. They provided weak forward guidance that monetary policy may need to tighten further, a signal muted enough to surprise no one in the market. As always, investors are closely watching for any hints about where interest rates might be headed next.
In the offshore market, China’s CPI for September will be published on Wednesday. To top things off, PPI data will be released that same day. These figures are anticipated to shed light on China’s economic trajectory, as policymakers seek to balance growth with inflation control.