LGT Navigator: US labor market developments and implications for the Fed

The focus today is on the monthly labor market statistics from Washington.

If employment growth accelerates, the Federal Reserve could be forced to curb its expansionary monetary policy more actively. Meanwhile, the mood on the capital markets has eased again. This was mainly due to an agreement in the dispute over the debt ceiling in the US, which will now be extended until December.

US labor market developments and implications for the Fed

On Wall Street, the stock indices continued their recovery on Thursday, although the momentum was lost again somewhat towards the end of trading. The preliminary agreement in Washington between Democrats and Republicans to extend the debt ceiling initially until December was received positively, thus preventing an imminent default of the US government. The Dow Jones Industrial exited with a whopping daily gain of +0.98% at 34'754.94 points. The S&P 500 gained +0.83% to 4'399.76 points and on the Nasdaq, the indices rose by almost one percent. The recovery had already gained momentum yesterday on Europe's stock exchanges - the EuroStoxx 50 posted a daily gain of +2.14% - and the positive trend continued for the most part in Asia today. The focus is now on the US labor market report, which plays a weighty role for the monetary policy of the Federal Reserve.

Threat of US default averted for now

The Senate in Washington last night approved an increase in the debt ceiling (from the current USD 28.5 trillion) by USD 480 billion by early December. The following vote in the House of Representatives and the signing by US President Joe Biden is now considered a formality. The decision in the Senate, however, was extremely close with 50 to 48 votes, which leads to the conclusion that the problem has merely been postponed, but not solved. US Treasury Secretary Janet Yellen had warned of a potential recession and a possible global financial crisis if the United States were virtually unable to service its debt. In any case, the Democrats' goal is to completely abolish the debt ceiling in its current form, which was introduced in 1917 and has been extended many times.

Positive short-term US labor market data

Weekly Initial Jobless Claims fell more than expected last week by 38'000 to 326'000 claims. This was after an increase had been observed in each of the previous weeks. Although this is a positive signal for the short-term development of the US labor market, weekly applications are still at a higher level than before the corona crisis.

Chief economist of the Bank of England warns of continuing inflationary pressure

According to the new chief economist of the British central bank, Huw Pill, there is a risk that inflationary pressure could last longer than previously expected. Consumer price inflation in the UK reached +3.2% in September, well above the 2% mark targeted by the Bank of England. If inflationary pressures intensify and the outlook shifts toward prolonged high inflation, the central bank may be forced to tighten monetary policy soon.

Global wealth rises to record level during pandemic

According to a recent study by the Allianz insurance group, global financial assets increased by almost +10% in 2020, reaching the EUR 200 trillion mark for the first time. For the current year, Allianz expects gross financial assets of private households to grow again by +7%. At the same time, however, the corona crisis is exacerbating wealth inequality worldwide. According to the insurer's Global Wealth Report, only 10% of the world's population currently owns around 85% of global assets.

Economic Indicators October 8

MEZ 	Country 	Indicator 	Last period

08:00 	GE 	Exports (August, m/m) 	+0.5%

08:00 	GE 	Imports (August, m/m) 	-3.8%

11:30 	UK 	Bank of England Minutes

14:30 	US 	Non-Farm Payrolls (September) 	+235,000

14:30 	US 	Unemployment Rate (September) 	5.2%

14:30 	US 	Average Hourly Earnings (September, y/y) 	+4.3%

Earnings Calender October 12

Country 	Company 	Period

SZ 	Givaudan 	9-Months Sales

SZ 	Lonza 	Investor Day

FR	LVMH 	Q3 Sales

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