The Autumn budget is taking place in winter
Bad news became good news again for stocks yesterday as a weaker-than-expected jobs report boosted the market’s hope for further rate cuts beyond September. In other news, the US service sector once again demonstrated its resilience in August, with the index beating expectations and rising to 52.0. The results of the latest Fed Beige Book Survey concluded that US economic activity saw “little or no change” across most of the country in recent weeks, adding that every region saw price increases, with 10 of the 12 reporting “moderate or modest” inflation and two seeing “strong input price growth.” It’s hard to know what to conclude from all that, but the Stock Market in the US climbed to new highs.
The UK Composite PMI for the month of August seemed remarkably robust, with an index reading of 53.5, indicating a moderately expanding economy. We found this week that the Autumn budget will be more like a winter budget, as the date set is the 26th of November. Quite why, when there is so much speculation about black holes, tax rises, and soaring borrowing costs, Ms Reeves wants to delay the budget feels a bit of a mystery. There has to be something of a question mark about whether she will remain in her post come the time.
The Vix fear index spiked earlier in the week but has slowly drifted back to its lows, indicating confidence amongst the investment community that stocks can remain resilient. To understand the demand from investors for anything AI at present, Anthropic, an AI safety and research company that’s working to build reliable, interpretable, and steerable AI systems, was looking to raise $5bn at a valuation of around $60bn, but ended up raising $13bn at a valuation of nearer to $180bn. Are those signs of a bubble? Maybe.
Later today, with much excitement, we will receive the monthly employment report in the US, the one we have all been waiting for. We receive the latest estimates of US unemployment, Non-Farm payrolls, and average earnings, which are intended to provide a true window into the state of the US jobs market and, by implication, the US economy. I guess it’s fair to say that what’s best for the market is a number pretty much in line with expectations. A weaker-than-expected report will raise concerns that the Fed are behind the curve, and a more substantial number will let the hawks fly again.
Have a good weekend
