17 September 2018
Bassanese Bites: Hello 3% – Week beginning: 17 September 2018
It was a generally positive week for global stocks helped by a “Goldilocks” pattern of US economic data and hopes of renewed trade talks between the US and China. Stocks rose and US 10-year bond yields once again broke through the “psychological” 3% level.
On the data front, although headline August US retail sales missed expectations, upward revisions still have September quarterly growth looking rock solid. US job openings also hit a record high and the percentage of workers leaving their job voluntarily (the “quit rate”) hit a 17-year high of 2.7%. Despite this apparent demand strength, however, last week’s US consumer price index report was a touch softer than expectations, with core annualCPI inflation slowing back to 2.2% from 2.4%.
Given the red hot US labour market, however, the previous week’s payrolls report showing a pick-up in annual average hourly earnings growth to 2.9% is where the real inflation risk lurks – indeed, accelerating wage growth remains the single biggest risk (but not yet reality) for the global equity bull run. Note Fed rhetoric of late has also been fairly hawkish, with many voting members reiterating the likely need to keep raising rates for some time to come.
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