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The U.S. economy grew by 4.9% in the third quarter, exceeding the 4.3% forecast. It should be recalled that in the second quarter, the figure was only 2.1%.
Even so, US ten-year bond yields fell. This means that markets do not believe it will affect the direction of monetary policy. Rather, no further rate hikes are expected.
As for the stock market, the deterioration in sentiment seems to have been caused, on the one hand, by the new restrictions on high-tech chip exports to China.
On the other hand, the correction of Alphabet and Meta shares, which presented good quarterly reports, although in some respects worse than expected.
Meta spooked investors about the possible negative impact of the Middle East conflict on advertising revenues, while Alphabet reported a drop in cloud and advertising revenues.
As for Europe, the eurozone’s business activity index has fallen to its lowest level in three years, at 46.5 instead of the expected 47.4.
However, the stock market reacted upward, and European 10-year bond yields fell as the economic slowdown contributed to the return of price stability, barring unexpected events.
Weak data also increased the likelihood that the ECB would keep interest rates unchanged at its current meeting. That is effectively what it did.
The problem is that, although the cause has finally been taken up, the slower pace of economic growth will inevitably affect risky assets, including the possible decline in profits.
Finally, for the second consecutive month, China has recorded increased industrial profits as consumption gains momentum.
In addition, more and more global investment banks are raising their forecasts for the country’s economic growth.
The problem is that the situation in the real estate sector continues to deteriorate. The authorities are lifting restrictions on the industry, but that is not helping.
Country Garden Holdings Co., for example, has experienced its first default on its dollar bonds, and more bad news could be coming soon.
Looking ahead to this week, as the economic data calendar suggests, the focus will be on the meetings of three central banks (the Fed, the Bank of Japan and the BOE).
Starting with the US, despite upbeat third-quarter GDP data (growth rate was 4.9%, exceeding expectations of 4.3%), no further interest rate hikes are expected.
In Japan, if the Bank finally decides to abandon control of the yield curve completely, Japanese government bond yields would soar, and the gap with global yields would narrow.
Finally, a Reuters poll reveals that 83% of economists expect the Bank of England to keep interest rates at 5.25%. The only problem is that inflation remains high in the country.
