Stronger-than-expected U.S. economic data, including robust private sector job growth and service activity, is challenging the likelihood of further Federal Reserve rate cuts, pushing Treasury yields higher, despite a counter-narrative of rising layoffs. Meanwhile, a record government shutdown is causing operational concerns, and Supreme Court hearings are casting doubt on the legality of President Trump's tariffs, introducing policy uncertainty. Internationally, the British pound firmed ahead of a critical Bank of England rate decision, while Asian equities advanced and European markets retreated.
Stronger-than-expected U.S. economic data, including above-forecast private sector job growth and rising service sector activity, is challenging the Federal Reserve's easing path. This robust activity has pushed long-dated Treasury yields to their highest in nearly a month, as futures indicate only a a 60% chance of another Fed rate cut next month. Despite the positive economic signals, a significant counter-narrative exists with U.S.-based employers cutting over 150,000 jobs in October, marking the largest monthly reduction in over two decades. Concurrently, the record 36-day government shutdown is creating operational disruptions, such as a mandated 10% flight reduction at major airports, while Supreme Court questioning casts doubt on the legality of President Trump's tariffs, introducing policy uncertainty. Corporate news saw Qualcomm's stock decline 4% despite an earnings beat, attributed to a warning regarding lost business from client Samsung. Internationally, the British pound strengthened ahead of a critical Bank of England policy decision, where a 40% chance of a rate cut is priced in, while Asian equities firmed and European markets experienced a slight decline.
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