UBS On-Air: Market Moves

The US has more people employed, working longer hours, for more pay. Last Friday’s employment report essentially summarized a soft economic landing. There was evidence of slower hiring (without firing) in the employment details, also consistent with a soft landing. While the Federal Reserve is late in cutting rates, the delay has not yet done much economic damage.

The latest employment report is in - Brian stops by to provide thoughts around the health of the US labor market, and what this latest data means for the potential timing and extent of Fed rate cuts in the weeks ahead. Plus, a look at what to expect in the week ahead. Featured is Brian Rose, Senior Economist Americas, UBS Chief Investment Office. Host: Shiavon Chatman

Just one month ago, markets were panicked by the release of an unreliable labor market signal, distorted by seasonal peculiarities. Now, once again, it is time for the US employment report. The unreliability adds unpredictability to the numbers, but the expectation is for a lower unemployment rate as temporarily unemployed auto-sector workers return to work.

The Washington Post reports that US President Biden will prevent Japan’s Nippon Steel from acquiring US Steel, citing national security grounds. There will probably be a legal challenge to this, as national security might be hard to justify. Economic nationalism, however, is not just about trade in goods—it also often covers capital flows. Interestingly, economic nationalism goes both ways on capital flows: “how dare foreigners buy our assets?” for inflows; and “why are you not investing at home?” for outflows.

As Congress returns from summer recess, and the race for the White House heats up, Shane drops by to outline legislative priorities over the next few weeks, along with updates as to where polling for the White House and key Congressional races currently stands. Featured is Shane Lieberman, Senior Governmental Affairs Advisor, Governmental Affairs US. Host: Daniel Cassidy

Equity markets had one of their funny turns yesterday. Some commentators, searching for scapegoats, want to blame the US ISM manufacturing sentiment poll. This seems unfair, as the ISM sentiment poll does not know what it is doing. Despite sentiment signaling five months of contraction, US manufacturing output is above where it was at the start of the year.

Alejo Czerwonko, the Chief Investment Officer for Emerging Markets Americas at UBS, shares his insights on the potential repercussions of the U.S. elections for emerging market assets. He explores historical trends, noting that Democratic leadership has historically favored performance. Alejo discusses how election outcomes could influence growth rates, interest rates, and trade relationships with major players like Mexico, China, and India. He also emphasizes the importance of long-term investment strategies amidst political uncertainty, highlighting Mexico as a key opportunity.

Following Canada’s decision to dramatically tax Canadian consumers of electric vehicles made in China, China has launched anti-dumping investigations into Canadian exports. “Dumping” is the deliberate sale of exports at below market price. It is not a common occurrence, but it is a convenient way of pursuing economic nationalism (per US and EU accusations of dumping against China).

Paul Donovan, an expert on economic implications, dissects the unsettling rise of prejudice politics, particularly the far-right AfD's electoral success in Germany. He delves into how economic insecurity fuels scapegoating, which in turn complicates productivity and fosters nationalism. The discussion reveals the complexities behind societal shifts and highlights the long-term economic ramifications of such political trends, urging listeners to reconsider how these dynamics play out in global relations.

Disinflation data continues today. The US July personal consumer expenditure deflator is expected to show fairly stable inflation rates. It is worth remembering that if inflation falls because of owners’ equivalent rent, this does not change the spending power of any US household (as OER is a fiction).