BoE rate decision ahead, with budget likely bring caution

• European markets lower despite upbeat Asian session.
• BoE rate decision ahead, with budget likely bring caution. 
• US jobs data sees challenger cuts push back on improved ADP/ISM numbers.

European markets are in the red once again today despite the pushback we saw for US tech stocks in a week that has seen major volatility despite the strength of earnings from the tech sector. This morning saw the German industrial production figure underperform expectations coming in at 1.3% following a revised figure of -3.7% in August. Notably, with the likes of the Hang Seng (2.12%) and Nikkei 225 (1.34%) gaining ground in Asia, it is Europe that appears to be the region suffering against a backdrop of uncertainty and weak growth expectations.

Today sees the latest interest rate decision from the bank of England with markets largely expecting the committee to hold rate steady at 4%. With inflation largely under control over the past five months and the jobs market showing signs of stress, there is the basis for Bailey and co to move the needle in a bed to lift economic activity. However, with the chancellor expected to enact a historic shift in tax policy that will undoubtably alter the trajectory of growth and inflation, the data dependent approach taken by central banks will likely mean that this meeting has come too early to act. In a meeting that will likely bring a split decision from the committee the fact that we will see a breakdown on opinions from each member provides a new element for traders to pour over.

In a week that is notable for its lack of US data, we have seen some key jobs numbers from the US over the past 24 hours. Yesterday’s ADP payroll figure came in above expectations, rising to 42k (32K expected). Meanwhile the ISM services PMI release brought tentative grounds for optimism with the employment element rising from 47.2 to 48.2. However, any optimism should be tempered, with ADP at historically low levels, ISM employment in contraction across both services and manufacturing, and the Challenger job cuts data signalling that hiring has slowed to a 14-year low. This morning’s 153,074 job cuts for the month of October represents a 175% rise in cuts compared with last October, with challenger attributing AI adoption as a key reason for this. Coming hot off the heels of the Amazon confirmation of 14,000 job losses, it is notable that today’s report saw technology as the main area being impacted by cuts. While there remain key concerns around the jobs market, the fact that we have seen expectations of a December rate cut fall to 67% signals the significant shift in confidence since the Fed’s recent rate decision.