Logic Monday Espresso Podcast

Monday Espresso Podcast - 9th December 2024

[00:00:00] Nathan Sweeney: It is Monday, the 9th of December. Today, I'm joined by Alex King, senior quantitative analyst, and he has sector coverage for Asia and EM. Good morning, Alex.

[00:00:11] Alex King: Morning, Nathan.

[00:00:12] Nathan Sweeney: So Alex, I think it'd be good to start with a quick recap of what was happening in markets last week.

[00:00:18] Alex King: Yeah, sure.

[00:00:19] Alex King: So starting with the US, we saw that major indices rose earlier in the week with the S&P and the NASDAQ both reaching record highs, especially growth sectors like technology, communication services, and consumer discretionary led the gains. We saw a modest pullback on Thursday that was driven by some small cap underperformance.

[00:00:41] Alex King: More globally, we saw that European equities remained resilient despite some political turmoil in France and Asian markets were mixed, influenced by geopolitical tension in South Korea and policy developments related to AI chip restrictions.

[00:00:57] Nathan Sweeney: Okay. So let's delve into that a little bit more. So of the key news items last week, you mentioned we had some jobs data out in the US so how's the US economy looking?

[00:01:07] Nathan Sweeney: Are we still seeing hiring coming?

[00:01:09] Alex King: Yes, so job openings for October increased to 7. 7 million. That's reflecting some continued labour market strength in the US. We did see some voluntary quits rising, which indicates worker confidence. The overall employment number did jump from 4.1% to 4.2%, but initial jobless claims rose slightly to 224,000.

[00:01:33] Alex King: Which remains historically low, which suggests stability in the labour market.

[00:01:37] Nathan Sweeney: Yeah. So if we look at that number, so that 224,000, so ultimately that's the number of people who are hired over the course of November, and it is a high number when you look at last month, because last month we had 36,000 people.

[00:01:51] Nathan Sweeney: The reason the number was so low is because you had weather related issues. So you had a hurricane and usually when you have extreme bad weather, people aren't hiring, particularly seasonal hiring. And that 224 is higher than expected. So the market was expecting 200, 000 jobs. And so we got a little bit more and sometimes you can see the unemployment rate actually shift up, even though there's more hiring, because more people are coming into the workforce when they see actually there's lots of jobs.

[00:02:19] Nathan Sweeney: So the overall labour force participation rate increases. Which can cause that to happen. But the key takeaway there is that there is continued strength within the US economy and lots of jobs being created, but on this side of the water, we did have some more political turmoil. So what was happening in France?

[00:02:42] Alex King: Yeah, absolutely. We saw some political uncertainty after a parliamentary vote to remove the government. French markets showed resilience to this, however. And then further afield, in South Korea, we saw some instability due to a martial law declaration and subsequent retraction. By the president leading to some market volatility in South Korea.

[00:03:03] Nathan Sweeney: Yeah. And I think this is a great reminder of the fact that, you know, markets can really throw left field events at you, which are just totally unexpected. And that's a great example. So martial law being implemented and then being quickly reversed. And obviously that can have an impact on markets, particularly over the short term and markets will react to that kind of news.

[00:03:23] Nathan Sweeney: And generally, they will always react in a cautionary manner because they need to digest what does that mean? What would that actually mean for companies in that country and maybe for companies in other countries who have supplies linked to that country. So you can see the knock on effect of, you know, something that can happen all the way across the other side of the world.

[00:03:42] Nathan Sweeney: But it's just a great reminder of the fact that you get these left field events happening in markets from time to time. But generally, nine times out of ten, we would tend not to react to such news because, you know, ultimately after assessing it, we'd feel that there's no real need for action and this is a classic example of that.

[00:04:00] Nathan Sweeney: Let's touch on the week ahead. So looking forward to next week, what kind of news items are on the table?

[00:04:05] Alex King: Yes. So this week we have GDP numbers coming out in Japan. That's today. As well as some CPI numbers in China. Tomorrow we have Germany CPI data coming out. And then on Wednesday we have CPI coming from the US as well as interest rate decisions to be made in Canada and Brazil. Thursday we have industrial production data coming out of Japan. And Friday we have some key data coming out of the UK with GDP, trade balance and industrial production data.

[00:04:38] Nathan Sweeney: Okay. Thank you, Alex. A great roundup there. So lots to focus on.

[00:04:42] Nathan Sweeney: Obviously markets will be really focused on that US inflation figure, but we're not really concerned about inflation at this point, but I think that's one to watch out for next year with tariffs potentially on the horizon. So thank you everybody for listening and have a great week.