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LGT Navigator: US labor market report points the way for markets and the Fed

October 4, 2019

While the fear of a global economic slowdown as a result of geopolitical uncertainties is weighing heavily on the stock markets, investors are eagerly awaiting the monthly US labor statistics this afternoon. The Fed, in particular, is likely to watch the medium-term employment trend closely and adjust its monetary policy accordingly.

Analysts are unanimous in assuming that 145,000 new jobs were created in September, which means that job growth in itself will remain solid. However, the US Federal Reserve (Fed) is unlikely to refrain from further interest rate easing before the end of the year, as the risks from the unresolved trade conflict and weak economic signals weigh too heavily. Meanwhile, statements by Fed representatives confirm expectations of a further easing of interest rates in December. Charles Evans, President of the Chicago Fed, and Robert Kaplan of the Fed Dallas said that the Fed must be "open-minded" about the effects of weaker economic data. The financial markets are also eagerly awaiting the latest statements from US Federal Reserve Chairman Jerome Powell this evening. The second survey published yesterday by the industry association ISM also underscored the concerns of the Federal Reserve. Growth in the US service sector slowed unexpectedly in September. The corresponding ISM Non-Manufacturing-Index fell from 56.4 points in August to 52.6 points and thus seems to follow the already long negative trend from the industry. Analysts had expected a decline to 55.3 points. The ISM index thus painted a weaker picture than the purchasing managers' index for the sector, which had improved from 50.7 to 50.9, but is only slightly above the 50 mark.

Outlook for the euro area continues to darken

The purchasing managers' index (PMI) for the private sector in the euro zone weakened in September to its lowest level since June 2013 and is now signaling a virtual stagnation in economic growth. The aggregate PMI published by IHS Markit fell from 51.9 points in August to 50.1 points. The decline is mainly due to the continued weakness in the industrial sector, where the PMI reached its lowest level since October 2012. Meanwhile, the service sector remained in the positive or growth zone, but the PMI also fell significantly from 53.5 to 51.6 points – the worst value since the beginning of the year. The German economy was particularly weak, with the purchasing managers' index for the private sector indicating a contraction for the first time since April 2013. According to IHS-Markit chief economist Chris Williamson, however, the development also remained weak in other euro countries. In France and Italy, too, growth had virtually come to a standstill. In Spain, the aggregated PMI fell to its second lowest level in around six years. The increasing risk of a recession should maintain the pressure on the ECB to take further measures to support the economy.

Brexit – Brussels has many questions for Johnson

The EU Commission is calling on Prime Minister Boris Johnson to clarify the British government's proposal to allow Britain to leave the EU in a regulated manner. There were many questions and problematic points. However, the EU was prepared to cooperate constructively with the British to ensure an orderly Brexit. The EU summit on 17 and 18 October, at which Brexit is the central issue, is likely to be decisive. Meanwhile, Prime Minister Johnson said that his government had shown great flexibility. Now it was up to the EU to make concessions, otherwise Britain would have no choice but to leave on 31 October without an agreement.

British PMIs confirm fears of recession

Like the industrial sector, the purchasing managers' index for the British services sector fell below the growth threshold of 50 points for the second time this year. In September, the barometer fell by -1.1 points to 49.5 points, which means that all three early indicators surveyed by IHS Markit are now in the negative range or below 50 points. In view of the continuing Brexit uncertainty and the weakening of the global economy as a result of the trade conflict, the probability of a recession on the British Isles appears to have increased significantly. This should also have a significant impact on the monetary policy of the British central bank. Recent statements by central bank member Michael Saunders suggest that the Bank of England would loosen interest rate restraints again in the event of a hard break.

Economic Indicators October 4

MEZ Country Indicator Last
14:30 US Unemployment Rate 3.7%
14:30 US Non-Farm Payrolls 130,000
14:30 US Private Payrolls 96,000
14:30 US Average Hourly Earnings (m/m) +0.4%
14:30 US Average Hourly Earnings (y/y) +3.2%
14:30 US Trade Balance -USD 54bn

Earnings Calendar October 8

Country Corporate Period
SZ Aryzta Y



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Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi, +41 44 250 78 59, E-Mail:
Quelle: LGT Bank (Schweiz) AG
Core Personal Consumption Expenditure
MEZCountryIndicatorLast08:00DERetail Sales (y/y)-1.7%08:45FRConsumer Prices EU Harmonized (y/y)1.4%09:00ESGDP (y/y)2.4%09:55DEUnemployment Rate5.0%11:00EUGDP (y/y)1.2%11:00EUCore Consumer Prices (y/y)1.1%11:00EUUnemployment Rate7.5%11:00ITConsumer Prices EU Harmonized (y/y)0.8%12:00ITGDP (q/q)0.12%14:15USADP Employment Report102k20:00USFederal Funds Target Rate2.5%