Weekly Base Metal Macroeconomic Slides
Executive Summary – Global Macro Outlook The most important macro development of the last week was the material repricing of U.S. rate expectations. While Q2 GDP was revised higher to 2.2% annualized, markets focused instead on deteriorating labour and consumer indicators. Consumer confidence missed expectations, JOLTS openings softened, core PCE inflation cooled and payroll growth slowed sharply to only 29,000 jobs. These developments significantly reduced expectations for further Fed tightening, leading October hike probabilities to collapse to 22% from roughly 70% at the beginning of the week. Importantly, StoneX's base case remains unchanged. The house view is for a single Fed rate hike in December. Here we cautioned against overreacting to the payroll number, noting analysis from Oxford Economics suggesting labour-market conditions remain broadly consistent with trend employment growth and stable unemployment around 4.2%. China delivered a considerably more encouraging picture. The official manufacturing PMI returned above 50 for the first time in two months, non-manufacturing remained in expansion and construction activity moved back into growth territory for the first time this year. Particularly encouraging was the broadening of economic momentum beyond high-tech manufacturing into more traditional consumer sectors, with consumer goods production reaching a five-month high and new orders remaining in expansion. StoneX increasingly views July as the trough for Chinese growth this year. Additional support comes from: • Mortgage subsidy program. • Lower financing costs. • Expanded direct investment quotas. • Reduced tariff uncertainty through January. • Accelerating fiscal spending. Against this, higher factory-gate inflation caused by elevated energy prices and Middle East tensions remains a risk factor. Meanwhile, sluggish developed market industrial demand is also a headwind, given Germany's labour market deterioration, political strains across the eurozone and weakening Japanese manufacturing. Yet resilient global trade, evidenced by an 83% Y/Y jump in South Korean September exports, provides an important offset and continues to support the export-led segments of the Chinese economy.
- Base Metals
