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The U.S. economy created 119,000 jobs in September, above expectations, but the unemployment rate rose to 4.4%, suggesting labor market conditions remained sluggish. Something for both doves and hawks to chew on ahead of next month’s Fed rate-setting meeting.
Minutes from the Fed’s October meeting published this week highlight already deep divisions on the committee over the prospects of a December rate cut. The account of that meeting has added to growing doubts that the Fed would deliver another reduction in borrowing costs, with traders now giving that scenario only about a one-in-four chance.
Clearly, the final weeks of the year are going to be exciting ones for the global economy: perfect timing for us to launch our new daily markets show, Reuters Morning Bid. We’ll be debuting on November 24, and you’ll be able to ask your smart speaker for Reuters Morning Bid or listen on the Reuters app or your favourite podcast platform. For those of you who like to see the action, you will be able to watch it on Spotify. I’ll have more details on that next week.
An accommodative Fed has been a key driver of the bull market for stocks and bonds this year, but so too has been the AI boom.
Nvidia’s surprisingly strong revenue forecast has calmed, at least temporarily, investor nerves over a potential AI bubble. The world’s most valuable company expects fourth-quarter sales of $65 billion, around $3 billion more than analysts were expecting. Its gross margin stands at 74%.
Nvidia results have become a barometer for the health of the AI industry, and its outlook is a big mark of confidence in the immediate future. But as Robert Cryan points out in a column today, long-term demand is inherently tricky to predict.
Nvidia’s business has become increasingly concentrated in its fiscal third quarter, with four customers accounting for 61% of sales, up from 56% in the second quarter. The company has also invested billions of dollars into some of its customers, leading to concerns of a circular AI economy.
Concerns of a different kind are stalking Japan right now. An off-the-cuff remark by new Prime Minister Sanae Takaichi has triggered Tokyo's biggest bust-up in years with China. If the current souring of relations drags on, it has the potential to do real damage to the Japanese economy.
Beijing has already urged citizens not to travel to Japan and halted imports of its seafood. Any broader boycott of Japanese goods could bring a loss in sales equivalent to about 1% of Japan’s GDP, according to research firm Capital Economics and hammer its key automotive industry.
The bigger fear is that China throttles the supply of critical minerals used in items from electronics to cars. Despite Japan's efforts to diversify, China still supplies around 60% of its imports of rare earths, according to Capital Economics.
Speaking of regional ties – the bond between Buenos Aires and Washington has certainly deepened with the U.S. stepping in to support the peso and offer financial support to President Javier Milei. I look at what Argentina's reliance on the U.S. for its peso currency lifeline means on the latest episode of Reuters Econ World. Listen here.
And a reminder, I’ll be in New York in early December for the Reuters NEXT summit. I’ll be hosting a live podcast with Reuters U.S. editor Sally Buzbee and Fed correspondent Howard Schneider all about navigating Trump’s world, and we have a whole host of speakers from the world of business and finance. You can pre-register for the live stream here or apply to attend in person here.
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