Monday Morning Update

This morning’s headlines continue to be dominated by the recent fighting in Israel and Gaza. Thus far, there have been over 700 people killed in Israel since Hamas launched their latest attack which involved 260 people being killed at a music festival. According to the BBC, almost 500 people have also been killed in Gaza, following retaliatory air strikes. This comes as Israel have said that over 1,000 targets have been hit in Gaza overnight as four military divisions have been deployed. The UN are also commenting on new reports emerging of alarming food scarcity and clashes across the Israel-Lebanon border.

The United Nations Security Council (UNSC) has met behind closed doors in an emergency session, though consensus around a statement has not been achieved. Given heightened geopolitical tensions, there has been a flight to safety across financial markets as investors consider the wider ramifications of the conflict.

More around the latest developments can be found at the BBC, click here to read.

Today will see delegates from around the world meet for the IMF’s latest meeting. This will take place in Marrakech, Morocco and comes just weeks after the city and country was devastated by a deadly earthquake which claimed the lives of 3,000. While the IMF’s and World Bank Group’s meetings are irregular, generally speaking meetings like this take place once a year and involve central bankers, finance ministers, executives and academics. The key themes for the meeting ahead include “Building Economic Resilience”, “Securing Transformational Reforms” and “Reinvigorating Global Cooperation”. Today will see the IMF Managing Director Kristalina Georgieva talk about “the costs of geoeconomic fragmentation” of the IMF’s World Economic Outlook and Global Financial Stability Report being published tomorrow. The meeting will take place over six days with other highlights including Christine Lagarde speaking on Friday.

As Bloomberg writes, the decision to go ahead with the summit in Morocco is “meant to signal the IMF and World Bank’s relevance to the region”. They continued by stating that “the need for such outreach was made clear when major emerging market powers gathered in August for the BRICS summit in Johannesburg, decrying the Western-led order and broadening their ranks to include Iran and Saudi Arabia. That meeting came a few weeks after Russian President Vladimir Putin hosted African leaders in St. Petersburg.” As such, markets will be keeping a close eye for any developments from the meeting in Morocco, as geopolitical and socio-economic issues take centre stage.

Yesterday saw the first day of the Labour Party Conference in Liverpool which will run to Wednesday. Later today, the Shadow chancellor Rachel Reeves is expected to unveil the Labour Party’s plans to establish an ‘Anti-Corruption’ Minister which would look to recoup some £7.2bn in money lost to Covid related fraud. As the BBC understands, “Labour’s proposal to recover money lost as a result of fraud and waste during the pandemic would bring together HMRC, the Serious Fraud Office and the National Crime Agency.” According to Reeves, just 2% of fraudulent Covid grants have been recouped, and thus the party sees is keen to capitalise on an issue which continues to be a salient topic for voters as the cost of living crisis continues to hit households and tax burdens rise.

Today could see thinner markets with the US’ Columbus bank holiday, though FOMC member Philip N. Jefferson will be speaking at 17:45 this evening. Here, markets will be looking to gain any insight on his monetary policy views ahead of the Fed’s Minutes, released later this week. Last month, Jefferson was confirmed by the Senate as vice chair of the Fed in an 88-10 vote which demonstrated bipartisan support for the central banker. Jefferson’s voting record (which has involved him opting to raise rates each time since Marc 2022), is indicative of what many describe as his slightly more hawkish stance and thus all eyes will be on any further indication of whether the Fed may raise again and/or how long the Fed may be looking to hold any terminal rate.

Wednesday will also see the release of the German HICP inflation data, where the market is expecting to see a print of 4.3% on an annualised basis. This is inline with last month’s print which represented the lowest level in two years and a sizeable deceleration from August’s 6.4% level. Nevertheless, Wednesday’s print comes as many German businesses as possible grapple with rising energy and rental costs which could well be passed on to consumer prices.

As alluded to, Wednesday evening will see the release of the FOMC’s minutes from their September meeting where the central bank met market expectations in holding rates at their 5.25-5.5% target. With the Fed maintaining their benchmark policy target rate at its highest level in 22 years, hawkish undertones were signalled to financial markets given indications that there would be less rate cuts in 2024 than previously expected. Indeed, according to the release of the Fed’s Dot Plot, projections indicated a likelihood of another hike this year ahead of two cuts in 2024. This came as Chairman Powell maintained that “the process of getting inflation sustainably down to 2% has a long way to go”. As such, markets will be keeping a close eye on the release of the Fed’s minutes to gain any further indication on potential paths moving forward and any potential disunity within the group which could continue to throw up question marks as to the Fed’s next move.