Some economic data points:
In the US, the labour market showed further signs of strength. The JOLTS report came in above consensus above expectations and reached a cycle high. The jobs openings rate was 4.4%, and the hires rate was 3.8%. The quits rate rose to 2.4%, a cycle high, and the layoffs rate was 1.1%. This latest report suggests a continuing healthy pace of underlying job growth.
The Japanese economy exhibited surprising strength driven by consumption and private capital expenditure. Real GDP was revised to 3% from an initial estimate of 1.1%. Private consumption grew at 2.9% while private capex surged 12.8%. Household and corporate diffusion indices also improved markedly in August compared with July.
And in China, credit growth surprised to the upside. While M2 and new RMB loans growth was weaker than expected, Total Social Financing was Rmb 1520bn in August vs. consensus: Rmb 1300bn driven by bond issuance even as bank lending slowed.
The US Mid Term Elections:
The Republicans control the House, Senate and White House. Donald Trump needs a Republican Congress to get further policy done and there are a number of tax cuts and regulatory easing still to be done. A Democrat Congress will derail such plans and put the President on the defensive. A Democrat Congress could try to reinstate the Affordable Care Act, or reverse some of the GOP tax cuts, or escalate investigations into the President, pushing towards impeachment. While the world may consider Trump an erratic and destabilizing President, his policies have been corporate and market friendly and a Democrat controlled Congress would likely threaten the current bull market and economic expansion.
With such a crucial vote ahead on November 6, this is the reality. Democrats need a net gain of 23 seats in the House and on current momentum they have a slight edge. In the Senate, Republicans are only a 50-49 majority but the Democrats are defending 10 states where Trump won in 2016 so their chances are slim. President Trump’s popularity languishes near its low and further, historically, the mid-terms are an opportunity to smite the President in a non-election year. With less than 2 months to the mid-terms, expect media coverage of the campaign to ratchet up and the President to become more aggressive and unpredictable on domestic and international fronts.