Hello there,
The European Central Bank (ECB) has cut interest rates for the third time this year to kickstart a stagnating economy. It's the first back-to-back rate reduction in 13 years. But the market is betting it won't be the last. In fact, most ECB watchers think the die is cast for cuts at every meeting until the spring.
The bloc has been skirting a recession for more than a year and the fear now is that anaemic growth could sap the so-far-resilient jobs market. The vacancy rate -- or the proportion of vacant jobs as a share of the total -- is falling from record highs.
Risks abound for the continent, not least the upcoming U.S. election. Bundesbank President Joachim Nagel has warned that Europe's economy could face significantly lower growth and higher inflation should Donald Trump be elected president.
Goldman Sachs economists estimate that if Trump went ahead with his tariff plans, their direct effect plus the trade uncertainty they would generate could shave one percentage point off output in the 20 countries of the euro area - more than the weak 0.8% growth they are forecast to eke out this year.
A Kamala Harris presidency wouldn't be plain sailing for Europe on the trade front either. Anti-China measures are a rare area of bipartisan agreement in the U.S. election campaign. For Europe's export-driven economy, that raises the question as to whether it can continue to juggle trade ties with both the United States and China.
Speaking of China, data released on Friday is expected to show the world's second-largest economy grew 4.5% year on year in the third quarter, slowing from 4.7% in the second quarter and hitting the weakest pace since the first quarter of 2023, according to a Reuters poll.
Beijing will report the figures at a time when authorities are starting to sharply increase stimulus measures, in an effort to ensure the economy meets the government's 2024 growth target of around 5%.
The sluggish economy and tighter scrutiny of financing and dealmaking have already encouraged many disillusioned Chinese bankers and fund managers to give up their careers.
The $67 trillion financial sector has borne the brunt of various initiatives, in particular, the "common prosperity" campaign launched in 2021 aimed at closing the wealth gap, with measures including caps on salaries and clawing back of bonuses.
And before I go, a shoutout for this week's Reuters Econ World podcast. I look at how climate change is making it harder for American homeowners to access insurance and the potential consequences for house prices and the wider economy.
As always, I'd love to hear from you by hitting reply on this email or finding me on LinkedIn.
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