Core Viewpoint - The Federal Reserve's Vice Chairman and New York Fed President Williams supports further interest rate cuts this year due to a potential slowdown in the U.S. labor market, but he emphasizes that current employment cooling does not indicate an imminent recession [1][2] Group 1: Interest Rate Policy - Williams believes there will be further interest rate cuts this year, contingent on future data, particularly if inflation rises slightly to around 3% and unemployment increases moderately [1] - The Federal Reserve's current monetary policy stance is described as "slightly restrictive," aimed at bringing inflation back to the 2% target while avoiding excessive shocks to the labor market [1] - The Fed announced a 25 basis point rate cut during the September 16-17 meeting, with the majority of officials supporting this move due to rising employment risks, despite concerns over persistent high inflation [1] Group 2: Inflation and Economic Factors - Williams estimates that the impact of President Trump's tariffs on overall price levels is lower than market expectations, contributing only 0.25 to 0.5 percentage points to inflation [2] - Core inflation is gradually returning to around 2%, with no signs of secondary effects from tariffs, and structural changes in the economy are reducing upward inflationary pressures [2] - Rising employment risks are partially offsetting price increase momentum, indicating a complex interplay between labor market conditions and inflation [2] Group 3: Federal Reserve Independence - Williams emphasizes the importance of the Federal Reserve's independence in the face of political pressure for deeper rate cuts and attempts to replace Fed officials [2]

Core Viewpoint - The Federal Reserve is experiencing increasing internal divisions regarding the outlook for interest rate cuts, with some officials advocating for further cuts while others express caution [2][5][10]. Summary by Sections Interest Rate Outlook - More than half of the 19 officials at the September meeting expect at least two more rate cuts this year, while a minority anticipates only one cut or no cuts at all through 2025 [2][5]. - The probability of a 25 basis point rate cut at the upcoming meeting on October 28-29 is estimated at 94.6% according to CME FedWatch [6]. Employment Market Concerns - The minutes highlight concerns among officials about rising risks in the U.S. labor market, suggesting that prolonged high rates could lead to unnecessary weakness, particularly in the housing sector [8][9]. - Some officials argue that recent indicators do not show significant deterioration in the labor market [9]. Inflation Risks - Officials are worried about persistently high inflation, which has exceeded the Fed's target for four consecutive years, with concerns that businesses and consumers may adapt to higher price growth [9]. - The balance between promoting employment and controlling inflation is emphasized as crucial for future policy decisions [9]. Data Availability Issues - The ongoing government shutdown has resulted in a lack of economic data, complicating the Fed's ability to make informed decisions at the next meeting [10]. - The absence of official data forces the Fed to rely on private sector information and feedback from businesses regarding pricing and hiring [10].

Core Viewpoint - The report from 招银国际 indicates that the potential U.S. government shutdown may end within two weeks, with a 96.2% market expectation for an interest rate cut in October, although the Federal Reserve may pause rate cuts due to improving employment data and persistent inflation above target levels [1] Economic Indicators - The U.S. services PMI showed stagnation in expansion for September, with both production and demand weakening, while employment saw a slight recovery but price indices remained high [1] - The manufacturing PMI indicated a slowing contraction, with weakened demand but a recovery in production and employment, alongside a slight decrease in price indices [1] - The inventory index showed increased contraction as businesses continued to deplete previously accumulated inventories [1] Employment and Government Impact - The government shutdown in October is expected to result in 700,000 federal employees facing unpaid leave, with the White House freezing nearly $30 billion in transfer payments [1] - Each week of the shutdown is projected to reduce GDP by 0.1-0.2 percentage points, with short-term impacts on the market being minimal; however, a shutdown lasting over two weeks may heighten market risk aversion [1] - Data on non-farm employment for the month has not yet been released, but initial unemployment claims across states indicate a decrease in first-time claims by the end of September, suggesting stability in the employment market [1]

Group 1 - The U.S. economy appears strong with a reported GDP growth rate of 3.8% for Q2, but this may be misleading as it relies heavily on a significant drop in imports, which decreased by 29.3% [1][6] - Consumer spending showed resilience, increasing from 0.6% in Q1 to 2.5% in Q2, surpassing government forecasts, particularly in services which grew at an annualized rate of 2.6% [2][3] - Private investment is weak, with residential investment down by 5.1% and business inventories continuing to shrink, contributing to a GDP growth reduction of over 3.4 percentage points [2][3] Group 2 - Government spending has also declined, with federal expenditures decreasing by 5.6% in Q1 and 5.3% in Q2, which raises concerns about overall economic growth [3][8] - The trade policies of the Trump administration, which imposed high tariffs on imports, have created uncertainty for businesses, affecting their willingness to invest and hire [5][8] - Employment data has shown signs of weakness, with a significant downward revision of previously reported job gains, indicating a slowdown in hiring activity [6][10] Group 3 - The Federal Reserve's recent interest rate cuts aim to stimulate job growth while managing inflation concerns, but the strong GDP figures complicate this strategy [6][10] - The upcoming release of the personal consumption expenditures (PCE) price index will be crucial for the Fed's decision-making regarding future rate cuts [6][10] - The anticipated Q3 GDP growth rate of 1.5% suggests that the previously reported 3.8% growth may not be sustainable, highlighting potential underlying economic issues [11]

Market Performance - The majority of European and American stock markets closed higher on October 3, with the Dow Jones Industrial Average and S&P 500 both reaching new closing highs [1][2] - The Dow Jones Industrial Average rose by 0.51% to 46,758.28 points, while the S&P 500 increased by 0.01% to 6,715.79 points, marking six consecutive days of gains for both indices [2][3] - The Nasdaq index, however, fell by 0.28% to 22,780.51 points, despite a weekly increase of 1.32% [2][3] Federal Reserve Insights - Federal Reserve Governor Stephen Milan advocated for a more aggressive rate cut approach, suggesting that current policies are overly restrictive for growth [5] - The Federal Reserve recently lowered the federal funds rate target range by 25 basis points to between 4.00% and 4.25% [5] - Vice Chairman Philip Jefferson emphasized the need for supportive monetary policy to prevent pressure on the U.S. job market, noting that inflation remains above the 2% target [5] Government Shutdown Impact - The U.S. federal government entered a shutdown on October 1 due to a lack of funding, marking the first shutdown in nearly seven years [7] - The shutdown has halted the release of key economic data, including monthly employment statistics, which could complicate the Federal Reserve's economic assessments [7] Emerging Markets and Capital Flows - Emerging market stocks saw a net inflow of $8.4 billion, marking the seventh consecutive week of inflows, driven by strong market performance [8][9] - Global stock markets experienced a net inflow of $26 billion last week, with technology stocks attracting $9.3 billion, a record high [9] Commodity Market Trends - International precious metal futures generally rose, with COMEX gold futures increasing by 1.14% to $3,912.10 per ounce, and silver futures rising by 3.45% to $47.97 per ounce [11] - Crude oil prices saw slight increases, with WTI crude oil rising by 0.35% to $60.69 per barrel, despite a weekly decline of 7.65% [13]

Economic Overview - Pre-market futures are mostly positive, but show signs of decline shortly before market opening due to the ongoing federal government shutdown, which has resulted in a lack of economic data, including the crucial Employment Situation report from the U.S. Bureau of Labor Statistics (BLS) [1] - The Dow is up by 44 points, the S&P 500 by 1.5 points, and the Nasdaq by 0.25 points, with the small-cap Russell 2000 also showing a gain of 6 points. All indexes are in the green for the trading week, with mid-single digits for the month and double-digit increases year to date, except for the Dow, which is up by 9% [2] Labor Market Insights - The government shutdown is impacting the availability of labor market data at a critical time, as there has been a rapid deceleration in non-farm payrolls over the past year. The absence of today's numbers leaves uncertainty regarding whether the labor market is stabilizing or continuing to decline [3] - The trailing four-month average for new jobs filled is +27K, significantly lower than the previous averages of +123K and +222K, raising questions about the future direction of the labor market [4] - The Unemployment Rate is expected to remain at a relatively benign 4.3%, but this figure does not fully capture the impact of retiring Baby Boomers and young individuals entering the workforce without meaningful employment, which skews the unemployment statistics [5][6] Market Expectations - Private-sector data remains unaffected by the shutdown, with expectations for the S&P final Services PMI and ISM Services for September to align with prior-month figures, indicating growth as both are above the 50-threshold [7] - The upcoming Q3 earnings season will coincide with the release of the Consumer Price Index (CPI) and Producer Price Index (PPI) for September, complicating the Federal Reserve's decision-making regarding interest rate cuts at their next monetary policy meeting [8]

Group 1: Employment Market Overview - The initial jobless claims rose slightly to approximately 224,000, up from 218,000 the previous week, while the number of continuing claims decreased to 1.91 million, indicating some unemployed individuals are gradually returning to work [1] - The market expected a non-farm payroll increase of about 50,000 jobs in September, with the unemployment rate remaining at 4.3% [1] - Job growth has significantly slowed compared to the previous year, with only 240,000 jobs added in September 2024, while the average monthly job growth over the last three months is just 29,000 [1] Group 2: Labor Market Dynamics - The stability of the unemployment rate despite reduced job additions is attributed to demographic changes, including more workers retiring or exiting the labor market, along with decreased immigration and increased deportations [2] - The construction industry faced a significant drop in job vacancies, with a decrease of 115,000 positions in August, reflecting challenges from high interest rates and housing affordability issues [2] - Healthcare remains a key growth sector, driven by an aging population, with approximately 10,000 individuals reaching retirement age daily, equating to 4 million new retirees annually [2] Group 3: Regional and Sectoral Insights - The Chicago Fed's real-time unemployment rate forecast indicates a slight increase to 4.34% in September, while the San Francisco Fed's labor market pressure index shows limited states experiencing significant unemployment rate increases [3] - Despite the overall weak employment data, most businesses plan to increase hiring in the next 12 months, indicating a stable labor market [3] - The labor market is characterized by "low growth and structural differentiation," with the healthcare sector expanding while construction and some service industries face challenges, alongside a growing concern over long-term unemployment [3]

Core Viewpoint - The ongoing government shutdown is influencing mortgage rates, with a decline in the 10-year Treasury yield potentially leading to lower mortgage rates, despite various market factors at play [1][4]. Impact of Government Shutdown on Mortgage Rates - The 10-year Treasury yield, which typically moves in tandem with mortgage rates, has been declining, suggesting that mortgage rates may also decrease [1]. - Mortgage rates have been falling since July but have recently seen slight increases due to aggressive lender actions rather than market movements [2]. - A government shutdown can lead to a drop in mortgage rates by approximately 0.125 to 0.25 percentage points, depending on the situation [4]. Economic Indicators and Market Sentiment - The shutdown may limit access to key economic data, which could shape investor sentiment and further influence mortgage rates [3]. - The ADP report indicating 32,000 job losses in September raises concerns about a weakening job market, especially with the absence of BLS job market numbers due to the shutdown [6]. - The bond market is currently fluctuating between concerns over the job market and inflation, both of which impact mortgage rates in different directions [8]. Predictions and Future Outlook - Predictions suggest that mortgage rates may continue to drift downward after the government shutdown, although various factors could affect this trend [7]. - The housing market is already under pressure from high home prices and elevated mortgage rates, and the uncertainty introduced by the shutdown may further discourage prospective buyers [7][8].

Core Points - The U.S. Federal Reserve cut the federal funds rate for the first time in 2025 due to concerns over labor market weakness, indicating potential economic slowdown [1] - There is a consensus among the Fed and Wall Street that another interest rate cut may occur at the upcoming meeting on October 28-29 [1] Economic Indicators - The Fed's dual mandate includes maintaining price stability with a target inflation rate of around 2% and supporting a healthy jobs market without a specific unemployment target [3] - As of August, the Consumer Price Index (CPI) is increasing at an annualized rate of 2.9%, down from a 40-year high of 8% in 2022, which led to a significant increase in the federal funds rate from 0.1% to 5.3% between 2022 and 2023 [4] - Job creation has been weak, with only 73,000 new jobs added in July, below the expected 110,000, and a downward revision of 258,000 jobs for May and June, indicating a weaker economy [5] - In August, only 22,000 jobs were created, and the unemployment rate reached a four-year high of 4.3% [6] Future Projections - Economists expect 50,000 new jobs in the upcoming September jobs report, which could influence the likelihood of an interest rate cut in October [6] - The Fed's quarterly Summary of Economic Projections indicates expectations for interest rates, economic growth, inflation, and unemployment over the next couple of years [7]

Group 1: Tariff Policies - The recent tariff policies announced by Trump include a 25% tariff on heavy trucks, 50% on kitchen cabinets and bathroom sinks, 30% on imported furniture, and a 100% tariff on patented and branded drugs, with implementation occurring just four days after the announcement [3][5] - The 100% tariff on drugs significantly impacts India, which exports $27.85 billion worth of pharmaceuticals, with 31.35% going to the U.S., and 47% of U.S. generic drugs being imported from India [5] - On September 30, Trump granted Pfizer a three-year exemption from the 100% drug tariff, causing Pfizer's stock price to rise, highlighting a perceived double standard in tariff application [7] Group 2: Impact on Industries - The film industry is facing a proposed 100% tariff, which could complicate international distribution and negatively affect Hollywood, as over half of its revenue comes from overseas markets [9] - New tariffs on softwood lumber and wood products, including a 10% tariff on imported softwood and a 25% tariff on cabinets and bathroom vanities, will primarily affect Canadian suppliers and could lead to increased costs for U.S. consumers [10] - The overall tariff strategy appears to be broad, potentially affecting various industries, with concerns that domestic production may not meet demand, leading to price increases for consumers [12] Group 3: Federal Reserve Response - Following the Federal Reserve's interest rate cut on September 18, there has been internal disagreement, with some members advocating for a more significant cut to support the labor market [14][16] - The New York Fed President, Williams, indicated support for moderate rate cuts to protect employment and manage inflation, while acknowledging the limited impact of tariffs on inflation so far [16][18] - The Fed faces a balancing act between controlling inflation and supporting employment, with market expectations leaning towards another rate cut in October [18][20]