Inflation Concerns - The current inflation rate has been above the target of 2% for over four and a half years, with pressures noted in both headline and core inflation, particularly in services [1][4][5] - There is a belief that the inflationary pressures may not solely stem from tariffs, indicating a need for increased attention to the situation [2][10] Labor Market Dynamics - The labor market appears to be in balance, with an unemployment rate around 4.3%, which has remained stable for the past year [3][4][15] - Businesses are currently absorbing price pressures but may need to pass these costs onto consumers in the near future, particularly as contracts are renegotiated [7][8] Economic Outlook - The forecast suggests inflation will remain above target for the next one to two years, potentially not reaching the 2% goal until late 2027 or early 2028 [5] - There is optimism regarding consumer demand and corporate profits, which may support GDP growth despite elevated market valuations [20] Monetary Policy Stance - The current monetary policy is described as mildly restrictive, with a need to maintain this stance until there are signs of significant economic weakness [29][30] - A government shutdown could negatively impact GDP growth, but historically, such events have had minimal long-term effects [27][28]

Energy Markets - The global oil market is experiencing significant challenges, with Brent crude prices struggling to remain above $70 per barrel due to a persistent supply glut and subdued global demand [2][8] - The U.S. Energy Information Administration (EIA) forecasts Brent crude prices to decline to an average of $59 per barrel in Q4 2025 and around $51 per barrel in early 2026, driven by large oil inventory builds as OPEC+ increases production by approximately 547,000 barrels per day starting September 2025 [2] - China's liquefied natural gas (LNG) imports are expected to decline for the eleventh consecutive month, with a year-to-date drop of 22% in 2025 and a 30% decrease in the first four months compared to 2024, primarily due to weak industrial demand and increased domestic gas production [3] Currency Movements and Central Bank Actions - The USD/JPY exchange rate has seen a significant drop of 0.6% to 148.61, with the Japanese Yen weakening 1.26% over the past month and 3.64% over the last year, driven by divergent economic performances between the US and Japan [4][8] - The Riksbank in Sweden has cut its policy rate by 0.25 percentage points to 1.75% to stimulate the weak economy, marking the eighth rate reduction since spring last year [5] Corporate Strategies - Verisure, a Switzerland-based security services company, is targeting a valuation of up to €13.9 billion (approximately $16.29 billion) in its planned IPO on Nasdaq Stockholm, aiming to raise €3.1 billion (around $3.7 billion) by selling new shares [6][8] - AstraZeneca plans a direct listing of its ordinary shares on the New York Stock Exchange, maintaining its primary listing in London, to attract a broader global investor base while investing $50 billion in the US over the next five years [7][8] Global Developments - Russia and Vietnam are strengthening energy ties, with new projects expected to begin in January 2026 and a memorandum of understanding signed for cooperation on Vietnam's first nuclear power plant [9] - China's Communist Party will hold its fourth plenary session from October 20 to 23 to deliberate on the 15th Five-Year Plan for National Economic and Social Development, which is closely monitored for its implications on China's economic rebalancing and geopolitical strategy [10]

Monetary Policy and Economic Outlook - Bank of Japan (BOJ) board member Asahi Noguchi indicates a heightened need to adjust the policy rate as Japan moves closer to its 2% inflation target, signaling a new phase for monetary policy [2][9] - Inflation expectations are slowly converging on 2%, driven by shifts in corporate price and wage-setting behavior and growing corporate profits facilitating cost pass-through to prices [3][9] - Despite ongoing inflation, there is a slowing rise in import prices, which could lead to slower consumer inflation [4] Labor Market and External Risks - The labor market is near full employment and the output gap is close to zero, but there are concerns over potential downside risks stemming from U.S. tariff policy [3][9] - Noguchi emphasizes the need for a flexible policy approach to address evolving risks, particularly those that could delay real wage growth [3] Corporate Developments - Deutsche Lufthansa (DLAKF) has set ambitious financial targets for 2028–2030, aiming for a significant profitability boost and a global workforce reduction of approximately 4,000 jobs [5][9] - The airline plans to modernize its fleet with over 230 new aircraft as part of its strategy [5]

Summary of Key Points from the Conference Call Industry Overview - **Monetary Policy in China**: The People's Bank of China (PBOC) maintained its monetary policy stance during the Q3 Monetary Policy Committee (MPC) meeting, indicating no significant changes from Q2. The economy is no longer described as "showing positive momentum" due to recent softening data. Expectations for policy rate and reserve requirement ratio (RRR) cuts in Q4 remain, contingent on further economic weakening [1][4][10]. Core Insights - **Government Bond Yields**: Long-term yields on Chinese Government Bonds (CGB) are rising, driven by a bond-to-equity rotation and market expectations of increased taxes on CGB investments. The 30-year and 10-year CGB yields are projected to continue climbing [2][10]. - **Industrial Profit Growth**: Industrial profits in China increased by 8.0% sequentially in August, following a 3.7% rise in July. This growth is particularly notable in raw material sectors like steel, suggesting the effectiveness of government "anti-involution" policies. However, industrial revenue has remained largely unchanged, indicating challenges in combating deflation [4][9][10]. Additional Considerations - **Investor Sentiment**: Investors express a generally positive outlook on China's technology and innovation in the medium term, but they remain concerned about deflation, corporate profitability, and household consumption in the short term. There is mixed sentiment regarding the direction of the Renminbi (RMB) and long-end CGB yields [10][11]. - **Deflationary Pressures**: The National Bureau of Statistics (NBS) highlighted that lower costs contributed to improved profits in August, emphasizing ongoing difficulties in addressing deflation within the Chinese economy [4][10]. Conclusion The conference call provided insights into the current state of the Chinese economy, highlighting the PBOC's cautious approach to monetary policy, rising government bond yields, and the mixed performance of industrial profits. Investors are advised to consider these factors when making investment decisions in the context of China's evolving economic landscape [5][10].

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>> BLOOMBERG "BLOOMBERG REAL YIELD" STARTS NOW. COMING UP, THE LATEST INFLATION STAYS IN LINE WITH EXPECTATIONS. STILL WELL ABOVE THE FEDERAL RESERVE'S 2% TARGET, ONLY FURTHERING DIVISION ON THE NEXT STEPS FOR THE RIGHT PATH.CREDIT ISSUANCE SHATTERS RECORDS FOR SEPTEMBER AS DEMAND FOR YIELD PERSISTS. WE BEGIN WITH THE BIG ISSUE, THE FED'S PATH FORWARD. >> THE ECONOMY WILL BE IN GOOD SHAPE FOR THE REST OF THIS YEAR AND INTO 2026.>> THE YEAR AND YOUR RATE OF CORE INFLATION IS GETTING EVER SO CLOSE TO THAT 3% ...

Group 1: Economic Outlook - The economy is expected to remain in good shape through the rest of this year and into 2026, with core inflation nearing the 3% level [1][2] - The Federal Reserve is likely to cut rates in the next two meetings, with potential cuts in 2025, but there is uncertainty about a string of cuts in 2026 [7][8] - Recent economic data shows personal income and spending rising more than expected, while inflation measured by PCE aligns with economists' expectations [3][4] Group 2: Federal Reserve Policy - There is a lack of consensus among Federal Reserve officials regarding the monetary policy stance, with some advocating for a shift towards a more neutral area [5][6] - Inflation remains above the 2% target, leading to questions about whether the Fed should cut rates in the near term [11][12] - The Fed's current policies are considered quite restrictive, and adjustments may be necessary as more data becomes available [6][12] Group 3: Credit Market Activity - September has seen record credit issuance in both the U.S. and Europe, with high-grade sales approaching $200 billion, a milestone achieved only four times in history [21][22] - Oracle's $18 billion bond sale is highlighted as a significant contributor to this month's volume, reflecting increased spending to meet AI demand [23][24] - Junk bond issuance also set a record at over $48 billion, marking the busiest week for junk bonds in five years [23][31] Group 4: Investment Strategies - Active management is deemed increasingly valuable in the current tight spread environment, allowing for differentiation among issuers [24][30] - Investors are encouraged to focus on credit selection, particularly in the context of potential idiosyncratic risks and broader economic conditions [35][39] - The importance of conducting thorough credit due diligence is emphasized to build a resilient portfolio capable of withstanding market fluctuations [40][41]

The dollar index (DXY00) on Friday fell by -0.41%.  The dollar was under pressure after Friday's report on the August core PCE price index, the Fed's preferred gauge of inflation, came in right on expectations, which may allow the Fed to keep easing monetary policy. The dollar extended its losses on Friday after the University of Michigan's US September consumer sentiment index was unexpectedly revised lower to a four-month low. Losses in the dollar were limited as Friday's better-than-expected reports ...

Louis Fed President Jim Bullard joins us now. And I am so excited to speak with you, Jim, because right now I'm looking at all of this data that suggests a really strong U.S. market, a really strong U.S. economy, people continuing to be able to spend and their incomes rising. What about this picture makes you think that the Fed needs to be cutting rates more aggressively.Yeah, Thanks for having me. So these numbers look to me like they're they're consistent with what markets are expecting. I think markets h ...

Year-over-year core PCE inflation coming in as expected, up by 2.9% in August, but uh obviously it's still pretty sticky. Joining us right now on the implications for the Fed with all of this is Loretta Mester. She is former Cleveland Fed president and a junct professor now at the University of Pennsylvania.And Loretta, what do you think of these numbers. Maybe not hotter than expected, but but sticky nonetheless. Yeah, it was another month of stickiness and that isn't really what the Fed wants to see.I mea ...