Good morning,


We have resisted the strong temptation for a Halloween related headline this week, although the eurozone inflation print yesterday (Monday) gave us plenty of material. Eurozone inflation for October has come in at 10.7%, above both the last reading and consensus expectations. Several times this year (most notably at Jackson Hole) markets have been caught offside by the narrative that ‘inflation has peaked’ or ‘rolled over’, only for the subsequent readings to be stubbornly high. Fresh from her appearance on the Late Late Show on Friday night, there’s plenty for President Lagarde to ponder.


In relation to the rate announcements this week, try not to get caught up in the headline increases – these have been well forecast and priced in. For example, markets (currency, yields, and equities) didn’t budge too much last week with the ECB move itself but were more influenced by the dovish post meeting comments. Therefore, investors are likely to focus more on the rhetoric from Powell and Bailey this week. Markets will be hanging on for anything even remotely dovish from the Fed, particularly in relation to wage growth in advance of Friday’s non-farm payrolls print.


Finally, much has been made of currency moves this year. Interestingly, data from FactSet illustrates that 58% of the S&P 500 tech sector earnings are from outside the eurozone. So, whilst dollar strength helps us when translating share prices back into euro, it’s worth remembering the impact on profits initially when revenues flow in the opposite direction.


As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.