The end of the longest federal government shutdown in history finally seems within reach. This weekend, a split among some Democratic senators allowed the Senate to adopt an agreement aimed at reopening essential public services until January 30. The text must now pass the House of Representatives before being validated by Donald Trump, but this is already very good news.
While few Americans would have accepted a prolonged paralysis of air travel caused by the shutdown—especially with Thanksgiving approaching—on the markets, it is above all the return of official economic statistics that is being welcomed. Until now, they had only been trickling in. So much so that private data, usually relegated to the background, was enough to trigger a reaction from investors last Thursday, particularly the survey by the firm Challenger, Gray & Christmas. Although this survey is traditionally volatile—based on announcements reported in the media rather than on actual job cuts—and poorly correlated with the figures from the Bureau of Labor Statistics (BLS), investors largely focused on its conclusions: the job market is deteriorating. According to the firm, American companies announced some 153,000 job cuts in October, driven by cost-cutting measures but also by the increasing use of artificial intelligence. This is the highest level for an October since 2003, recalls Andy Challenger, the firm's sales director. These figures are hardly surprising given the multiple restructuring plans recently unveiled. The latest examples include Target, which plans to eliminate 1,800 positions—nearly 8% of its headquarters staff—and Amazon, which is considering cutting 14,000 jobs. In any case, while this data is still insufficient to provide a reliable assessment of the health of the job market, it did not prevent investors from anticipating another Fed rate cut as early as December. The yield on the US 2-year Treasury bond fell by 7 basis points on Thursday! Yet, several central bank officials are calling for caution, including Austan Goolsbee (Chicago Fed) and Beth Hammack (Cleveland Fed). Jerome Powell himself emphasizes that the labor market is currently showing only a "very gradual cooling." The ADP data supports this, with a rebound in job creation in October (+42k), after a contraction in September (–32k). This is not the only indicator to have recovered. The ISM services index returned to expansion territory, reaching 52.4 in October, compared to 50.0 the previous month. This improvement reflects both a recovery in production and a marked increase in new orders, despite persistent headwinds, particularly on the tariff front. On this point, the Sino-American climate also seems to be softening. Beijing lowered its tariffs on American products by 24% for one year, in response to the decree signed by President Trump reducing tariffs related to fentanyl from 20% to 10%.
While these signals are welcome, a new uncertainty is emerging: the upcoming Supreme Court decision on the use of the IEEPA (International Emergency Economic Powers Act) as a legal basis for imposing reciprocal tariffs. Scott Bessent expressed confidence after the hearings, while reiterating that a potential invalidation would not eliminate existing tariffs, but would lead to their replacement with other legislative measures. But such a scenario would still open a new phase of uncertainty...
In this turbulent context, equity indices experienced sharp declines over the week, with technology stocks at the forefront, while valuation levels remain high. The Nasdaq fell by 3%, marking its biggest weekly drop since the end of March. The same trend is observed in Europe, where the Euro Stoxx 50 is down 1.7%. Budgetary issues are also a source of concern there: France is struggling to present a compliant budget draft on time, while the United Kingdom is still searching for ways to improve its public finances. In this context, the Bank of England opted for the status quo. However, the very close vote (5-4) and the tone of its communication suggest a possible 25 basis point interest rate cut as early as December.
