Ceasefire in Gaza Approved, U.S. Government Shutdown Remains Unresolved

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Summary:

Israeli Government approves Gaza Ceasefire Agreement; Barr: Further interest rate cuts should be approached with caution......

[Quick Facts]

1. Israeli Government approves Gaza Ceasefire Agreement.

2. U.S. Senate rejects Bipartisan funding bill again, Trump threatens to cut Democratic programs.

3. German exports to the U.S. decline for the fifth consecutive month.

4. ECB Minutes: Interest rate level is solid enough to handle shocks.

5. Trump proposes to expel Spain from NATO.

6. Alternative labor data suggests 'no-hire, no-fire' trend continues.

7. Barr: Further interest rate cuts should be approached with caution.

[News Details]

Israeli Government approves Gaza Ceasefire Agreement

The Israeli government approved a ceasefire agreement in Gaza in the early hours of the 10th. According to details announced by the mediators, the deal between Israel and the Palestinian Islamic Resistance Movement (Hamas) will lead to an end to the war, the release of Israeli hostages and Palestinian prisoners, as well as the entry of humanitarian aid into the Gaza Strip.

U.S. Senate rejects Bipartisan funding bill again, Trump threatens to cut Democratic programs

On the 9th, a Republican-backed U.S. bill aimed at ending the government shutdown failed to secure enough votes in the Senate and was not passed. U.S. President Donald Trump stated on the same day that, given the continued congressional stalemate over reopening the government, he plans to cut certain federal Democrat programs. Trump said these would be permanent cuts, targeting only Democratic projects. He did not specify which programs would be cut, but he has spent days threatening large-scale layoffs if Democrats continue to demand concessions in exchange for passing federal funding bills.

German exports to the U.S. decline for the fifth consecutive month Based on data released by Germany's Federal Statistical Office on the 9th, German exports to the U.S. fell by 2.5% in August compared to the previous month, marking the fifth consecutive monthly decline. Analysts pointed out that German exports are under ongoing pressure due to U.S. tariff increases. Compared to the same period last year, German exports to the U.S. in August dropped by 20.1%, falling to €10.9 billion — the lowest level since November 2021. Dirk Jandura, President of the Federation of German Wholesale, Foreign Trade and Services (BGA), said that Germany's foreign trade situation remains severe and has been stagnant for months. He added that although German exports to China rose in August, this was not enough to fully offset the negative impact of the tariff crisis on German exports to the U.S.

Seasonally and working-day adjusted figures from the Federal Statistical Office also showed that the overall German exports fell by 0.5% in August. Among other major export markets, exports to China increased by 5.4% month-on-month.

ECB Minutes: Interest rate level is solid enough to handle shocks

According to ECB meeting minutes, policymakers are not in a rush to cut interest rates again, despite their acute awareness of exceptionally high uncertainty and risks. The ECB kept rates unchanged in September and even offered a mildly optimistic assessment of the eurozone economy, signaling a high bar for further policy easing — even as U.S. tariffs continue to cloud the outlook.

Minutes suggest that the current level of interest rates should be seen as sufficiently robust in managing shocks, in view of two-sided inflation risks, and taking into account a broad range of possible scenarios. Since the meeting, the likelihood of further rate cuts has decreased further due to relatively moderate data and comments from ECB President Christine Lagarde suggesting the uncertainty range around the inflation outlook is narrowing. The minutes noted that the current situation may see significant changes at some point, but it is difficult to predict when or in which direction. The strategy of waiting for more information remains highly valuable. However, given substantial downside risks, the door to further easing is not entirely closed.

Trump proposes to expel Spain from NATO

U.S. President Donald Trump said on the 9th that Spain should be considered for expulsion from NATO because it has refused to significantly increase its military spending. Previously, under U.S. pressure, NATO pledged to raise the member nations' annual defense spending to GDP ratio from the current 2% to 5%. Speaking at the White House during a meeting with visiting Finnish President Alexander Stubb, Trump said, "Spain. They have no excuse for not doing it," and "Perhaps you should expel Spain from NATO." He also urged European leaders to pressure Spain, saying, "You have to call them and find why are they a laggard."

Alternative labor data suggests 'no-hire, no-fire' trend continues

The government shutdown has left Wall Street without key statistics — data that is especially critical now, as investors rely on U.S. labor market figures to gauge the pace of potential Federal Reserve rate cuts. Russell Price of Ameriprise is studying private-sector data, including ADP employment reports and surveys from the Institute for Supply Management (ISM). He said that while these are not as comprehensive or detailed as the Bureau of Labor Statistics (BLS) employment report, they help better gauge the direction of the labor market. Price also uses alternative estimates for weekly initial jobless claims. He said current indicators suggest employers remain reluctant to both hire and fire workers.

Barr: Further interest rate cuts should be approached with caution

Federal Reserve Governor Barr said in a speech on Thursday that current inflation still faces upward pressure, while the labor market shows signs of softness, creating a "dilemma" for monetary policy.

New tariff measures under the Trump administration could push prices higher, making it more difficult to bring inflation down. Although companies have not yet fully passed on tariff costs to consumers, Barr said that "normalizing margins over time implies a gradual, but longer, upward trajectory for inflation, a pattern of price increases that I fear could convince many consumers that higher inflation is going to be more of a permanent phenomenon."

Recent data show consumer spending remains strong, and President Trump's newly announced tariffs on trucks may add to inflationary pressures. Barr is skeptical of the view that short-term inflation caused by tariffs should be ignored. A softer labor market helps ease upward pressure on prices, but currently, due to the federal government shutdown, official data is lacking, making it difficult to assess the actual extent of the demand slowdown. With slowing output growth and headwinds from tariffs, labor supply, and other factors, the economy may face further pressure in the coming months. Therefore, "the FOMC should be cautious about adjusting policy so that we can gather further data, update our forecasts, and better assess the balance of risks."

[Today's Focus]

UTC+8 15:40 Speech by ECB Governing Council Member Pablo Hernández de Cos

UTC+8 21:45 Speech by Chicago Fed President Austan Goolsbee

UTC+8 22:00 U.S. October University of Michigan Consumer Sentiment Index (Preliminary)

UTC+8 01:00 (the next day) Speech by St. Louis Fed President Alberto Musalem

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