Tariff Case Weakens Trump's Chances, ADP Jobs Show Structural Divergence

Jamie Dimon said $20 billion in potential private-sector financing for Argentina "may not be necessary," according to a Reuters interview with the JPMorgan Chase & Co. chief executive officer.

Dimon, speaking from Detroit on Wednesday, said JPMorgan remained ready to help Argentine President Javier Milei if necessary. "We have done special financing to Argentina in the past; if they need that, we're all ears," Dimon told Reuters.

Wall Street banks were coordinating with US Treasury Secretary Scott Bessent on another pillar of a Trump administration rescue package meant to help its libertarian ally win Argentina's congressional midterm election last month. After Milei emerged victorious by a wide margin, Bessent indicated that markets, and not US taxpayers, could fulfill Argentina's financing needs next year.

Dimon himself met with Milei in Buenos Aires two weeks ago as the chief executive visited the bank's growing operations in Argentina, where it's been operating for more than a century.

The JPMorgan CEO's remarks are the latest sign that Bessent's lifeline to Milei was indeed just a "bridge" to Argentina's election, as the Treasury secretary first described it in September. The package came together after Milei's party lost a key provincial vote seen as a bellwether for the national race, provoking weeks of market volatility.

Other aspects of the US lifeline included a separate $20 billion currency swap line and the Treasury intervened in Argentina's market to buy pesos and prop up the beleaguered currency before the midterm vote. Milei also traveled to Washington to meet with President Donald Trump at the White House last month.

Milei's party won about 41% of votes in the midterm race, comfortably defeating the main Peronist opposition and doubling the libertarian party's presence in Congress. The results surpassed even optimistic expectations and sparked a market rally, including a record one-day gain for the country's sovereign bonds.

The Argentine president is now returning to the US again. He'll speak at a business forum in Miami and attend an event at Trump's resort in Palm Beach on Thursday, then head to New York to speak with investors on Friday.

Source: Bloomberg Europe

The number of Chinese companies in MSCI Inc.'s global stock gauges has climbed for the first time in nearly two years, setting up the market for more inflows from passive investors.

More Chinese stocks were added to MSCI's Global Standard Indexes than deleted in the quarterly shuffle for the first time since February 2024, according to data compiled by Bloomberg. The index provider added 26 Chinese companies and removed 20.

The shift comes after the MSCI China Index has risen more than 30% so far this year, beating its global gauge. Many of the newly selected stocks are in sectors championed by Beijing's industrial policy — strategic materials, robotics, artificial intelligence and high-end manufacturing.

Additions include Ganfeng Lithium Group Co., Hua Hong Semiconductor Ltd., JL Mag Rare-Earth Co., China Gold International Resources Corp., Wolong Electric Group Co. and UBtech Robotics Corp.

The announcement came as Chinese stocks fell in October for the first time in six months, as an earlier liquidity-driven rally gave way to concerns about lingering US-China tensions and a struggling economy. Foreign inflows into Chinese equities moderated to $2.2 billion in October from $4.6 billion a month earlier, according to Morgan Stanley.

The change, which saw 69 total companies brought in and 64 taken out of from the all-country world index, reflects an improving picture for Chinese stocks. Many of the new entrants have doubled or tripled in price year-to-date. Now they're on tap for further price support in the form of inflows from passive investors that track the benchmarks.

Source: Bloomberg Europe

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U.S. Transportation Secretary Sean Duffy confirmed on Wednesday that he would order a 10% reduction in scheduled air traffic at 40 major airports starting Friday unless a deal to end the federal government shutdown is reached.

The shutdown, now in its 36th day, has forced 13,000 air traffic controllers and 50,000 Transportation Security Administration officers to work without pay. This has worsened staff shortages, caused widespread flight delays and extended lines at airport security screening.

"We had a gut check of what is our job," Duffy told reporters, explaining why he made the decision.

Reuters earlier reported the plan.

The move is aimed at taking pressure off air traffic controllers. The U.S. Federal Aviation Administration also warned that it could add more flight restrictions after Friday if further air traffic issues emerge.

Duffy had warned on Tuesday that if the federal government shutdown continued another week, it could lead to "mass chaos" and force him to close some of the national airspace to air traffic, a drastic move that could upend American aviation.

Airlines have repeatedly urged an end to the shutdown, citing aviation safety risks.

Shares of major airlines, including United Airlinesand American Airlineswere down about 1% in extended trading.

An airline industry group estimated that over 3.2 million passengers have been affected by flight delays or cancellations due to rising air traffic controller absences since the shutdown began October 1. Airlines have been raising concerns with lawmakers about the impact on operations.

Airlines said the shutdown has not significantly affected their business but have warned bookings could drop if it drags on. More than 2,100 flights were delayed on Wednesday.

On Tuesday, FAA Administrator Bryan Bedford said that 20% to 40% of controllers at the agency's 30 largest airports were failing to show up for work.

The federal government has mostly closed as Republicans and Democrats are locked in a standoff in Congress over a funding bill. Democrats have insisted they would not approve a plan that does not extend health insurance subsidies while Republicans have rejected that.

Source: TradingView

The Bank of Canada signaled on Wednesday an end to its cutting cycle after trimming its key overnight interest rate to 2.25%, but Governor Tiff Macklem said he would be ready to respond if Canada's economic outlook changed materially.

The 25-basis-point cut, the second in a row, brings the rate down to the lowest since July 2022.

Macklem said the easing was designed to help the economy deal with the disruption from U.S. tariffswhile keeping inflation close to the bank's 2% target.

In January, the bank had forecast the economy would grow by 1.8% in both 2025 and 2026. But, citing U.S. trade policy, it now says growth in 2025 will be just 1.2%, dropping to 1.1% in 2026, before recovering to 1.6% in 2027.

"If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment," the bank said in its rate announcement.

Economists said while rate cuts have paused for now, there could be more easing in the next year.

"Though it's still unclear how the balance of risks between inflation and growth plays out, the policy rate needs to be lower as excess capacity in the economy remains wide," said Andrew DiCapua, principal economist at the Canadian Chamber of Commerce.

Macklem, however, said the bank would need to see evidence of a materially altered economic outlook to respond further.

"We recognize there's a lot of uncertainty out there, and if the outlook changes we're prepared to respond," he said.

Macklem said while the trade war was depressing demand, it had also added costs for many businesses. The bank expected these forces to offset each other, he told reporters.

Canada's economy contracted in the second quarter by 1.6% and early indicators suggest it might barely avoid another contraction in the third quarter.

"The weakness we're seeing in the Canadian economy is more than a cyclical downturn. It is also a structural transition," Macklem said, adding this limited the ability of monetary policy to boost demand while keeping inflation at 2%.

The bank sees annualized growth of 0.5% in the third quarter and 1% in Q4. It returned on Wednesday to the practice of issuing detailed quarterly economic forecasts after suspending them in March due to economic uncertainty.

The BoC aims to keep the rate of annual inflation anchored at 2%, the mid-point of its 1% to 3% target range.

In its forecasts, the bank estimated inflation would average 2% over the year. Consumer prices are expected to average around 2.1% in 2026, the bank said.

The Canadian dollar firmed after the monetary policy decision and was trading up 0.22% to 1.3915 to the U.S. dollar, or 71.86 U.S. cents. Money markets are not pricing in any probability of rate cuts until March next year.

Source: Kitco

A Bank of Japan move to raise interest rates at a time when the government is calling on companies to invest more would likely send a mixed message on policy, according to the leader of Japan's ruling coalition partner.

"We are at a point where we are calling for more investment in the private sector, and such a move could seem like a contradictory measure," Japan Innovation Party co-leader Fumitake Fujita said in an interview with Bloomberg News on Wednesday, referring to an increase in borrowing costs. "Our basic stance is that restraint needs to be exercised regarding the timing."

The comments come as investors, BOJ watchers and businesses try to gauge when the central bank will next raise interest rates and whether the formulation of an economic package by new Prime Minister Sanae Takaichi's cabinet in the coming weeks might delay that move.

Economists and traders have largely boiled the likely timing down to a move coming in either December or January. Fujita's comments point to a cautious view about a rate hike coming so soon after a fiscal package and extra budget are expected by early December. The BOJ next sets policy on Dec. 19.

Market players are also wanting more clarity on how the government will fund plans to increase defense spending and if it will end up lowering the sales tax, another measure that would put more strain on the nation's finances.

The JIP, also known as Ishin, formed a new coalition with the ruling Liberal Democratic Party just over two weeks ago, after the LDP's long-time partnership with Komeito collapsed in mid-October. Ishin is a right-leaning party based in Osaka that provides the coalition with more seats than the centrist Komeito in the lower house, but still leaves it two short of a majority.

The new coalition marks a shift in the government's stance to focus more on economic growth and less on fiscal consolidation. Fujita expressed concern about rate hikes that might hinder efforts to encourage business investment and higher wages, putting the brakes on growth.

"We are at a stage of focusing more on the real economy," he said, adding that nominal wages are getting closer to matching inflation levels and businesses are doing better. "We're not at a stage to conduct monetary policy that ends up having a big impact."

Still, Fujita said there is scope to consider incremental hikes at timings that are "appropriate," but he didn't specify when he thought the next rate hike should take place.

Last week, the BOJ left its benchmark interest rate unchanged, pushing the yen to a fresh eight-month low despite Governor Kazuo Ueda hinting that a hike is getting closer. The BOJ is now tasked with gauging the timing for its next move without being swayed by weakness in the currency or political leaders at home or abroad.

Fujita acknowledged the hesitation in markets over how to interpret Takaichi's comments on fiscal policy, saying that as her government pulls together its first extra budget, "the message from the government needs to be a focus on growth and a call for investment."

Pursuing that messaging without pushing down the yen may be a difficult balancing act. "I guess the only way to go about it is by watching markets closely," he said.

Takaichi's government has already started discussing an extra budget, partly aimed at relieving inflationary pressure on households and raising defense spending to 2% of GDP this year, two years ahead of schedule.

Fujita dismissed the possibility of funding the earlier increase in defense spending with higher taxation but didn't specify how more outlays will be funded.

"We can't know unless we try it, and it also depends on the pacing," he said. He added that in the longer term, he hoped to see a stronger domestic defense industry that would cut back on the need to buy defense equipment from overseas producers.

The Ishin co-leader also said that discussions over cutting the sales tax on food would take place but avoided giving specific details on how those discussions may go.

One of the largest discrepancies in policy between Ishin and the LDP during the upper house election in July was over inflation relief. While the LDP at the time advocated cash handouts to help households, Ishin campaigned for a temporary cut in the sales tax on food.

When the coalition formed, the two parties compromised by agreeing to discuss a potential sales tax cut without specifying a deadline for such discussions. Fujita said that there was general alignment with Takaichi on the direction of countering inflation, but added that there are political concerns at play as well.

He said that the coalition will continue to weigh up a potential cut further down the line, based on how the economy is faring after the extra budget and after gauging the impact of the economic package on households.

Source: Bloomberg Europe

New Zealand's top central banker said on Thursday that the deterioration in the country's labour market was within the bank's expectations, after data this week showed the jobless rate in the third quarter rose to the highest level since 2016.

"It is hard out there, that is something that we had anticipated in terms of where we're in the economic cycle," Reserve Bank of New Zealand Governor Christian Hawkesby said at a parliamentary committee hearing.

Hawkesby was speaking following the release of the RBNZ'sFinancial Stability Report on Wednesday.

Hawkesby reiterated that the central bank's assessment ofthe financial system was that it was "well-placed, not only forwhat's going on at the moment, but some more severe scenarios aswell, if they were to play out."

Hawkesby also said that there was no shortage of things toworry about at the moment, that risks remain elevated relativeto recent years and that top of the list of concerns was globaltrade fragmentation and trade wars.

"We don't think we're out of the worst yet," Hawkesbysaid. * Hawkesby said New Zealand was currently experiencing amulti-speed economy with different regions and different sectorsresponding in different ways.

Source: Investing