U.S. employment confidence has collapsed! ADP reaches a new low and the Conference Board’s confidence falls off a cliff

Asian Market Trends

On Tuesday, as lower-than-expected retail sales data strengthened market expectations for the Federal Reserve to cut interest rates in December, the U.S. dollar index fell back from its highs and fell below the 100 mark. As of now, the U.S. dollar is quoted at 99.66.

Russia-Ukraine situation - ① U.S. officials said that Ukraine has agreed in principle to the peace agreement proposed by the United States, but there are still some terms that need to be discussed. Ukrainian officials said that Ukraine and the United States have reached consensus on the core terms of the peace agreement recently discussed in Geneva. ② Zelensky: Negotiations on the peace plan with the United States will continue. ③Trump: The peace agreement is very close to being reached, and there are only a few differences left. US personnel have been assigned to negotiate with Russia and Ukraine respectively. ④ It is reported that Zelensky hopes to meet with Trump on the 27th to finalize a peace agreement.

Federal Reserve—①Milan: The economy needs a sharp interest rate cut, and the unemployment rate is rising because monetary policy is too tight. ② Bessant revealed that it is very likely that Trump will announce the candidate for the new chairman before Christmas. Sources said Hassett was chosen among five candidates, but there were also reports that there was no frontrunner.

U.S. retail sales in September recorded a monthly rate of 0.2%, lower than expected; PPI in September recorded a monthly rate of 0.3%, in line with expectations.

ADP Weekly Employment Report: In the four weeks ending November 8, 2025, private sector employers lost an average of 13,500 jobs per week.

U.S. Bureau of Economic Analysis: Gross domestic product for the third quarter of 2025 will be released on December 23.

Summary of institutional views

UBS: Two 25 basis point interest rate cuts will be carried out before the end of the first quarter of 2026

The next few moves of the Federal Reserve remain the core issue of the market. A dovish www.xmxmxm.cnment from New York Fed President Williams last week raised market expectations for a rate cut in December, but those hopes have cooled as other officials expressed caution. As the Fed's December meeting approaches, divisions within the www.xmxmxm.cnmittee appear to remain, leaving markets highly dependent on every data point.

This week, the Fed's schedule is quieter, with officials in a period of silence ahead of the results of the December meeting. The "Beige Book" of economic conditions will still be released as planned, which may provide new insights into regional economic conditions. Investors will also dissect economic data including retail sales, durable goods and employment reports for clues on the path of policy. Minutes from the Fed's last meeting revealed divisions within the www.xmxmxm.cnmittee between advocating patience and being open to further easing.

Our base case remains for two more 25 basis point rate cuts before the end of the first quarter of 2026. However, with limited official www.xmxmxm.cnmunication this week, we wouldn't be surprised to see more volatility in interest rates and currency markets. We continue to focus on high-quality fixed income assets.

Westpac: The employment structure is differentiated under the impact of AI, and the Australian market has yet to see evidence of an “AI unemployment wave”

Recently, discussions about “AI replacing labor” have been rampant. We believe that although AI has automated some tasks previously performed manually, concerns about mass unemployment are overblown. Historical experience shows that new technologies will indeed reduce the employment share of affected industries, but from an overall economic perspective, output and employment often rise instead of falling. In addition, AI will not diminish the value of human labor. On the contrary, as jobs that "robots" can do will become more www.xmxmxm.cnmon (supply increases), their relative prices will fall; while for jobs that only humans can do, their relative prices will rise. The impact of AI will vary by occupation type and experience level. Clerical and administrative jobs are more susceptible to replacement by AI automation, while nursing occupations and technical jobs are less affected. It is worth noting that entry-level positions are more vulnerable than senior positions because the former contain more routine "basic repetitive tasks" that are easily automated. At the same time, such jobs are often more vulnerable during economic downturns. This explains why the U.S. market is currently worried about the prospects for entry-level and recent graduate employment. Researchers from Stanford University, the Federal Reserve Bank of St. Louis and other institutions suspect that the application of AI has begun to disrupt the job market. (It could be a www.xmxmxm.cnbination of both, or a pullback from over-hiring during the pandemic.)

However, we have yet to see clear evidence of this effect in Australia. As Westpac economist Ryan Wells pointed out last week,While youth unemployment has fluctuated and is generally recovering, there are currently no signs of a general deterioration in hiring for entry-level jobs. The JSA noted that job vacancy filling rates have been improving (including in the latest June quarter report). If the entry-level job market had collapsed, we would see a significant increase in the average number of applicants per open position in key industries, while the number of qualified applicants remained stable or declined. But JSA data shows the opposite, with the average number of qualified applicants rising while the total number of applicants remained stable or slightly lower than a year or two ago.

Analyst Matthew Ryan: The British budget may push the Bank of England to www.xmxmxm.cnpletely turn dovish. The best situation is...

For financial markets, the most ideal situation is for the British government to announce better-than-expected economic growth and productivity forecasts, while the fiscal gap is smaller than previously feared. In this scenario, the tax increase will be more limited and targeted, and the Labor Party can maintain its credibility by avoiding raising the rates of the "three major taxes".

But we must remain aware of unexpected situations. Investors will be highly wary of any unplanned tax increases, as well as the risk of upward revisions to borrowing forecasts and actual spending further outpacing inflation. If Chancellor of the Exchequer Reeves fails to www.xmxmxm.cne up with a credible strategy for additional funding, these conditions will be unacceptable to the market and may trigger a sell-off in sterling.

We believe that the impact of the Budget on the pound will be amplified through the adjustment of the Bank of England's monetary policy expectations. A budget statement that focuses on raising taxes and restraining growth is likely to be interpreted by Monetary Policy www.xmxmxm.cnmittee officials as a signal that the easing cycle needs to continue, or prompt them to take a more aggressive pace of interest rate cuts in 2026 to hedge against the growth risks posed by fiscal policy.

Given that the Bank of England’s November interest rate resolution vote showed a subtle 5-4 pattern, the balance of the December meeting can easily shift to a rate cut - the futures market has not yet fully priced in this expectation (the probability is 80%). If the Budget adopts a pro-growth orientation, it will have the opposite effect: weakening market expectations for an interest rate cut by the Monetary Policy www.xmxmxm.cnmittee will strengthen the pound's upward momentum.

Reuters analyst Jamie McGeever: Financial stability risks may force the Federal Reserve to cut interest rates, and the real economy is more deeply tied to the wealth effect of Wall Street than before

If market concerns about "over-optimism in AI" continue to simmer and turn the recent market turmoil into a more destructive earthquake, then the financial stability risks caused by the collapse of asset prices may force the Federal Reserve to cut interest rates.

Just a few days ago, due to concerns about financial stability, the mainstream voice in the market was still asking the Federal Reserve to "pause" its easing cycle rather than continue to cut interest rates. Cleveland Fed President Hammack warned on Thursday that further interest rate cuts "could www.xmxmxm.cne at the cost of exacerbating financial stability risks," and Dallas Fed President Logan expressed a similar view the next day. This concern is justified given the high valuations of U.S. stocks and extremely tight credit spreads.

However, if the recent wave of stock market sell-offsIf the surge in interest rates persists, causing financial conditions to tighten sharply (in the opposite direction), the Fed's decision-making logic may be reversed. Admittedly, this is not the baseline scenario at this time. Traditionally, the Fed will not easily step in to calm the market unless liquidity dries up and market functions are impaired. Although market sentiment and performance It has worsened, but we are still far from true "crisis mode", especially considering that the market rebounded on Friday. But this time, the situation may not need to worsen to that extent, because, according to the calculations of many economists and even the admission of some policymakers. , the health of the "real" economy is now more deeply tied to Wall Street's wealth effect than ever before. The recent market fluctuations (which may not be over yet) may be the last piece of the puzzle to "finalize" the decision to cut interest rates.

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