Daily Commentary

MarketMinder’s View: Here is an interesting take: This piece acknowledges Europe’s energy situation looks stable now (with gas storages full going into the winter), but it worries “things could go horribly wrong” if unexpected supply disruptions occur, especially since Europe is more connected to global energy markets now due to its “forced diversification from Russian pipeline gas to liquified natural gas.” The alleged issue there is that instead of locking in supply at fixed rates from a dedicated supplier, European nations will have to compete with Asia for seaborne supply, exposing them to fluctuating (and presumably higher) global prices. The article argues the problem could be particularly acute in a colder-than-anticipated winter, which would lead to higher gas demand compared with recent years. “In a base case scenario, which assumes historically normal temperatures, analysts and traders expect Europe to enter the winter with gas storages about 45 to 55 per cent full. That is less than in the previous two mild winters, when Europe ended winter with storages about 60 per cent full. Should Europe experience a much colder winter, storage levels could drop to about 35 per cent, analysts said.” We agree a cold winter may lead to big gas withdrawals, especially if the wind drops as it has this week, but that isn’t a probable outcome at this point—we aren’t meteorologists and have no crystal ball about future weather conditions. However, for investors, we see two takeaways. One, Europe isn’t likely to run out of gas this winter. It is more a matter of how much the region will have to pay to bolster future storage levels—a price problem, not a supply issue. Two, this long-lingering false fear indicates sentiment isn’t as far along into optimism as it is stateside—worth keeping in mind when weighing how reality squares with expectations.

MarketMinder’s View: China’s October exports rose 12.7% y/y, well above FactSet’s estimate of 5.9% and the 11^th positive reading in the past year. The article points out exports’ strength this year may be tied partially to the prospect of a “trade war” launched under a potential Donald Trump presidency, with exporters trying to front-run new tariffs. Not only would that pull demand forward, but people worry the tariffs themselves will roil commerce. While new tariffs are possible, we urge investors to wait for action rather than engage in fruitless speculation—and remember tariffs from Trump’s first presidency (which extended and broadened under the Biden administration) weren’t the massive negative many feared. Furthermore, they aren’t assured to happen, as Trump used some of his tariff rhetoric as a means to get other parties to the bargaining table on trade deals. Beyond tariff talk, here is some more helpful perspective on China’s latest export figures: “October has historically been a weaker month for exports before a final rush in the last two months of the year. The rise was off a weak base in the same period a year earlier, when shipments abroad dropped almost 7%. Even so, the figures outdid expectations. Exports to the US rose 8.1%, the most in three months. Shipments to most markets climbed, with double-digit increases to Asean, the European Union, South Africa and Brazil. Shipments to Russia jumped almost 27%, the fastest growth this year.” A weak base may have flattered the numbers, but overall, external demand looks solid. For global investors, that factoid matters most, in our view.

MarketMinder’s View: According to the Labor Department, initial jobless claims rose by 3,000 to a seasonally adjusted 221,000 for the week ending November 2, in line with economists’ estimates. As the analysis here points out, this weekly data series reinforces the common view that hurricanes and labor stoppages weighed on employment recently. “Employment growth slowed sharply last month, with nonfarm payrolls increasing by only 12,000 jobs, the fewest since December 2020. That aligned with a jump in claims in early October as Hurricane Helene disrupted economic activity in the U.S. Southeast region. Applications stayed elevated through the middle of last month after Hurricane Milton lashed Florida.” As for strikes at a global aerospace manufacturer, “The number of people receiving benefits after an initial week of aid, a proxy for hiring, rose 39,000 to a seasonally adjusted 1.892 million during the week ending Oct. 26, the claims report showed. The Boeing-related furloughs are mostly keeping the so-called continuing claims elevated.” (Which reminds us, MarketMinder doesn’t make individual security recommendations, and we bring you this for the broad theme only.) With hurricane-related disruptions fading and striking workers agreeing to a new contract, November will likely show a big pickup in jobs growth—a one-off boost after a one-off blah. For investors, keep an eye on the broad reaction to those data, which may reveal some hints about sentiment. For more, see this week’s commentary, “No October Surprise in the Jobs Report.”