Finimize - 🇺🇸 America's stronger than expected

What’s going on here?

Data on Friday showed the US added way more jobs last month than economists predicted.

What does this mean?

There were 254,000 jobs added in September in the US, compared to economists’ predictions of 150,000 – and August’s numbers were revised upwards, too. All that suggests the US economy’s faring far better than expected, and that investors’ concerns about a slowdown in hiring were exaggerated. The unemployment rate dropped to 4.1%, beating forecasts of 4.2%, and workers were getting paid 4% more on average than at the same time last year. And as the saying goes, more money, more... shopping – so perhaps consumers will keep splashing their cash for a while yet.

Why should I care?

For markets: What traders are doing with jobs data.

Bank of America predicted stocks would rally if data showed the US added anywhere from 125,000 to 175,000 jobs. Friday’s numbers, then, were firmly in “blowout” territory. They point to an economic soft landing (where interest rates are falling without the economy tipping into recession) and should encourage investors to take on more risk – even if it also means smaller rate cuts next month (since last month’s jumbo cut seems to be doing the job). And Bank of America was right: investors bought up US stocks, which initially jumped 1% on Friday, and sold off government bonds, whose prices fell and yields rose.

What’s going on here?

On Friday, the European Union (EU) voted to introduce import taxes – a.k.a. “tariffs” – of up to 45% on Chinese-made electric vehicles (EVs).

What does this mean?

The EU thinks China’s racing out in front with an unfair advantage because its EV makers frequently receive government subsidies. So Europe is trying to protect its car manufacturers by leveling the playing field. And, if it plays out, the decision could turn the industry on its head, potentially raising the prices of Chinese EVs. There's also a looming risk that China retaliates, which could further strain trade relations. But Europe did $815 billion worth of trade with China last year, so both sides might prefer to stick rather than twist – and continue to negotiate toward a low or no tariff solution.

Why should I care?

Zooming in: Big dog, small bite.

Chinese EV makers will have to decide whether to absorb the tariffs, which will hit their profits – or raise the prices of their vehicles, which will hit demand and, as a result, sales and profits too. That said, the tariffs probably aren’t as big a deal as the EU might hope: in the first four months of the year, Europe contributed less than 3% of sales for Chinese car manufacturers BYD, Geely, and SAIC, according to investment bank Daiwa Securities.

For you personally: Up, up, and away.

Tariffs typically spark up inflation because companies pass higher costs on to customers. Any increase in inflation could disrupt the European Central Bank’s plans to cut eurozone interest rates. On the one hand, that makes sense since higher rates should help tamp down inflation. But, on the other, the region’s biggest economy (and home to major carmakers Volkswagen, BMW, and Mercedes) is in recessionary territory: Germany is practically crying out for the economic helping hand of a Europe-wide rate cut.