CZECHIA: Election Winner ANO On Track To Lead Next Administration
Oct-05 18:40
Andrej Babiš's ANO is on track to form a coalition or minority government after Czech voters handed it a clear victory in parliamentary elections held over the weekend. The party garnered 34.5% of the vote and immediately proceeded to coalition talks with right-wing Motorists for Themselves (AUTO) and Freedom and Direct Democracy (SPD).
- The governing Spolu alliance (ODS, KDU-ČSL and TOP09) took 23.4% of the vote, finishing in a distant second place, as expected. Its result was marginally better than suggested by opinion polls, but insufficient to hold onto power and should prompt the alliance's leaders to rethink future cooperation. The Civic Democratic Party (ODS) brought forward its leadership election to January amid reports that outgoing Prime Minister Petr Fiala was considering stepping down.
- Among those who lost their seats was Finance Minister Zbyněk Stanjura, widely associated with the outgoing administration's unpopular austerity measures. Stanjura led Spolu's electoral list in the Moravian-Silesian region and is one of just two ministers of the Fiala Cabinet who failed to make it into the Chamber of Deputies. His disappointing result testifies to the role of the government's fiscal policy in determining election results.
- Tomio Okamura's far-right SPD performed significantly worse than expected, falling behind STAN (11.2%) and the Pirate Party (9.0%) and taking 7.8% of the vote. Some of the far-right vote may have gone to AUTO, which came fifth with 6.8% of the vote, despite earlier doubts whether the party would make it past the 5% electoral threshold.
- The results dealt a severe blow to left-wing parties, with an alliance running under the aegis and leadership of post-communist Stačilo! failing in their bid to return to the Chamber of Deputies. This will deprive left-wing parties of media presence and influence on the legislative process for another parliamentary term.
- Prime ministerial front-runner Andrej Babiš held talks with President Petr Pavel, as well as the leaders of the SPD and AUTO, as the two parties are favourites to prop up the new government. Babiš floeated the idea of giving the parliament speaker position to the SPD, while the party could support his minority government in exchange.
- ANO's Karel Havlíček said that it was likely that Czechia would operate on a provisional budget at the beginning of 2026 as the fiscal plan submitted by the outgoing administration would need to be revised.
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US STOCKS: Remain Off Early Highs, Banks & Energy Shares Underperforming
Sep-05 18:33
- Major indexes retreated early Friday after climbing to new record highs following the lower than expected August employment data. While the soft data initially spurred buying on hopes of increased rate cuts by year end, focus quickly shifted back to the data being market negative.
- While effective funds did project a -25bp cut at the September 17 FOMC (and nearly -75bp by year end), officials are less convinced. Chicago Fed President Goolsbee stated on Bbg TV he is "undecided" on a rate cut at the September FOMC, saying he wants "to get more information" while playing down the signal from the recent nonfarm payrolls due to a potentially softer labor force growth dynamics.
- Currently, the DJIA trades down down 247.99 points (-0.54%) at 45372.09 (*45770.20 high), S&P E-Minis down 33 points (-0.51%) at 6478.0 (*6541.75 high), Nasdaq down 47.5 points (-0.2%) at 21660.14 (*21878.81 high).
- A combination of Financials, Energy and Industrials sector shares continued to lead decliners in the second half. Banks and services weighed on the former: Interactive Brokers Group -6.07%, Charles Schwab -5.82%, Ameriprise Financial -4.51% and Raymond James Financial -4.20%.
- Weaker Energy and Industrial sectors partially tied to a late week decline in crude (WTI -1.70 at 61.78) weighed down by: Diamondback Energy -3.57%, ConocoPhillips -3.49%, Fastenal -5.29%, GE Vernova -2.86% and CH Robinson Worldwide -2.80%.
- One negative standout that carried through to the second half: Lululemon fell appr 18.25% on downgrades and guidance cuts. Information Technology sector shares traded mixed: Broadcom +10.42%, Enphase Energy +7.17%, Micron Technology +3.60% and Oracle +3.40%. On the flipside: Advanced Micro Devices -6.45%, NVIDIA Corp -3.18% and Microsoft Corp -2.93%.
- On the positive side, Real Estate and Materials sectors outperformed in the first half, the former buoyed by: Weyerhaeuser +2.19%, SBA Communications +1.94%, American Tower Corp +1.90% and Public Storage +1.82%. Leading gainers in the Materials sector included: Albemarle Corp +2.56%, Sherwin-Williams +2.52%, Newmont Corp +2.27% and Steel Dynamics +1.94%.
USDJPY TECHS: Fades Off Resistance
Sep-05 18:30
- RES 4: 151.62 61.8% retracement of the Jan 10 - Apr 22 bear leg
- RES 3: 150.92 High Aug 1 and a key resistance
- RES 2: 149.81 76.4% retracement of the Aug 1 - 14 bear leg
- RES 1: 149.14 High Sep 3
- PRICE: 146.92 @ 16:11 BST Sep 5
- SUP 1: 146.91/146.21 Intraday low / Low Aug 14 and bear trigger
- SUP 2: 145.86 Low Jul 24
- SUP 3: 145.40 50% retracement of the Apr - Aug upleg
- SUP 4: 145.36 Trendline drawn from the Apr 22 low
USDJPY resistance to watch is 148.78, the Aug 22 high. This week’s gains have resulted in a print above it. A clear break of this level would highlight a range breakout and a stronger bullish theme, and open 149.81, a Fibonacci retracement. However, the pair has pulled back from this week’s high and remains inside its range. Key support to watch is 146.21, the Aug 14 low and the bear trigger.
US LABOR MARKET: MNI US Employment Insight: Summer Softening To Spur Fed Action
Sep-05 18:23
We've just published our latest Employment Insight - download full report here.
Quick Take: Most Indicators Point To Uncomfortable Increase In Labor Market Slack
- The August nonfarm payrolls report surprised on the dovish side for both payrolls employment and the unemployment rate. It confirms there are indeed rising downside risks to employment but also that the “curious” kind of balance in the labor market, per Powell’s words, remains in play.
- Nonfarm payrolls growth surprised lower in August (22k vs Bloomberg cons 75k) along with a two-month downward revision of -21k that offered no offset to last month’s historically large downward revisions.
- What’s more, the 22k increase would have looked a lot worse without a switch to a more favorable seasonal factor – the NSA change in August was the lowest for an August since 2015.
- Three-month seasonally adjusted averages stand at 29k for both nonfarm and private payrolls or a particularly weak -30k for private payrolls excluding the cyclically insensitive health & social assistance.
- These payrolls figures need to be viewed against recent breakeven estimates roughly in a range of 50-100k but with some seeing scope for lower numbers.
- The unemployment rate offers a better guide of labor market balance amidst a sharp decline in labor supply under the Trump administration, something multiple FOMC members mentioned in recent weeks.
- Here, the unemployment rate was on the dovish side at a new recent high of 4.324% after 4.25% in July. Consensus had been for 4.3% but with a skew to a 4.2% print.
- Remember though, the median FOMC member in the June SEP pencilled in an u/e rate of 4.5% in 4Q25.
- From an employment growth perspective, the latest vintage of data suggests that June was the low point (when nonfarm payrolls fell -13k for the first decline since Dec 2020. That chimes with continuing claims data, which increased in late May/early June before stabilizing, as well as ADP private employment.
- As for wages, AHE was on the soft side of expectations in August considering downward revisions to average hours worked. It’s seen year-ago growth moderate further to 3.7% Y/Y, albeit stronger at 3.9% Y/Y on a non-supervisory employee basis, and with productivity gains still keeping unit labor costs in check.
- A 25bp cut from the Fed on Sept 17 is more than priced (28bp at typing vs 30bp at one point post-data) whilst markets have shifted to almost pricing three consecutive cuts to year end with a cumulative 72bp.
- Still ahead on the labor front before that FOMC decision, preliminary benchmark revisions next week on Sep 9 with large downward revisions expected (-550k seems to be a minimum view for now).
