Shockwaves from Paris attacks will have global effect
This week, financial markets will be assessing and reacting to the impact of the terrorist attacks in Paris on Friday. Indeed, on Sunday evening, the French defence ministry reported that French fighter jets had hit targets in Syria. Both the oil price and gold price rose 1%, reflecting concerns about the geopolitical situation in Europe and the Middle East. There is no doubt that the G20 summit will now be dominated by events in Paris, as some of the world's leaders wrestle with the problems now facing us.
It is a little difficult to turn to 'normal' news in the aftermath of such events. Last week, the UK labour market report was released. On the one hand, it was good to see that the unemployment rate fell to 5.3%. On the other hand, wage growth, in terms of average weekly earnings, slowed to 2.5% in September from 2.8% in August. The market reaction was fairly muted. However, the most interesting part of the release was that the unemployment rate fell to 5.2% in September, the lowest level since May 2008. This is good news for individuals in employment, but also another sign that the labour market is tightening. Some employers, particularly in specialist sectors, are finding that this is an impediment to expansion.
China was in the news again. For some time, China has wanted to join other leading global currencies in the International Monetary Fund's benchmark foreign exchange basket. On Friday, the managing director of the International Monetary Fun, Christine Lagarde, issued a statement in which she supported the view that the Chinese currency, the renminbi, meets the requirements to be a freely usable currency and thus meets the criteria to be included. A final decision will be taken at the end of November. From an economic perspective, this may have little significance, but at a symbolic level the move is hugely important to China.
In the US, the focus this week will be on the Federal Reserve committee minutes from the October meeting. Due to be published tomorrow, they may provide further clues as to the timing and extent of the expected rate rises in the US. This week will also see speeches by several Fed members. At the moment, given the intense attention on the Federal Reserve, all speeches will be followed closely and analysed for any signals on rates.
On Saturday night, I was in a restaurant in Lyon with friends, enjoying great food and company. On Friday night, similar groups of friends in Paris were targeted by brutal terrorists. It is sometimes all too easy from a distance to consider such tragedies at a macro level. However, although appropriate to consider the effect on markets, we can't lose sight that the real impact and cost is borne at a very personal level. For some families and friends, not unlike ours, life will never be the same again.