Evelyn Reynolds

Inflation in the euro area rose from 1.7% to 2% in October, flash figures showed Thursday, coming in slightly higher than the 1.9% forecast.
Core inflation and services inflation were both unchanged on the previous month.
Markets currently expect the European Central Bank to cut interest rates by another 25 basis points in December, with one analyst saying the latest data would end debate over whether a larger 50-basis-point cut is warranted.

Line-up of pumpkins in the Netherlands, on Oct. 27, 2024.
Nurphoto | Nurphoto | Getty Images

Inflation in the 20-nation euro zone rose to 2% in October, preliminary figures released by statistics agency Eurostat showed Thursday.
Economists polled by Reuters had forecast a headline figure of 1.9%. The September headline reading was revised down to 1.7% from 1.8% on Oct. 17, below market expectations.

The biggest upward pull in the headline rate came from food, alcohol and tobacco, where price rises accelerated to 2.9% from 2.4%.
Core inflation, which excludes those volatile components along with energy prices, was unchanged at 2.7%, slightly higher than the 2.6% expected. Services inflation — an important gauge of domestic price pressures — also held steady at 3.9%.

The euro was up 0.15% against the U.S. dollar following the release, trading at a two-week high of $1.087.
The fresh Thursday inflation print was seen as crucial in judging whether the European Central Bank could consider implementing a jumbo half-percentage-point cut in interest rates at its next meeting in December.
The central bank has so far trimmed rates three times this year, in quarter-point increments that altogether took the central bank’s key rate from 4% to 3.25%.

Markets are currently pricing another 25-basis-point reduction in December.

Euro zone growth

Traders are also considering the latest growth figures for the euro area, which showed better-than-expected 0.4% expansion in the third quarter, even as analysts predicted further weakness ahead.
The ECB said during its October meeting that the process of disinflation was “well on track” and that sluggishness in the euro zone’s economic activity had added to its confidence that inflation will not resurge dramatically.
“Hotter eurozone inflation, stronger growth and record low unemployment wipe out bets for a 50 [basis point] cut,” Kyle Chapman, foreign exchange market analyst at Ballinger Group, said in a note.
Chapman said that, while an uptick in consumer price growth was expected toward the end of the year, services inflation remained sticky.
“A big concern underpinning the risks of inflation undershooting the target was a potential tipping point with the labor market, the surprising resilience of which could be at risk of a sharp unwind in labor hoarding if consumption worsens. That concern is no longer so significant,” Chapman stressed, pointing to this week’s growth and employment figures.
“Back-to-back 25 [basis point] moves are the way to go. The need for below-neutral rates to rescue a contracting eurozone economy is fading from the discussion, and that negates the need to hurry the easing cycle, particularly with services inflation struggling to come unstuck.” More

“I think globally, the serious, serious issue that we need to watch is sovereign debt,” Mohammed Al-Jadaan told CNBC in Riyadh.
Global public debt hit a record $97 trillion in 2023, prompting the United Nations to call for urgent reforms for governments and financial systems around the world.

RIYADH — National debt is a major threat to markets in the near future, Saudi Arabia’s finance minister said, expressing particular concern over lower income countries as well as what he described as rapidly growing global fragmentation.
“I think globally, the serious, serious issue that we need to watch is sovereign debt issues, particularly in low-income countries and emerging economies that do not have the fiscal buffers to lean into in case of disruptions in the market,” Mohammed Al-Jadaan told CNBC’s Dan Murphy Wednesday from the Future Investment Initiative in Riyadh.

“And hopefully between the IMF and the G20 we will find a solution, and we will be ready to support the world economy in case of shocks in that area, but it is an area that we need to watch, as global leaders, to make sure that it doesn’t surprise us.”
Al-Jadaan earlier in the conversation noted the importance of reaching a soft landing for economies as central banks attempt to manage inflation.
“We came from Washington two days ago, after a week full of meetings at IMF and the World Bank and the G20, and I think a there is a clear recognition that the world is actually proving to be resilient,” he said. “And a lot of discussion around steering the soft landing, which is very important. The key challenge is actually sovereign debt, and a lot of discussion throughout last week is to make sure that the three institutions work together to try and find a solution to the sovereign debt, particularly in low-income countries.”
Global public debt hit a record $97 trillion in 2023, prompting the United Nations to call for urgent reforms for governments and financial systems around the world.

Saudi Finance Minister Mohammed al-Jadaan attends a panel panel at the annual Future Investment Initiative (FII) conference in Riyadh on October 25, 2023. (Photo by Fayez Nureldine / AFP) (Photo by FAYEZ NURELDINE/AFP via Getty Images)
Fayez Nureldine | Afp | Getty Images

Particularly in Africa, the UN wrote in a June report this year, “faltering economies in the wake of multiple global crises have resulted in a heavier debt burden.” The number of African countries with debt-to-GDP rations surpassing 60% has more than quadrupled from 6 to 27 between 2013 and 2023, the report said.

Paying back debt has also become more expensive, hitting emerging market and developing countries more intensely.
“I think the painful fact is that low-income countries, a lot of them, are now having today their debt service that is actually more [costly] than their health care, education and climate action combined,” Al-Jadaan said Wednesday.
“That is not good for the world, and we need to make sure that we find a solution to that. Hopefully we will, and we are working collectively global to reach that solution.” More

A postelection America worries U.S. billionaire Ray Dalio.
Speaking at the Future Investment Initiative conference in Saudi Arabia on Wednesday, Dalio spoke about major geopolitical and election-related concerns.
Dalio said he continues to be concerned about the increase in U.S. Treasury supply.

Ray Dalio speaking with CNBC at the Future Investment Initiative in Riyadh, Saudi Arabia, on Oct. 30, 2024.

A postelection America worries U.S. billionaire Ray Dalio, who called for reforms numerous times amid a political landscape rife with what he views as irreconcilable differences between both Democratic and Republican parties.
Speaking at the Future Investment Initiative conference in Saudi Arabia on Wednesday, the founder of the investment firm Bridgewater Associates spoke about major geopolitical and election-related concerns, the issue of rising U.S. deficit and how investors can best position their portfolios.

“Both of the candidates worry me,” Dalio told CNBC. “This left, right and fighting each other is a problem as it becomes more of the extremes. I think there needs to be a bringing of Americans together, that middle of that, and making great reforms. … There needs to be a strong leader of the middle, I believe, that makes great reforms. … Neither of the candidates does that for me.”
Dalio noted that Republican presidential candidate Donald Trump is “a lot more capitalist” than Democratic candidate Kamala Harris, and therefore better for domestic capital markets. However, he warned that there will be big deficits in an economy run by either party. Both candidates have major differences, including in tax policies, he added, noting that Trump’s plan to collect greater tariff revenue could lead to a spike in prices depending on how much that revenue is converted into internal productivity.
Consequences of the election are “really more a left-right question, and it’s a shame because we need to bring the country together in a smart way and make great reforms. We need to do that,” Dalio said. “The debt is concerning, the internal conflict is concerning, the external conflict is concerning and certainly the climate and the cost of the climate is concerning.”

Dalio said he continues to be concerned about the increase in U.S. Treasury supply. About a third of U.S. Treasurys are held by foreigners, leading to a supply-demand issue that has more upside than downside risk for investors, he said.
“We have a real debt problem. … I think one man’s debts is another man’s assets,” Dalio said. “Treasury market is basis of all capital formation. At some point, when you combine it with the internal conflict issue, if you have a downturn — when the downturn comes — I’m worried about internal political and social conflict.”
When positioning one’s portfolio, the famed investor said gold should be part of a diversified and balanced strategy that reduces overall risk.

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