Global Markets Kickstart: The Japan Consumption Boost
The Japan Consumption Boost
Chart of the Week: Diverging US and EU PMIs Reflect Contrasting Equity Market Trends
Over the past quarter, US and European equity market performance has diverged further The US market, buoyed by an economy steadily progressing toward a soft landing, has seen confidence in corporate earnings growth drive new highs. Meanwhile, Europe faces stagnating economic conditions and market volatility. With Europe struggling to keep pace with US fiscal and economic momentum, and political disruptions in Germany and France, the gap in US and EU equity trends is expected to persist.
Market Recap:
Geopolitical Turmoil in EU and Asia Leaves Global Equities Unshaken
Falling Yields Lift Bond Returns, Bitcoin Breaks $100K, Yen Rises on Rate Hike Expectations
Better than expected economic data and optimistic remarks from Jerome Powell on the U S economy supported continued gains in U.S. equity indices. Despite political turbulence in France following the collapse of its government, which weighed on French markets, stronger than expected data from China lifted German equities, contributing to solid performance across European stock markets last week.
What’s Trending: French Political Turmoil May Trigger Short Term Volatility in EU Stocks
On December 4, the French National Assembly passed a no confidence motion against Prime Minister Barnier with 331 votes (out of 577 seats), relegating his administration to a caretaker government. President Macron has vowed to remain in office and expedite the appointment of a new prime minister. As per the French Constitution, two parliamentary elections cannot be held within a year, following Macron’s decision in June 2024 to dissolve the Assembly for an early election. With the National Assembly deeply divided, the 2025 budget remains deadlocked. In an extreme scenario, political gridlock may persist until mid-2025, when another parliamentary dissolution and election could break the impasse.
In Focus:
Japan’s Wage Growth and Fiscal Stimulus Expected to Revive Consumption
Stable Growth, Attractive Valuations Drive Foreign Interest in Japanese Domestic Stocks
Following the summer bonus season, year-over-year growth in regular wages eased in August September but remained positive, reflecting structural support from spring wage negotiations. With labor demand exceeding supply, overall wage growth is expected to persist. Historical data indicates a close correlation between wages and private consumption, with clear boosts to spending observed when wage growth surpassed 0% in 2022. As annual wage growth steadily improves, Japan’s domestic consumption is likely to regain momentum.
