Global Market Volatility and US Trends Shape Mizrahi-Tefahot's Economic Outlook
Mizrahi-Tefahot Bank chief strategist Yoni Panning analyzes global markets, noting US volatility, potential travel-driven drops in Israel's CPI, and sticky European inflation.
Global financial markets are experiencing heightened volatility, driven by mixed economic indicators in the United States and notable domestic trends affecting Israel's Consumer Price Index, according to the weekly macroeconomic review by Yoni Panning, chief strategist at Mizrahi-Tefahot Bank. Panning outlines key trends across three primary economic arenas: the US, Israel, and Europe.
In the United States, markets have faced sharp fluctuations amid midterms pricing adjustments. Panning notes that political impacts triggered a steep downward revision in the stock market—a statistically rare occurrence by many measures. However, following late-week stabilization, historical data suggests markets tend to recover after such shocks. The US bond market has already priced in this assumption, registering a mild drop of a few basis points, particularly along the mid-curve.
Simultaneously, the broader US economy remains robust. The latest Non-Farm Payrolls (NFP) report showed substantial job growth alongside relatively firm wage increases. Additionally, the University of Michigan consumer sentiment index indicated a slight recovery in early November, though analysts view it primarily as a reaction to the midterms. Panning emphasizes that a future cooling in economic activity—stemming from potential AI sector pessimism or post-election fiscal tightening—could significantly impact the labor market and inflation trajectory.
Domestically, Mizrahi-Tefahot highlights the aviation and tourism sector as a key deflationary driver for Israel's upcoming Consumer Price Index. Data on Israelis traveling abroad shows remarkably subdued levels in absolute terms. Although seasonal adjustments remain subject to interpretation given the sparse holiday calendar in October, bank analysts project this moderation will translate into a notable decline in the travel component of the upcoming CPI, helping to ease local inflationary pressures.
In Europe, policymakers continue to grapple with persistent economic challenges. European inflation remains elevated, fueled directly by high global oil prices. While goods inflation continues to maintain relative moderation, sticky services inflation remains a central chronic burden, complicating efforts to fully curb price increases across the eurozone.
