The shekel appreciates on US election results
Ceasefires (in Gaza as well as Lebanon) do not appear to be on the immediate horizon. The ground operation on both fronts is winding down, although missiles and drones continue to land in the extended North of Israel, resulting in some damage and casualties. The immediate risk is from Iran, which threatens to retaliate (possibly a drone attack through their Iraqi proxy). Domestic politics: Netanyahu fired Yoav Gallant, his Minister of Defense, who opposed exempting the ultra-orthodox from the army and is in favor of reaching a ceasefire in Gaza. Trump’s victory is generally viewed as positive for Israel. The shekel has appreciated by 0.7% (against the basket) since the US elections, and the bond yield differential against US has narrowed.
Business sentiment worsened in October due to the widening of the missile barrage from Lebanon. October’s Business Sentiment survey reflected weaker growth and increasing pessimism regarding activity and employment for the next month. The current activity index declined to 13.8 from 17.0, and expectations for next month declined to -6.1 from -1.0 (from the net balance of responses). We note that this deterioration is due mostly to the widening of missile barrage from Lebanon to the Haifa area, making up about ¼ of the population.
The labor market has softened, reducing both wage and inflationary pressure. The number of employed (seasonally adjusted) declined by 12k in August-September, following rapid growth YTD through July of +54k in net new jobs. The number of job vacancies declined by 3.2% since June. We are witnessing a decline in both the number of employed and in the number of job vacancies, a development that signifies a softer labor market with less wage/inflationary pressure.
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