Sept 27 (Askume) – Financial markets are heading into the fourth quarter on expectations that global interest rates will fall from the highs of the past few years, with the only question being whether the economy will recover faster or slower.
Here’s what New York’s Ira Iosebashvili, Singapore’s Rai Wei, Amsterdam’s Yoruk Bahceli and London’s Mark Jones and Amanda Cooper have to say about the market’s hot spots in the coming week.
1/4 of the error
The season three finale aired on Tuesday after months of turmoil.
August saw massive volatility, with the usually soft yen swinging wildly, nearly coinciding with the collapse of the Mag 7 tech bull market, and top central banks once again becoming concerned about their economies.
Stocks have largely pulled themselves out of trouble since then, but the yen is headed for its best quarterly performance since the 2008 global financial crisis, with global benchmark borrowing costs and oil prices both falling around 15% and China unwinding stimulus measures.
So the final phase of the year will be dominated by the November US election between Donald Trump and Kamala Harris . But that should be cool, right?
2/A A delicate balance
The Federal Reserve cut interest rates by 50 basis points on Sept. 18, kicking off a rate-cutting cycle , but employment remains a focus of investors as they gauge how quickly the Fed needs to cut monetary policy in the coming months.
Market participants are keenly watching whether next Friday’s data will support Federal Reserve Chairman Powell’s optimistic outlook on reducing inflation and growth resilience, which is a major factor in the market hitting new highs after the Fed meeting.
Weakness in the labor market could rekindle concerns that a recession may be imminent, while unexpectedly strong job growth could raise concerns that the Federal Reserve will cut interest rates faster than might have been expected to avoid an inflation explosion .
Economists surveyed by Askume expect the US economy to create 145,000 jobs in September, compared with 142,000 in August .
3/Turn this page
Data from Chinese official and private sector surveys on factory activity will be released on Monday, just a week after China unveiled its most aggressive stimulus package since the pandemic began to prop up a struggling economy .
Of course, it is too early to tell the economic impact of these measures, from deep interest rate cuts to support for the stock market.
But given the optimism in global markets following Beijing’s announcement , investors may now be able to look past Monday’s potentially disappointing data.
While the release of Chinese PMI data dominates the Asian economic calendar, Thailand will also have a meeting between the country’s government and central bank.
The two will discuss domestic inflation targeting and recent strength, as the debate over rate cuts has been going on for several months.
4/Sad Britain
In the race to achieve a neutral interest rate, the Bank of England is far behind the Federal Reserve and the European Central Bank.
Markets suggest traders believe the Bank of England will almost certainly cut interest rates at a much slower pace than most other major central banks. Upcoming UK second-quarter GDP data is unlikely to impress policymakers in London, who remain concerned about persistent inflation in the economy. The new Labour government has warned Britain’s dire financial situation – which will be addressed in the October budget – will leave consumers in the most dire state in six months. Next week’s mortgage and consumer credit data could bring some much-needed cheer.
5/Deflate
Euro zone inflation data due to be released on Tuesday will be closely watched as the European Central Bank decides whether to cut interest rates again in October.
Consumer prices in France and Spain rose less than expected in September, rising 1.5% and 1.7%, respectively.
Economists believe overall euro zone inflation has fallen below the European Central Bank’s 2% target for the first time since June 2021 due to a drop in energy prices, although it is expected to rise again in the final months of the year.
Investors now see a more than 50% chance of a 25 basis point rate cut in October, having dismissed it as unlikely last week after euro zone business activity unexpectedly fell in September, raising concerns that the European Central Bank is behind the curve.
Dovish policymakers are now preparing to push for rate cuts . Hawks may resist.
Traders believe inflation is falling much faster than the European Central Bank expects.
