Key events to watch in the week ahead: 2 – 8 September 2024

This week’s overview

This week was a mixed week for US equity markets. While the Dow Jones made fresh record highs, the tech-heavy Nasdaq and the S&P 500 fell after chip maker Nvidia’s results failed to impress. Investors have just been so accustomed to Nvidia crushing expectations in the past and we are now looking at Nvidia’s smallest earnings surprise in 18 months. Nevertheless, the company is clearly still enjoying robust demand for its products, with its results offering investors an excuse to rotate away from the outperforming tech sector into other laggard sectors.

Looking into the new week, here are four key events to watch.

2 September 2024 (Wednesday, 9.45am SGT): China’s Caixin manufacturing Purchasing Managers' Index (PMI)

China’s sluggish manufacturing sector remains an economic headwind for the country, with its Caixin manufacturing PMI dipping back into contractionary territory at 49.8 in July. Supply continued to outpace demand, with output expansion at its slowest pace in nine months. While there is an improvement in services activities (52.1 versus 51.2 prior), the subdued PMI read still paint a mixed economic backdrop overall.

Questions remain over whether China can still meet its full-year economic growth target of around 5%, with any deeper contraction in the PMI read likely to raise the pressures on authorities to do more for the economy.

For now, expectations are for the Caixin manufacturing PMI to improve slightly to 50.0 from previous 49.8. China’s official PMI read will be released over this weekend, which may be looked upon for some cues for the Caixin PMI read.

3 September 2024 (Tuesday, 10pm SGT): US Institute for Supply Management (ISM) manufacturing PMI / 5 September 2024 (Thursday, 10pm SGT): US ISM services PMI

Last month (July), the ISM Manufacturing PMI fell to 46.8 from 48.5, below market expectations of 48.8, the sharpest contraction in US factory activity since November 2023. It was the 20th decline in activity during the last 21 periods, underscoring the impact of high interest rates on goods demand.

However, the ISM services measure, which represents the more resilient and important sector of the US economy, rebounded to 51.4 in July from 48.8 prior, helping to quell slowdown fears in early August. This month, the ISM service PMI is expected to ease to 51.2 and the Manufacturing ISM is expected to increase to 47.5.

The rates market is pricing in a 70% chance of a 25 basis point (bp) cut and a 30% chance of a 50bp cut from the Federal Reserve (Fed) in September.

4 September 2024 (Wednesday, 9.30am SGT): Australia’s 2Q gross domestic product (GDP)

Australian GDP rose by 0.1% in the March quarter of 2024 from an upwardly revised 0.3% in the prior quarter for an annual rate of 1.1% YoY. While it was the tenth straight rise in quarterly GDP, it was the softest pace of growth in six quarters and compares with an average of 2.4% over the past decade.

Tepid economic growth is the unpleasant side effect of restrictive monetary policy, as the RBA looks to rebalance demand and supply to cool stubborn inflation. In the August Statement of Monetary Policy, the RBA revised GDP growth lower to 0.9% YoY in June before a rebound back to 1.7% in December. The rates market is pricing in 20 bp of RBA rate cuts by the end of the year and a cumulative 50 bp of rate cuts by April 2025.

6 September 2024 (Friday, 8.30pm SGT): US August non-farm payrolls

In August, a higher-than-expected jump in US unemployment rate to 4.3% from previous 4.1% triggered a market sell-off in global markets, as there were concerns that the Fed may be falling behind the curve on its rate cuts. The unemployment rate of 4.3% has now surpassed the Fed’s June economic projections of a median 4.2% rate in 2025 and 4.1% in 2026, which suggests that economic risks may be larger than what policymakers expect.

With market sentiments having fully recovered from the early-August job scare on views that the jobs data may be distorted somewhat by Hurricane Beryl, validation around the labour market strength will be sought next week.

Expectations are looking for a rebound in job additions to 163,000 jobs in August, up from the previous 114,000 in July. The unemployment rate is expected to tick lower to 4.2% from previous 4.3%. Any surprise surge in unemployment rate in the likes of the July data may likely renew growth fears and put a dampener on the risk rally.

Average hourly earnings are expected to increase 0.3% month-on-month, up from the 0.2% prior.