Key events to watch in the week ahead: 9 – 15 September 2024

This week’s overview

September is off to a rough start, in what has been seasonally one of the worst month for stocks during the year. With the recent run in economic data suggesting that “bad news is bad news”, market participants are back to debate on the soft landing narrative, leaving risk sentiments highly sensitive to any downside economic surprises, particularly in the upcoming US labour data.

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

9 September 2024 (Monday, 9.30am SGT): China’s inflation rate

Back in July, China’s consumer price index (CPI) rose by a more-than-expected 0.5% in July from a year ago, boosted by a surge in pork prices. However, core CPI, which strips out food and energy prices, rose below-expectations at 0.4% year-on-year.

This suggests that pricing pressures are not broad-based and continue to point to a weak domestic demand backdrop for the world’s second largest economy. Signs of the ongoing real estate slump were also reflected in the steeper-than-expected drop in rental prices.

Ahead, expectations are for China’s August consumer prices to register a 0.7% increase year-on-year, up from the 0.5% prior. However, producer prices are expected to mark a deeper contraction at -1.4% year-on-year, from the 0.8% contraction prior. Apart from the headline number, markets will be watching for any broad-based price gains to validate any economy recovery.

10 September 2024 (Wednesday, 8.30am SGT): Australia’s Westpac Consumer Sentiment

Last Month (August), the Westpac-Melbourne Institute Consumer Sentiment index jumped by 2.8% to a six-month high of 85.0. This rebound from July's 1.1% dip far exceeded market expectations of a modest 0.5% rise.

The rebound to the highest sentiment reading since February came as the effects of tax cuts and fiscal measures became more visible and worries over the Reserve Bank of Australia (RBA) rate hikes eased. The 'family finances vs a year ago' sub-index soared by 11.7% to hit a two-year high of 70.9, while the outlook for family finances over the next 12 months climbed 5.1% to 96.8.

The preliminary expectation for this month (September) is for a fall back to 83. The interest rate market shows an 85% chance of a 25 basis point (bp) rate cut in December, with a cumulative 57 bp of RBA rate cuts priced by April 2025.

11 September 2024 (Thursday, 8.30pm SGT): US consumer price index (CPI)

In July, the annual headline inflation rate in the US cooled for the fourth straight month, dipping to 2.9%. This marked the lowest level since March 2021, down from 3% in June and below the 3% expected. The annual core inflation rate, which strips out the more volatile food and energy sectors, continued its descent to a more than three-year low of 3.2% in July 2024, matching market expectations and down from 3.3% in the previous month.

This month (August), the preliminary expectation is for annual headline inflation to ease to 2.6% and for core inflation to remain at 3.2% YoY. The rates market is pricing in 35 bp of Federal Reserve (Fed) rate cuts for September, with a cumulative 109 bp of Fed rate cuts priced in by year-end.

12 September 2024 (Thursday, 8.45pm SGT): Eurozone Central Bank (ECB) interest rate decision

Back in June this year, the ECB has cut interest rates by 25 bp, lowering its deposit rate to 3.75% after revealing greater confidence around easing inflation. It then kept rates on hold at the last meeting, guiding for the September meeting to be ‘live’.

Ahead, market rate expectations are fully priced for the ECB to ease rates further by another 25 bp this month. Slowing wage growth last quarter has offered some calm to policymakers' concerns around runaway labour costs, reinforced by a sharp fall in Eurozone inflation to a three-year low of 2.2% in August.

Market participants will remain on the lookout for any hints around policy outlook, with rate expectations still split on whether back-on-back rate cuts through the rest of the year is warranted. Fresh economic projections from the central bank will be key, any downward revision to growth or inflation data would raise the case for faster cuts.