Ahead of the game: 30 September 2024

US equity markets

US equity markets experienced gains in the first half of this week. However, their progress was hindered by month-end rebalancing flows and a disappointing consumer confidence reading, which stoked fears of a potential economic downturn.

ASX 200 and China

Closer to home, the Australian Securities Exchange (ASX 200) saw a slight decline, with notable movements at the sector level. China's significant easing measures, the most substantial since 2015, helped alleviate some concerns about growth risks and prompted a shift from banks into major mining companies.

The week that was: highlights

• The United States (US) S&P Global Composite Purchasing Managers' Index (PMI) edged lower to 54.40 in September from 54.60 in August
• US consumer confidence for September plummeted to 98.70 from August’s 105.60
• In the Euro Area (EA), the Hamburg Commercial Bank (HCOB) Composite Flash PMI fell for a fourth consecutive month to 48.90 from 51.00 in August
• In the United Kingdom (UK), the S&P Global Composite PMI eased to 52.90 in August from 53.80 prior
• The Reserve Bank of Australia (RBA) kept interest rates on hold at 4.35% for a seventh straight meeting and sounded hawkish
• The Australian Monthly Consumer Price Index (CPI) indicator rose by 2.70% year-on-year (YoY) in August, easing from 3.50% in July
• Staying in Australia (AU), the ex-volatile measure of inflation eased to 3.00% in August from 3.70% in July, and annual trimmed mean inflation eased to 3.40% YoY in August from 3.80% in July
• Crude oil fell 1.79% to $69.73 as concerns around Libyan supply disruptions eased and initial enthusiasm after the announcements of China's easing measures cooled
• Gold hit a fresh record high of $2670.00
• Wall Street’s gauge of fear, the Volatility index (VIX), eased to 15.40 from 16.16.

Key dates for the week ahead

Australia & New Zealand

• AU: Building Permits and Retail Sales (Tuesday, 1 October at 11.30am AEST)
• AU: Balance of Trade (Thursday, 3 October at 11.30am AEST)
• AU: Home Loans (Friday, 4 October at 11.30am AEST)

China & Japan

• CN: NBS Manufacturing PMI (Monday, 30 September at 11.30am AEST)
• CN: Caixin Manufacturing PMI (Monday, 30 September at 11.45am AEST)

United States

• US: Federal Reserve (Fed) Chair Powell Speech (Tuesday, 1 October at 3.00am AEST)
• US: Job Openings and Labor Turnover Survey (JOLTS) Job Openings (Wednesday, 2 Octoberat 12.00am AEST)
• US: Automatic Data Processing (ADP) Employment Change (Wednesday, 2 October at 10.15pm AEST)
• US: Initial Jobless Claims (Thursday, 3 October at 10.30pm AEST)
• US: Non-Farm Payrolls (Friday, 4 October at 10.30pm AEST)

Europe & United Kingdom

• EA: Inflation (Tuesday, 1 October at 7.00pm AEST)

Key events for the week ahead

• AU

Retail sales

Tuesday, 1 October, 11.30am AEST

In July, Australian retail sales stagnated, falling short of market forecasts for a 0.30% rise. This followed growth of 0.50% in both June and May 2024.

Ben Dorber, head of retail statistics at the Australian Bureau of Statistics (ABS), stated: “After rises in the past two months, boosted by mid-year sales activity, the higher level of retail turnover was maintained in July.”

The most significant decline was seen in clothing, footwear, and personal accessory retailing (-0.50%), followed by department stores (-0.40%) and cafes, restaurants, and takeaway food services (-0.20%). Household goods retailing and other retailing remained unchanged at 0.00%. Food retailing was the only sector that recorded an increase in July, up by 0.20%.

This month, preliminary expectations indicate a retail sales increase of 0.40% month-on-month (MoM). This boost is anticipated from government cost-of-living rebates, tax cuts, and spending on Father's Day gifts, which occurred on 1 September.

AU total monthly retail turnover chart

• EA

Inflation

Tuesday, 1 October, 7.00pm AEST

In August, the annual headline inflation rate in the Eurozone eased to 2.20%, the lowest level since July 2021, down from 2.60%. Meanwhile, the core inflation rate decreased slightly to 2.80%, down from 2.90% in July, aligning with estimates.

For September, preliminary expectations are for the headline inflation rate to ease to 2.10%, while the core inflation rate is expected to drop to 2.70%.

Earlier this month, the European Central Bank (ECB) reduced its key deposit rate by 25 basis points (bps) to 3.50%, following an initial rate cut in June. ECB President Lagarde indicated a continuation of the ECB’s data-dependent and “meeting by meeting” approach, pushing back against expectations for a follow-up cut in October.

However, with cooling inflation readings and slowing activity data, the market has fully priced the 17 October ECB meeting for a 25 bp rate cut, with a total of 50 bp of cuts anticipated by year-end.

EA core inflation chart

• US

Non-Farm Payrolls

Friday, 4 October, 10.30pm AEST

In August, the highly anticipated jobs report delivered mixed results. Headline payrolls increased by 142,000, falling short of expectations for 165,000. Additionally, significant downward revisions were made for the previous two months—July’s weak figure was adjusted down to 89,000 from 114,000. On a positive note, the unemployment rate decreased to 4.20% from 4.30%.

This softening in the labour market triggered the Fed’s 50 bp rate cut earlier this month, marking its first cut since March 2020. The Fed Chair referred to the rate cut as a risk management decision, stating that this “recalibration” aims to sustain the economy's and labour market's strength.

This week’s US consumer confidence numbers for September plummeted to 98.70, down from August’s 105.60. The labour market differential also declined from 15.90% to 12.60%, indicating a potential rise in the unemployment rate this month. Consequently, the rates market has priced in 40 bp of easing for the 7 November Federal Open Market Committee (FOMC) meeting and a cumulative 79 bp by year-end.

For September, preliminary expectations suggest that the US economy will add 130,000 jobs, with the unemployment rate rising to 4.30%. If the US economy adds 100,000 jobs or fewer and the unemployment rate exceeds 4.30%, it could reignite concerns that the Fed is falling behind and strengthen expectations for a second consecutive 50 bp rate cut in November.

US unemployment rate chart