Ahead of the game: 2 September 2024
US equities mixed as the Dow reaches new records, but Nvidia's weak guidance drags Nasdaq and S&P 500 lower.
![Stocks](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/news-article-image-folder/Adobe_stocks_26-06-2024.jpg/jcr:content/renditions/original-size.webp)
US equities mixed, ASX 200 boosted by easing inflation
While the Dow Jones reached new record highs, both the tech-heavy Nasdaq and the S&P 500 declined following disappointing forward guidance from chip maker Nvidia, which fell short of lofty expectations.
On the home front, the ASX 200 is poised to secure a third consecutive week of gains. This performance is supported by month-end buying and a decrease in inflation, which is anticipated to keep the Reserve Bank of Australia (RBA) on hold at its next meeting.
The week that was: highlights
- US durable goods orders rose by 9.9% in July, beating forecasts of 3%
- US gross domestic product (GDP) growth for Q2 was revised higher to 3% from 2.8%, with personal spending, the primary engine of economic growth, rising by 2.9%, surpassing the previously estimated 2.3%
- US weekly initial jobless claims fell by 2000 to 231,000, in line with expectations
- In Australia, the monthly consumer price index (CPI) indicator rose by 3.5% year-over-year (YoY) in July, easing from 3.8% in June and above consensus expectations of 3.4%. Annual trimmed mean inflation eased to 3.8% YoY from 4.1% in June, exceeding market expectations of 3.7%
- Crude oil rose by 1.27% to $75.80
- Gold gained 0.27% this week to $2,519, consolidating below its $2531 record high
- Wall Street's gauge of fear, the Volatility Index (VIX), eased to 15.64 from 15.85 the prior week.
Key dates for the week ahead
Australia & New Zealand
- AU: Building Permits and Company Profits (Monday, 2 September at 11:30am AEST)
- AU: Q2 GDP (Wednesday, 4 September at 11:30am AEST)
- AU: Balance of Trade (Thursday, 5 September at 11:30am AEST)
- AU: Home Loans (Friday, 6 September at 11:30am AEST)
China & Japan
- CN: Caixin Manufacturing Purchasing Managers' Index (PMI) (Monday, 2 September at 11:45am AEST)
- CN: Balance of Trade (Saturday, 7 September at 1:00pm AEST)
United States
- US: Institute for Supply Management (ISM) Manufacturing PMI (Wednesday, 4 September at 12:00am AEST)
- US: Job Openings and Labor Turnover Survey (JOLTS) Job Openings (Thursday, 5 September at 12:00am AEST)
- US: ISM Services PMI and Non-Farm Payrolls (Friday, 6 September at 10:30pm AEST)
Europe & United Kingdom
- EA: Retail Sales (Thursday, 5 September at 7:00pm AEST)
![indices](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/news-article-image-folder/Adobe_indices_07-11-2024.jpeg/jcr:content/renditions/original-size.webp)
Key events for the week ahead
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CN
Caixin manufacturing PMI
Monday, 2 September at 11:45am AEST
China’s sluggish manufacturing sector continues to pose economic challenges, with the Caixin manufacturing PMI slipping back into contractionary territory at 49.8 in July. Supply continues to outpace demand, with output expansion slowing to its weakest pace in nine months. While there is an improvement in services activities (52.1 versus 51.2 previously), the subdued PMI index reading still reflects a mixed economic outlook overall.
Questions remain regarding whether China can meet its full-year economic growth target of around 5%, with any deeper contraction in the PMI reading likely to increase pressure on authorities to take further action to support the economy.
Currently, expectations are for the Caixin manufacturing PMI to edge up slightly to 50.0 from the previous 49.8. China’s official PMI reading, due to be released this weekend, may provide further insights into the Caixin PMI outlook.
CN Caixin manufacturing PMI chart
![CN Caixin manufacturing PMI chart](http://a.c-dn.net/c/content/dam/publicsites/igcom/au/images/News-and-articles/CNpmi3008.png/jcr:content/renditions/original-size.webp)
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US
ISM manufacturing and service PMI
Wednesday, 4 September at 12:00am AEST
Last month, the ISM manufacturing PMI fell to 46.8 from 48.5, below market expectations of 48.8. This marks the sharpest contraction in US factory activity since November 2023. It was the 20th decline in activity in the last 21 months, highlighting the impact of high interest rates on goods demand.
In contrast, the ISM services PMI, which represents the more resilient and crucial sector of the US economy, rebounded to 51.4 in July from 48.8. This helped to alleviate slowdown fears in early August. This month, the ISM services PMI is expected to ease to 51.2, while the manufacturing PMI is forecast to increase to 47.5.
The rates market is pricing in a 70% chance of a 25 basis points (bp) cut and a 30% chance of a 50 bp cut from the Federal Reserve (Fed) in September.
US ISM services PMI chart
![US ISM service PMI chart](http://a.c-dn.net/c/content/dam/publicsites/igcom/au/images/News-and-articles/ISM3008.png/jcr:content/renditions/original-size.webp)
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AU
Q2 2024 GDP
Wednesday, 4 September at 11:30am AEST
Australian GDP rose by 0.1% in the March quarter of 2024, up from an upwardly revised 0.3% in the prior quarter, resulting in an annual growth rate of 1.1% YoY. While this marks the tenth consecutive rise in quarterly GDP, it is the softest growth pace in six quarters, compared to an average of 2.4% over the past decade.
Katherine Keenan, Head of National Accounts at the Australian Bureau of Statistics (ABS), noted: "GDP growth was weak in March, marking the lowest through-the-year growth since December 2020. GDP per capita fell for the fifth consecutive quarter, decreasing by 0.4% in March and 1.3% over the year."
Key details include:
- Per capita GDP growth: fell by 0.4% quarter-over-quarter (QoQ), marking the fifth consecutive quarterly decline, deepening the “per capita recession”
- Household saving to income ratio: decreased to 0.9% from 1.6% as nominal household consumption growth outpaced disposable income growth
- Inventories: added 0.7 percentage points to growth
- Government expenditure: contributed 0.2 percentage points to growth, driven by spending on social assistance benefits
- Household spending: increased by 0.4% in the March quarter as households continued to focus their spending on essential categories.
AU quarterly GDP rate chart
![AU quarterly GDP rate chart](http://a.c-dn.net/c/content/dam/publicsites/igcom/au/images/News-and-articles/AUGDP3008.png/jcr:content/renditions/original-size.webp)
Tepid economic growth is an expected side effect of restrictive monetary policy, as the RBA aims to rebalance demand and supply to tackle persistent inflation.
In the August Statement on Monetary Policy (SoMP), the RBA revised its GDP growth forecast lower to 0.9% YoY in June, with an expected rebound 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 cuts by April 2025.
AU RBA growth, unemployment, and inflation forecasts from the August SoMP
![Unemployment and Inflation forecasts chart](http://a.c-dn.net/c/content/dam/publicsites/igcom/au/images/News-and-articles/RBA3008.png/jcr:content/renditions/original-size.webp)
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US
Non-farm payrolls
Friday, 6 September at 10:30pm AEST
In August, a higher-than-expected rise in the US unemployment rate to 4.3% from the previous 4.1% triggered a global market sell-off, raising concerns that the Fed may be lagging in its rate cut schedule. The unemployment rate of 4.3% has now exceeded the Fed’s June economic projections of a median 4.2% rate in 2025 and 4.1% in 2026, suggesting that economic risks could be greater than policymakers anticipate.
With market sentiment having fully recovered from the early-August job scare, partly attributed to distortions from Hurricane Beryl, next week’s data will be closely watched for validation of the labour market's strength.
Expectations are for a rebound in job additions to 163,000 in August, up from the previous 114,000 in July. The unemployment rate is expected to tick lower to 4.2% from the previous 4.3%. Any unexpected surge in the unemployment rate, similar to the July data, may renew growth fears and dampen the ongoing risk rally.
US unemployment rate chart
![US unemployment rate chart](http://a.c-dn.net/c/content/dam/publicsites/igcom/au/images/News-and-articles/Usinem3008.png/jcr:content/renditions/original-size.webp)
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