A Look at the Day Ahead in U.S. and Global Markets

Overview

Mike Dolan reviews upcoming events in U.S. and global markets, focusing on the effects of monetary policies and upcoming inflation data.

U.S. Stocks Perform Well

U.S. stocks have reached new records as the last full week of the quarter concludes, buoyed by significant monetary easing in China. Wall Street awaits the release of the Fed’s inflation gauge.

China’s Economic Measures

China’s central bank has cut its one-week reverse repo rate by 20 basis points in response to an economic slowdown. Cities like Shanghai and Shenzhen are lifting restrictions on home purchases to stimulate the real estate market. China’s industrial profits contracted sharply in August, declining nearly 18% YOY.

China’s Market Reaction

Despite the economic concerns, China’s stock indexes surged by 4.5% last Friday, marking their best week since 2008, driven by public borrowing and increased hopes of recovery.

U.S. Economic Indicators

The U.S. economy showed strength with a drop in jobless claims and an increase in durable goods orders. Fed’s inflation measures, including August’s PCE gauge, will reveal if the easing path is justified.

Fed’s Outlook

Forecasts suggest a 0.2% rise in core PCE, increasing the annual rate to 2.7%. Fed officials expect to lower rates to neutral levels (~3%) if the economy remains stable. The Fed’s next meeting has a balanced outlook for further rate cuts.

Global Market Dynamics

The dollar index strengthened while eurozone inflation pressures are mounting, with expectations for another 50 bps cut from the ECB. France’s inflation rate fell to 1.5% in September, while Germany faces increased unemployment.

Additional Developments

The Bank of Mexico cut its benchmark interest rate, and Japan’s yen recovered after political changes.

Key Developments Ahead

• U.S. August PCE inflation gauge
• Personal income and consumption data
• Trade balance figures
• Retail and wholesale inventories
• Federal Reserve Board Governor Michelle Bowman’s speech.

By Mike Dolan, editing by XXXX; mike.dolan@thomsonreuters.com