This week, if funding isn’t secured by Tuesday’s close, markets will keep an eye on a potential US government shutdown, the release of the September US jobs report on Friday, and Chinese consumer spending during the Golden Week holiday, starting Wednesday.
Eurozone consumer confidence and US pending home sales and the Dallas Fed manufacturing may be of interest. However, the key to today will be central bank chatter. The ECB’s Lane, the Fed’s Hammack, and BoE’s Ramsden speak on a policy panel at the ECB Cleveland Fed inflation conference. We will also hear from the ECB’s Schnabel on mental policy, while Nagel, Cipollone, Muller and Vijcic attend separate events. Later the Fed’s Williams, Muslim and Bostic speak. China’s official manufacturing and non-manufacturing PMI kicks-starts Tuesday, we also have the nation’s RatingDog manufacturing and services PMIs. UK GDP and US job openings, Conf. Board consumer confidence and MNI Chicago PMI will also be of interest. Tomorrow’s central bank commentary comes from the Fed’s Jefferson, Logan and Goolsbee, the ECB’s Elderson and BoE’s Breeden, and Mann. Eurozone CPI and HCOB manufacturing PMI, UK S&P manufacturing PMI and US ISM manufacturing, S&P Global manufacturing PMI, construction spending mortgage applications and auto sales will be enough to keep markets busy on Wednesday. Eurozone unemployment follows on Thursday and later that day we have US initial jobless claims and factory orders. The Fed’s Logan, ECB’s Guindos and Galhau all speak. Eurozone PPI, and HCOB services PMI, the US employment report and ISM services will garner market focus on Friday. The US jobs data will be watched closely for any impact on future interest rate decisions. The Fed’s Jefferson speaks on the economy and monetary policy, and the ECB’s Lagarde, Schnabel, Sleijpen, BoE’s Bailey and Fed’s Williams all speak at an event.
Fed rhetoric, upside surprises in US data, and additional tariffs were the key drivers of markets last week. The yield on the 10-year rose 5bps to 4.18%, while the S&P Index fell 0.31%. The dollar maintained its ascent supported by the upward revision of Q2 GDP and robust consumer spending. Meanwhile, Brent crude enjoyed a 5.17% rally to close above $70pb.
Aside from the stronger Q2’25 US growth and consumer spending estimates, the Fed’s favoured inflation gauge, the PCE Price index, came in-line with expectations, with the headline at 2.7yoy and core unchanged at 2.9%yoy. Interestingly, the Uni. of Michigan sentiment and expectations softened in September. The former fell to its lowest level since May amid increasing economic concerns. The Uni. of Michigan inflation expectations eased to 4.7% for the 1-year, while the 5-10 year fell to 3.7%.
Fed Chair Powell noted his concerns of the labour market and thus growth concerns. He signalled that there is no predetermined rate path, noting that current policy remains restrictive. His counterpart Bowman, however, called for decisive interest rate cuts to combat a deteriorating job market stating that the Fed is at “serious risk of already being behind the curve.” She argued that with inflation (excluding tariffs) hovering near target, the focus should shift to supporting the job market, and she also advocated for the Fed to aggressively shrink its balance sheet by potentially selling mortgage-backed securities (MBS) and adjusting the Standing Repo Facility (SRF) rate to act strictly as a backstop. Elsewhere, China’s “anti-involution” campaign appears to be helping industrial performance, as August profits for industrial firms surged 20.4%yoy, the fastest growth since December 2023. Although partially due to a low base from the prior year, the policy push has improved the PPI and, consequently, profit margins, particularly in the manufacturing sector, whose share of total profits rose significantly. This rebound was most pronounced in upstream, SOE-heavy industries like steel and non-ferrous metals, underscoring their strong response to policy support. Concurrently, the People’s Bank of China injected a substantial CNY600 billion in medium-term liquidity in September and signalled a policy shift in its Q3 meeting to prioritise support for small and micro enterprises and stabilising foreign trade, reflecting growing concern over external economic uncertainty.
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