This week’s financial highlights | The Federal Reserve leads the central bank’s super week. Will the September PMI in Europe and the United States sound a new alarm?

Yun Shang Hui Xin Limited

The international market was in turmoil last week, with the European Central Bank's policy interest rate rising to a record high, and the listing of ARM attracting attention.

In terms of market, U.S. stocks were mixed, with the Dow rising 0.12% for the week, the Nasdaq falling 0.39% for the week, and the S&P 500 falling 0.16% for the week. The three major European stock indexes performed well. The British FTSE 100 index rose 3.12% on the week, the German DAX 30 index rose 0.97% on the week, and the French CAC 40 index rose 1.91% on the week.

This week will usher in the central bank super week. Among the major banks, the Federal Reserve and the Bank of Japan are expected to remain on hold and pay attention to the potential turning signal of the Bank of Japan. The central banks of Switzerland, Norway and Sweden may continue to raise interest rates. In terms of data, Europe and the United States will release the Purchasing Managers Index (PMI) for September, focusing on whether the economic cooling will further spread. The U.S. government shutdown and the U.S. auto workers' strike also deserve special attention. Microsoft's autumn conference has a lot to watch.

Fed expected to stay on hold

If the U.S. Congress cannot reach an agreement in time, a partial shutdown of the U.S. federal government after September 30 will be inevitable. House Speaker Kevin McCarthy proposed the idea of a short-term funding bill to fellow Republicans last week to keep the government running. However, the reality is that there is currently no consensus on such a move, and some House Republicans are seeking to cut spending targets for the next fiscal year.YSHX

The Federal Reserve interest rate meeting will be held. Markets see little chance of a rate hike, with the Fed expected to remain patient and review incoming data before taking the next step. Therefore, the focus is likely to come from the latest economic and interest rate forecasts in the "dot plot". Specifically, how will the Fed adjust economic and labor indicators, and will it continue to send a signal to raise interest rates again this year?

September PMI data deserves attention. The latest New York Fed data shows signs of rebound in the manufacturing industry, and whether the service industry, the backbone of the economy, can stabilize on the line of prosperity and contraction has become the key to the intensity of business activities. At the same time, the United States will update data on new housing starts, building permits and existing home sales in August. Although mortgage interest rates continue to remain high, the overall real estate market is stabilizing. Investors will also continue to pay attention to changes in the initial jobless claims indicator, looking for clues about a loosening of the labor market.

The United Auto Workers union's strike action against the three major U.S. automakers Ford, General Motors and Stellantis has begun. Some analysts worry that this could push up car prices, add more fuel to the inflationary pressures that will begin to re-emerge this summer, and intensify concerns about its impact on the overall U.S. economy. It is necessary to pay due attention to the latest developments of the incident.

Microsoft will hold a special autumn event on Thursday local time. In addition to the hardware updates of the Surface series, the most talked about is the launch of Microsoft's products in the field of AI. There are reports that the AI-powered Windows 11 operating system is expected to be launched in the next few weeks, and the much-anticipated Microsoft 365 Copilot may also be unveiled.

In terms of financial reports, companies worthy of attention this week are FedEx and General Mills. The transportation industry is an important indicator of the U.S. economy, and the consumer outlook during the holiday season will also test the economic resilience.

Crude oil and gold

Due to continued concerns about tight supply, international oil prices rose for the third consecutive week and set a new high for the new year. The front-month contract of WTI crude oil rose 3.73% on the week to US$90.73/barrel, and the front-month contract of Brent crude oil rose 3.62% on the week to US$93.93/barrel.YSHX

Troy Vincent, senior market analyst at DTN, said the oil supply deficit is expected to continue for several months as recent refinery shutdowns limiting product supply and the extension of Saudi Arabia's voluntary production cuts will help push crude prices higher. bringing it above some key technical resistance levels. "However, with the dollar nearing this year's highs, central banks continue to raise interest rates or keep them at historically high levels. As we enter the fourth quarter, demand should start to slow," he said.

Edward Moya, senior market analyst at OANDA, believes that oil prices are not far away from challenging $100. “Of course this is not a one-way transaction, because the short-term risks in the outlook may change consumer perceptions and attitudes. The oil market will be in a period of time. Times remain tight and we may need to see a new catalyst to push prices into triple digits."

International gold prices rebounded after hitting a three-week low in mid-week, as the market continued to evaluate the outlook for the Federal Reserve's policy. The COMEX gold futures contract for September delivery on the New York Mercantile Exchange rose 0.28% on the week to US$1,923.70 per ounce.

After the release of inflation data last week, the market consensus was that the Federal Reserve would remain on hold. Rupert Rowling, market analyst at Kinesis Money, said: "Gold's bottoming recovery is due to the slight weakening of the U.S. dollar. The relationship between the U.S. dollar and gold is inversely related because gold is mainly priced in U.S. dollars."YSHX

Han Tan, chief market analyst at Exinity Group, believes that the hawkish tone of the Fed meeting may be the trigger for gold to re-enter sub-$1,900 territory, "However, if the policy statement or the market takes away from the Fed Chairman Powell's press conference Extrapolating the dovish cues, spot gold could see a larger gap above $1,900.”

The Bank of England may raise interest rates by 25 basis points

The European Central Bank announced last week that it would raise interest rates by 25 basis points to a record high. The resolution stated that the economy has slowed down and inflation continues to decline, but is expected to continue for a long time. The ECB reaffirmed its determination to return inflation to its medium-term target of 2% in a timely manner, and future decisions will ensure that key interest rates remain sufficiently constrained for as long as necessary.

The European Central Bank raised its forecast for the Eurozone inflation rate in 2023 to 5.6%, to 3.2% in 2024, and down to 2.1% in 2025. The increase mainly reflects the rising path of energy prices. At the same time, the Eurozone economic growth forecast has been revised downwards, with economic growth expected to be 0.7% in 2023, 1% in 2024, and 1.5% in 2025. European Central Bank President Christine Lagarde refused to rule out the possibility of further interest rate hikes. She emphasized that "you cannot say that interest rates are at a peak," reiterating that future actions will depend on incoming data. "This quote represents a difficult internal compromise between hawks and doves: 'We're raising rates this time, but the tightening is probably done,'" Evercore ISI economist Krishna Guha said in a note. Already.'"

This week, the Eurozone, Germany and France will release the PMI index for September. After falling below the boom-bust line more than expected in August, whether the economies of various countries can quickly stabilize, especially the pace of recovery of the service industry, will determine the next step of the European Central Bank. Crucial.

The Bank of England will hold an interest rate meeting on Thursday, and the market expects a 70% chance of raising interest rates. Recent data releases have been generally underwhelming, with economic growth slowing and job demand cooling, and leading indicators suggest this may continue. However, inflationary pressures remain high and wage growth remains at record highs, posing a dilemma for the Bank of England.

The agency predicts a split vote on the resolution. Recent comments from Bank of England officials suggest a rate hike is the more likely outcome, but the end of the tightening cycle may be in sight. In terms of data, inflation data for August will be released the day before the central bank meeting. Affected by energy price fluctuations, the overall CPI is expected to rise to 7.1%, while the core CPI drops slightly to 6.8%. The monthly retail sales rate is scheduled to be released on Friday.YSHX