Last week, the international market was volatile. The Federal Reserve's interest rate cut has landed, while the Bank of England and the Bank of Japan remain inactive. The US stock market rose across the board, with the Dow Jones Industrial Average up 1.61%, the Nasdaq up 1.49%, and the S&P 500 index up 1.36%. The three major European stock indexes saw mixed performance, with the FTSE 100 index in the UK falling 0.52%, the German DAX 30 index rising 0.11%, and the French CAC 40 index rising 0.47%.
There are many highlights this week, and the situation in the Middle East has once again become the focus. The inflation indicators that the Federal Reserve is most concerned about will be revealed, and several Federal Reserve officials will give routine speeches. The September PMI of European and American economies tests economic resilience. Multiple central banks will hold interest rate meetings, and Australia is expected to remain inactive, but easing inflationary pressures may pave the way for a change in policy stance. The Swiss National Bank (SNB) will be the last major central bank to announce policy decisions in September, and like the Federal Reserve, there is a high degree of uncertainty regarding the extent of the SNB's interest rate cut. The market expects a probability of a 25 basis point rate cut to be around 60%. Since the Swiss franc surged against the US dollar and the euro in early August, market expectations for even greater interest rate cuts have risen.
The United States releases heavyweight inflation indicators
The Federal Reserve started its interest rate cut cycle with 50 basis points last week, which drew attention to the job market. But the FOMC does not expect further significant interest rate cuts, as the interest rate dot matrix and the latest interest rate futures pricing show a greater likelihood of a 25 basis point rate cut in November. This week, several Federal Reserve officials will give speeches, and the latest statements and clues regarding the economy and monetary policy are attracting attention.
In terms of data, the personal consumption expenditure price index (PCE) in the United States received the most attention in August. In July, the overall PCE remained unchanged at 2.5%, not far from the Federal Reserve's target of 2%. Based on 6-month annualized data, this indicator may further decline in the coming months, which is even considered a factor in the Federal Reserve's decision to lower interest rates by 50 basis points.
In addition, the Consumer Confidence Index performance of the American Chamber of Commerce in September will become an important reference for economic momentum, and investors will also pay attention to a series of housing indicators, including the recent decline in mortgage interest rates, new home sales, and the Case Shiller House Price Index. The durable goods orders in August and the final GDP performance in the second quarter are equally crucial.
As the deadline for the US government shutdown approaches again, the Republican split has led to the failure of the House proposal, and Speaker Johnson's initial proposal has been rejected.
This week's noteworthy corporate financial reports include Micron Technology, Opener, Accenture, BlackBerry, and others.
Crude oil and gold
International oil prices have rebounded significantly, and tensions in the Middle East have once again intensified. The Federal Reserve's interest rate cuts have boosted market sentiment. WTI crude oil rose 4.76% to $71.72 per barrel in the near month contract week, while Brent crude oil rose 4.02% to $74.49 per barrel in the near month contract week.
Barbara Lambrecht, a commodity analyst at Deutsche Bank, stated in a report that "oil prices are driven by two factors: on the one hand, the Federal Reserve has lowered key interest rates more than many people expected, which has increased hopes of avoiding a significant decline in demand for oil in the largest market. On the other hand, the ongoing escalation of the Middle East situation has led to an increase in geopolitical risk premiums. There is no doubt that further deterioration of the situation may push up prices," she said.
Helima Croft, head of global commodity strategy at Royal Bank of Canada Capital Markets, believes that Iran is still an unknown and 'Tehran may be waiting for the right moment'.
Driven by the Federal Reserve's interest rate cuts, international gold prices have hit a new historical high. COMEX gold futures for December delivery on the New York Mercantile Exchange rose 1.41% for the week to $2647.4 per ounce.
Some analysts suggest that there may be further increases in gold prices. CityIndex analyst Fawad Razaqzada stated in a report that geopolitical risks, such as ongoing conflicts in Gaza, Ukraine, and elsewhere, will ensure the maintenance of safe haven demand for gold. At the same time, the continued weakness of the US dollar has made gold cheaper for holders of other currencies, bringing additional benefits.
Daniel Ghali, a commodity strategist at TD Securities, is somewhat cautious. It is clear that the Federal Reserve has decided to start the easing cycle with a significant interest rate cut, and there is still some buying activity. However, given the relatively low inflow of ETFs (exchange traded funds), Asian buyers are still waiting, and all signs indicate extreme positioning, "he said.
Eurozone PMI tests economic resilience
Although the European Central Bank announced a rate cut this month, it remains cautious about the pace of future easing. After a slight rebound in the spring, the eurozone economy seems to have lost momentum again, especially in Germany, the largest economy in the European Union. However, inflation has been almost under control, so the European Central Bank can respond accordingly to further deterioration of growth prospects.
This week, the September PMI of the Eurozone will receive attention. The regional composite PMI slightly increased in August, mainly due to the rebound of the service industry, but the purchasing managers' index for the manufacturing industry is still in a contraction range. As long as the service industry continues to support the broader economy, the European Central Bank may maintain a cautious stance until it has more confidence in fully controlling inflation.
The Bank of England maintained its key interest rate unchanged last week, adopting a more cautious attitude than the Federal Reserve towards expectations of policy easing. The Bank of England has stated that it expects the inflation rate to fall to its target of 2% by the end of next year. Although it may follow suit with interest rate cuts in the coming months, it has also expressed concerns about the slow rise in service prices and wages.
The Bank of England did not pre commit to adopting specific easing policies. The Governor of the Bank of England, Andrew Bailey, stated that there is still disagreement among policy makers regarding the speed at which long-term inflationary pressures will subside, as wage growth appears to remain too high and unsettling. He said, 'Maintaining low inflation is crucial, so we need to be careful not to cut too quickly or too much.' He is' optimistic 'that interest rates will further decrease, but the Bank of England first needs more evidence to prove that price pressures are cooling down.
The UK PMI has risen for the second consecutive month, highlighting a brighter economic outlook for 2024. Further improvement in September may alleviate the urgency for the Bank of England to shift towards a faster pace of interest rate cuts. Luke Bartholomew, Deputy Chief Economist of fund management company Anben, said, "The potential inflationary pressure in the UK remains high, and the information sent by the labor market on the health of the economy is mixed