Economic Spotlight: Key Events and What’s Next 14-21/10/2024

• Economic Spotlight. Keywords:
• The US economy is receiving good economic indicators regarding the decline in inflation and the stability of the labor market.
• The European Central Bank is meeting this week with expectations of lower interest rates.
• China and Japan will have an appointment with very important economic data at the end of this week.

Economic Spotlight. Introduction 

Last week, the financial markets were on a date with the latest major inflation data in America represented by the reading of the consumer price index, which is the last reading before the upcoming US Federal Reserve meeting on November 7, during which expectations indicate that a second reduction will be made by a quarter of a percentage point, also supported by the calm economic indicators of the US labor markets.

While the European side was directly discussing a significant reduction in the euro during the upcoming meetings of the European Central Bank, this was prompted by the sudden decline in the inflation index in the eurozone to below the targeted levels.

The markets also witnessed many developments related to the Chinese economy, which returned to work after its annual holiday that extended for a full week, the most prominent of which was related to the stimulus that the Chinese government intends to direct directly to stimulate its economy.

Also, Japanese markets were witnessing important matters regarding the future of their interest rate path, under the leadership of the new president of the Japanese Liberal Democratic Party, Ishiba Shigeru.

While the pace of fears of geopolitical tensions and their impact on various markets, especially safe havens, led by gold, did not decrease, in addition to fears that the global economy will be exposed to many problems if these tensions continue for a longer period.

As for the oil markets, they also witnessed a significant decline in oil production by Libya and Iraq, with OPEC recording the deepest decline in almost three years.

Economy Spotlight. The Most Important Events Last week

First. The US economy:

The US economy has witnessed several reassuring signs about its future and that it is proceeding according to what the Federal Reserve promised while adhering to high interest rates at their highest levels over the past two years.

Job opportunities increased in August by about 329 thousand jobs to record 8.040 million jobs, in conjunction with a decrease in layoffs.

While private sector salaries in the United States increased more than expected in September, which is another evidence that labor market conditions have not deteriorated.

Inflation data came in a great relief for the markets, after the Consumer Price Index (CPI) fell from 2.5% to 2.4%, although it was higher than previous expectations of a decline to 2.3%, but the increase was at its lowest levels since 2021.

The picture of continued decline in inflation was confirmed with the Producer Price Index, which in turn declined well, supported by a decline in the prices of cheap goods.

Also, US stock markets, specifically the S&P 500 and Dow Jones indexes, closed at record highs, driven by financial companies' results represented by JP Morgan, Wells Fargo, and BlackRock Asset Management.

Second. The European economy:

The situation was no different on the European side, which is still providing economic indicators supporting the idea of ​​the European Central Bank making future cuts to interest rates on the euro.

The President of the French Central Bank, Francois Villeroy, said that the European Central Bank may cut interest rates on the euro by the end of this year, faster than expected, to protect the European economy from a faster-than-expected decline in inflation, reaching 1.8% compared to the targeted 2%.

This is because stabilizing inflation at the target rate will be a requirement to support weak growth in the region, and to ensure the implementation of monetary policies in a stable manner, according to Villeroy.

Third. China's economy:

Chinese markets have returned to activity after the annual weekend, but with some disappointment after official statements did not indicate enough details about the size of the upcoming stimulus packages, especially since hopes are pinned on the packages to stimulate the Chinese economy, ranging between $280 billion and $1.4 trillion, to push it back to its targeted growth rate of about 5%.

On Saturday, the Chinese finance minister spoke about China's pledge to increase its debt "significantly" to revive its faltering economy, but it left investors wondering about the total size of the stimulus package, a vital detail for measuring the sustainability of the recent stock market rally.

These statements were followed by four of China's largest state-owned banks announcing cuts to current mortgage rates starting October 25, as part of the government's efforts to stimulate its economy.

Fourth. The Japanese economy:

In Japan, things were moving towards calming the new leader of the Japanese Liberal Democratic Party, from fears of rushing to raise interest rates on the Japanese yen, which prompted the Japanese stock markets to close by 2% compared to the previous week's close, while causing the Japanese yen to decline against the dollar to its lowest levels since mid-August.

The Japanese economy also witnessed the legendary investor Warren Buffett buying $1.9 billion worth of Japanese yen-denominated bonds, in a move that analysts considered to be paving the way for increasing his company Berkshire Hathaway's exposure to Japanese assets, which may benefit from the issue of postponing the interest rate hike despite the high inflation rate.

Fifth. Economic developments:

Last week brought many scattered news, the most important of which was related to Boeing, which is still witnessing a major strike related to workers' rights and their demands to raise their wages by 40%, as the company said that it is in the process of laying off 17,000 jobs, representing 10% of its workforce, and that it will postpone the delivery of a type of its large aircraft, due to the deterioration of the company's business in light of its ongoing strike for a month, which some company officials indicated may be resolved during the current week.

European markets were also in for news that may deepen the dispute between Europe and Germany over Chinese electric cars, after the European Commission expressed its intention to impose customs duties on Chinese cars for a period of five years starting in November, which Germany rejected, stressing that China can respond to these duties in a way that harms the European economy, specifically the leading German industry.

Sixth. The most important upcoming economic indicators:

Here is a look at the most important economic indicators that we will witness next week:

Tuesday 10-15-2024:

Britain: Unemployment rate with expectations of stabilizing at 4.1%.

Sweden:

Inflation rate with expectations of continuing to decline since the beginning of 2024 from 1.9% to 1.6%, which increases the likelihood of a reduction in interest rates by the Swedish Central Bank.

Oil: The monthly report of the International Energy Agency.

America: Will witness many statements by Federal Reserve members (Neel Kashkari, Mary Daly, Adriana Kogler)

Wednesday 10-16-2024

Britain: Inflation rate (Consumer Price Index) with expectations of declining from 2.2% to 1.9%.

America: Statements by Federal Reserve member Raphael Bostic.

Europe: Speech by European Central Bank President Christine Lagarde.

Thursday 10-17-2024:

Europe:

• Consumer Price Index reading, with an expected confirmation of its decline on an annual basis at 1.8%
• Euro interest rate decision with an expected decrease of a quarter of a percentage point to reach 3.25%.
• EU Leaders Summit.

USA:

• Retail sales with an expected stability without change on an annual basis, and a slight increase monthly.
• Crude oil stocks.
• Continued unemployment implications.
• Unemployment claims rates.

Friday 10-18-2024:

Japan: Consumer Price Index, with an expected significant decline from 2.8% to 2.3%.

China:

• GDP for the third quarter, with an expected decline from 4.7% to 4.6%
• Industrial production with an expected slight increase.
• Retail sales.
• Unemployment rate.

UK: Retail sales.

Sunday 10-20-2024:

China: Foreign direct investment.

Monday 21-10-2024:

China: Prime Lending Rate (Interest Rate).