Economic Spotlight: Key Events and What’s Next October 7 - 11

Economic Spotlight. Keywords:

• US labor markets are showing signs of a recession.
• Markets will be waiting for US inflation to come in, which could be good for gold and stocks but bad for the dollar index.
• The Bank of Japan meeting summary showed that policymakers discussed the need to slow interest rate hikes amid uncertainty over prices.
•  Oil markets were heavily influenced by geopolitical tensions in the Middle East.
• Eurozone inflation falls below target for first time since 2021.

Economic Spotlight. Introduction 

Last week was a week full of events, economic data, statements and geopolitical events that cast their shadows on various global markets, starting with the Chinese side, which showed great readiness to stimulate its economy and enable it to regain its ability to achieve the growth targeted by the government for 2024, or approach that specified rate of 5%.

Also, the United States of America dealt with the major challenge represented by the largest strike waged by its port workers in more than half a century.

Markets were also affected by geopolitical events in the Middle East region, which still represent the biggest challenge and most prominent threat to achieving the required economic growth, at a time when it is approaching the closure of the inflation file that it has been trying to address since 2022.

As for the coming week, the markets will focus on two things: updates on the course of tensions in the Middle East due to their direct impact on stock markets, safe havens and the dollar, in addition to the American economic data represented by the inflation index that will be issued during the coming Thursday and Friday.

Economy Spotlight. The Most Important Events Last week

First. The US economy:

Last week presented a series of significant economic indicators and important statements that will greatly influence the direction of the US Federal Reserve in its upcoming meetings throughout 2024.

On Monday, US Federal Reserve Chairman Jerome Powell publicly expressed his openness to the possibility of implementing moderate interest rate reductions of up to half a percentage point by the end of the year, considering the two remaining meetings.

The U.S. economy recently faced a major event as dockworkers on the East Coast and Gulf of Mexico began the largest strike in fifty years, seeking to improve wages.

The government responded quickly, as the strike threatens to disrupt trade and could result in a daily loss of about $5 billion.

Also, economic indicators show that the labor market remains strong, with the personal consumption expenditures index, the Federal Reserve’s preferred inflation measure, rising slightly to 2.7% annually while seeing a marginal monthly decline.

Job openings topped 8 million, the unemployment rate fell to 4.1% from 4.2%, and average wages fell slightly less than expected.

 As a result, expectations are shifting toward a possible quarter-point interest rate cut at the Fed’s November 7 meeting, with the Fed Watch tool indicating a 97.4% chance of such an outcome.

Second. European Economy:

The Eurozone experienced a notable decline in inflation to 1.8%, marking the first instance of inflation falling below the 2% target. This decrease was primarily supported by lower inflation rates in France, Germany, Spain, and Italy, attributed to reduced energy prices and a slowdown in factory activity linked to China.

In the UK, the economy grew at a slower pace than previously anticipated in the second quarter, with GDP growth revised down from 0.7% to 0.5%, falling short of analysts' expectations of 0.6%. While the UK continues to be one of the slower economies in recovering from the pandemic, the OECD has adjusted its growth forecast upward, now projecting 1.1% for 2024 (up from 0.4%) and 1.2% for 2025 (up from 1.0%).

Additionally, Switzerland has seen a decline in inflation, reinforcing expectations that the Swiss National Bank will continue to lower interest rates during its final meeting of the year on December 12, 2024.

Third. The Chinese economy:

Last week, China observed the Golden Week holiday, commemorating the 75th anniversary of the founding of the People's Republic of China. In response to its struggling economy, the Chinese government implemented a series of stimulus programs and measures aimed at revitalizing growth. These initiatives included diversifying support across the stock market, providing cash assistance to low-income individuals, and increasing government spending.

However, amidst this positive news, a proposal emerged from the United States for a broad ban on the use of Chinese software in any electric vehicle sold in the country. This initiative is under consideration by a coalition of affluent nations, reflecting concerns regarding China's significant presence in the electric vehicle sector.

Fourth. Japanese Economy:

At the end of September, Japanese stock markets experienced a decline of 4.6% from their peak levels earlier in the month.

This drop was largely influenced by the appointment of a new leader for the Liberal Party, who advocates for increasing interest rates on the Japanese yen to stimulate economic growth and avert recession.

However, the minutes from the recent meeting of the Bank of Japan revealed that policymakers discussed the necessity of moderating interest rate hikes in light of market uncertainty, diminishing the likelihood of an imminent rate increase. Consequently, the Japanese Nikkei 225 stock index closed above 38,600.

Fifth: The impact of geopolitical unrest

Last week experienced significant geopolitical turmoil, primarily driven by escalating tensions in the Middle East. This situation impacted various assets, particularly crude oil prices.

West Texas Intermediate (WTI) saw an increase of approximately 9%, closing the week at $74.45, while Brent crude prices rose about 10%, finishing at $78.

Economic Spotlight.  Things markets are waiting for next week:

The US economy is poised to receive important statements from FOMC members, including Kashkari, Bowman, and Bostic, as well as a key inflation report that will have significant implications for various global markets and assets.

As for the economic indicators for the coming week, the following are the most important indicators:

Monday 10/7/2024:

• Britain: Retail sales.
• Eurogroup meeting.
• China: China's foreign exchange reserves for September.

Tuesday 10/8/2024

• Sweden: Swedish consumer price index.
• Canada: Trade balance

Wednesday 10/9/2024

• America: US crude oil inventories.
• Federal Open Market Committee meeting minutes for September.

Thursday 10/10/2024

• America: Consumer price index, with an expected decrease on an annual basis from 2.5% to 2.3%.

Friday 10/11/2024

• America: Producer price index, with an expected decrease on a monthly basis slightly.
• Britain: GDP for August.
• Canada: Unemployment rate for September, expected to remain stable at 6.6%.

Sunday 10/13/2024

• China: Consumer Price Index

Trade Balance.