Economic Spotlight: Key Events and What’s Next

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The Market Spotlight report discusses the most important US economic indicators last week and sets the stage for other very important indicators for the current week.

China has taken one of the most important measures to stimulate its economic growth in a way that may positively reflect on global markets.

Japan has witnessed important party elections that will greatly reflect on its economic future.

Economy Spotlight. introduction: 

This Week A week full of economic indicators and events that affected various economies around the world, starting with good news from China, through economic data encouraging further interest rate cuts, and ending with events related to the statement and the positive report issued by the Organization for Economic Cooperation and Development. 

Economy Spotlight . The Most Important Events Last week

First. United States of America: 

The beginning of last week witnessed important statements by some heads of the Federal Reserve Banks, most notably Raphael Boucek, Neel Kashkari, and Austin Goolsbee. 

These members expressed their openness to deeper interest rate cuts, if inflation continues to decline and labor market indicators improve.

The most important US economic indicators issued last week

- Business activity indicators: Both the industrial and service purchasing managers' indices stabilized above 50 points, which is the standard point indicating expansion in the private sector.

- Consumer Confidence Index: The index fell by the largest amount in three years from 105.6 to 98.7, reflecting growing concerns about the US labor market and the possibility of it falling into recession.

- Crude Oil Inventory: Inventory witnessed a sharp decline, with a deficit of 4.4 million barrels compared to a deficit of nearly 1.6 million barrels last week.

- US GDP reading: It was in line with expectations, confirming that the US economy grew by double from 1.6% to 3% as in the second quarter of 2024.

- Personal Consumption Expenditures Price Index: This inflation indicator, preferred by the Federal Reserve, showed some relief, as despite its annual increase by the same expectations, it recorded a slight decline on a monthly basis, coinciding with other positive indicators, the most important of which was the decline in personal spending and income.

The relatively good reading of the PCE price index was reflected in the US stock market indices, which achieved good weekly gains, specifically the Dow Jones Industrial Average, which closed at a new record level, due to hopes for upcoming interest rate cuts.

Second. China:

China could be the one with the positive news in a noticeable way over the past week, as the markets witnessed several announcements by the People's Bank of China (the Chinese central bank) about a series of measures aimed at revitalizing the Chinese economy and pushing it to achieve the economic growth desired by the government around 5% rates. 

The Chinese bank made important announcements to facilitate borrowing money by families and companies, the most prominent of which were:

• Reducing short-term interest rates for seven days to 1.5% from 1.7%. 
• Reducing mortgage rates. 
• freeing up state-controlled commercial banks to lend a larger percentage of their assets. 
• Reducing the minimum down payment for home purchases. 
• Reducing the reserve requirement ratio for financial institutions by half a percentage point. 

All eyes will be on this news and its impact on the Chinese economy (the second largest economy in the world), which if positive could have a positive impact on the performance of the markets, according to analysts.

Third. Europe:

Europe zone witnessed many events, most notably Volkswagen, against the backdrop of its decision to close some of its factories to overcome some of the problems and challenges it faces due to external competition, which opened up many problems between the company and labor unions.

As for economic indicators, the continent witnessed decisions by the Swedish Central Bank, which reduced its interest rate by a quarter of a percentage point to reach 3.25%.

Also, the Swiss Central Bank took the same step, bringing its interest rate to 1%, which is the lowest rate among major central banks (except for the Bank of Japan). 

Fourth. Japan: 

Japan ended last week with the elections to choose the leader of the Liberal Democratic Party, in which Shigeru Ishiba won, over his competitor Sanae Takaichi, who was the most vehement opponent of the idea of ​​raising interest rates on the Japanese yen. 

As for the winner, who will be the next prime minister, he stressed that the country's monetary policy will remain lenient, but he will not resist any further increases in interest rates. 

after that, the Japanese yen rose against the backdrop of the selection of the new leader, to levels of 146 yen per dollar, before closing at 142 yen.

Important statements:

 The Organization for Economic Co-operation and Development issued a report entitled "Transformation for the Better", in which the organization indicated that global growth is stabilizing with the fading impact of raising interest rates by central banks and reassurance regarding inflation and raised its expectations for global growth for 2024 from 3.1% to 3.2%.

The organization also expected that interest rates in America would reach 4.75% by the end of 2024 and 3.5% by the end of 2025, and interest rates in Europe would decrease to 2.25%.

Economy Spotlight. Things markets are waiting for next week:

This week includes one of the most important economic indicators that the markets are waiting for, which is the US unemployment rate, which will be released on October 4.

It is worth noting that the unemployment rate that was released last August contributed to spreading panic in the markets that priced the possibility of the US economy entering a state of recession when it rose to 4.3%, and the markets are waiting for the current reading with expectations indicating that unemployment will stabilize at the same level of 4.2%.

As for the most important economic indicators, they will be as follows:

Monday, September 30, 2024:

• The speech of the Federal Reserve Chairman, with expectations that he will provide evidence about future monetary policy decisions.
• The reading of the British GDP for the second quarter (adjusted reading).
• The speech of the Governor of the European Central Bank, Christine Lagarde.

Tuesday, October 1, 2024:

• The job opportunities in America for the month of August.
• The inflation rate in the Eurozone.

 Wednesday, October 2, 2024:

• US non-farm private sector jobs change.
• Eurozone Unemployment Rate

Thursday, October 3, 2024:

• The Institute for Supply Management's Non-Manufacturing Purchasing Managers' Index

Friday, October 4, 2024:

• US Average Wage Index.
• US Unemployment Rate.

Note:

As Chinese markets prepare to close for the seven-day Chinese National Day holiday starting October 1.