Bassanese Bites: China cheer – September 30 2024
Global markets
Global equities rose further last week helped by surprise Chinese stimulus moves and the ongoing US “goldilocks” environment.
US economic data was reasonably mixed last week though broadly consistent with the soft landing or “goldilocks” scenario. On the negative side, the Conference Board US consumer confidence index fell in September to be back around long-run average levels – reflecting a softening labour market outlook. That said, weekly jobless claims remained remarkably low, an alternative (University of Michigan) consumer sentiment report ticked up and the August private consumption expenditure (PCE) inflation report matched benign market expectations.
The core PCE rose 0.1% in the month, with the annual rate ticking up to 2.7%. Annual headline PCE inflation, however, is now down to 2.2%.
In Europe, weak manufacturing data has boosted expectations of a potential ECB rate cut next month. Those expectations could rise further if, as the market expects, this week’s EU inflation report shows annual headline inflation falling to just under the ECB’s 2% inflation target.
But the global highlight last week was a succession of monetary and fiscal stimulus announcements from China – both to encourage more home buying and support the equity market. As would be expected, this caused a pop higher in Chinese equities, commodity prices and the $A – though the jury is out on whether the measures will be enough to offset China’s entrenched structural growth impediments such as over regulation, population ageing, and the debt-fuelled property bubble. I have my doubts!
Global week ahead
Key global highlights this week will be updates on the health of the US economy, with job vacancies and ISM manufacturing reports on Tuesday, jobless claims and the non-manufacturing ISM report on Thursday, followed by the all-important payrolls report on Friday.
