An overview of the global market

Asia-Pacific Markets React to Economic Developments and Inflation Trends

On Friday, Asian-Pacific markets saw declines due to Japan releasing revised second-quarter GDP figures and Hong Kong suspending trading for the entire day due to a storm warning. Japan's Nikkei 225 extended its losses from Thursday, dropping by 1.38%, while the Topix fell by 1.11%.
Japan's second-quarter economic growth was 4.8% on a quarter-on-quarter annualized basis, which was lower than the preliminary estimate of 6% and fell short of the 5.5% expected in a Reuters poll. Finance Minister Shunichi Suzuki expressed concerns about FX movements and indicated a readiness to consider various options to address excessive moves.
The offshore yuan hit its lowest level against the U.S. dollar since its inception in 2010, reaching 7.3599 yuan per dollar after crossing the 7.35 level earlier in the day. Meanwhile, solid jobless claims figures supported the case for the Fed to maintain elevated interest rates, with U.S. unemployment benefit applications reaching their lowest point since February.
John Williams, President of the Federal Reserve Bank of New York, stated that U.S. monetary policy is currently in a favorable position, but officials will closely analyze data to determine their approach to interest rates. In a separate statement, Chicago Fed President Austan Goolsbee suggested that the debate would soon shift from how high rates should go.
Additionally, German inflation in August eased to 6.1%, as reported by the federal statistics office, confirming preliminary data. This figure is harmonized to enable comparisons within the Eurozone, with food and energy prices driving the overall inflation rate higher.
ECB Hike Signals, China's Economic Surge, and Arm Holdings' Strong Debut

European markets were poised for a positive opening on Friday in response to the European Central Bank's indication that their latest interest rate hike could be their last. Simultaneously, global stocks were experiencing a rally.
Meanwhile, oil prices surged to their highest point in 10 months, driven by robust August data on Chinese retail sales and industrial production. Chinese retail sales surpassed expectations by growing 4.6% compared to the previous year, exceeding the Reuters poll forecast of 3%. Similarly, industrial production in August increased by 4.5% year-on-year, surpassing the 3.9% forecast.
Furthermore, industrial production, which also rose by 4.5% in August from the previous year, exceeded both the 3.9% forecast and the 3.7% increase reported for July. The People's Bank of China maintained the interest rate on its one-year medium-term lending facility and injected additional liquidity into the markets via a key policy loan for the 10th consecutive month, following a recent reduction in lenders' reserve requirements.
The European Central Bank raised interest rates by 25 basis points, marking its 10th consecutive rate hike and pushing its main rate to a historic high of 4%. The bank revised its inflation forecasts slightly upward for the current year and the next, projecting rates of 5.6% and 3.2%, respectively. However, it lowered its 2025 inflation forecast from 2.2% to 2.1% and also adjusted its economic growth expectations for the Eurozone downwards.
Notably, a significant development emerged as ECB Governing Council members suggested they do not anticipate further rate hikes at this time, indicating a potential period of stable rates.
In other market news, Arm Holdings Plc had a strong trading debut in New York, with a 25% jump in its stock price. Conversely, Ford Motor Co. and General Motors Co. faced challenges as workers at Detroit carmakers-initiated strikes following the expiration of contract deadlines. Additionally, traders were preparing for the triple witching options event on Friday, which had the potential to cause volume spikes and increased market volatility.
Market Volatility and Central Bank Decisions: A Weekly Overview

Asian-Pacific markets declined on Monday in anticipation of central bank decisions scheduled for the week. Meanwhile, European markets had a negative start to the week.
The troubled Chinese real estate developer Evergrande saw its shares plummet by as much as 22.6% on Monday following the detention of some staff from the group's wealth management unit by the police over the weekend.
There are reports suggesting that the Japanese investment holding company SoftBank is planning to make significant investments, potentially reaching "tens of billions," in the field of artificial intelligence.
Societe Generale SA's stock dropped by more than 7%, significantly impacting Europe's Stoxx 600 Index, as the lender's strategic plan failed to meet investor expectations.
Oil prices continued to rise for the third consecutive day, with Brent crude approaching $95 per barrel due to OPEC+ supply cuts tightening the market. Investors are closely monitoring Saudi Energy Minister Prince Abdulaziz bin Salman's address at an industry conference on Monday for insights into the global oil supply outlook.
The US Federal Reserve is set to announce its decision on Wednesday. While it is widely expected that the central bank will maintain interest rates, investors are keen to discern the Fed's stance on inflation.
In other developments this week, Australia's central bank will release the minutes of its September 5 policy meeting on Tuesday, and the Bank of Japan will conclude its monetary policy meeting on Friday. Additionally, the People's Bank of China is expected to announce its loan prime rate decisions on Friday.
Last week in Europe, the European Central Bank raised interest rates by 25 basis points, marking the 10th consecutive hike and bringing its main rate to a record high of 4%.
Global Economic Snapshot: Market Movements, Central Bank Actions, and Inflation Concerns

The Nikkei share average in Japan experienced a drop of over 1%, but upon closer examination, it becomes apparent that more than half of this decline can be attributed to a small number of chips- and AI-related stocks with significant weightings. European markets began the day with lower openings on Tuesday, as investors kept an eye on the commencement of the US Federal Reserve's two-day monetary policy meeting.
Australia's central bank maintains the stance that inflation in the country is "too high," yet in its recent meeting, it chose to maintain its benchmark policy rate at 4.1%. Minutes from the Reserve Bank of Australia indicate that the board deliberated between raising rates by 25 basis points or leaving them unchanged. Ultimately, the argument for keeping the rate unchanged prevailed, with the RBA noting that "recent data aligns with inflation returning to target within a reasonable timeframe while keeping the cash rate at its current level." Despite positive developments from developers Country Garden Holdings Co. and Sunac China Holdings Ltd., sentiment in Asia remained subdued. Country Garden secured bondholder approval for the final batch of eight local notes it sought to extend repayments on, while Sunac received approval from creditors for its debt restructuring plan.
Crude oil prices have surged by roughly one-third since mid-June, thanks to collaboration between Saudi Arabia and Russia to limit supplies and boost prices. This puts additional pressure on central bankers worldwide as they work to combat rising prices. The Federal Reserve will set its policy on Wednesday, followed by the Bank of England on Thursday and the Bank of Japan on Friday. Given expectations that the Fed will maintain interest rates this week, traders will closely monitor the "dot plot" summary of economic forecasts. The key questions are whether policymakers will retain their projections for one more 25 basis-point rate hike by year-end and how much easing they are considering for 2024. In June, they had projected a one percentage point reduction.​
Global Markets React to US Federal Reserve's Rate Decision and Economic Updates

Asia-Pacific markets experienced a decline today as a reaction to the US Federal Reserve's decision to maintain its benchmark policy rate. The central bank also disclosed its intention to raise interest rates once more this year, in accordance with its projections.
These projections indicate that the central bank anticipates raising rates to a median level of 5.6% by the conclusion of 2023, an increase from the current range of 5.25% to 5.5%. Additionally, the Federal Open Market Committee, responsible for rate-setting, projected two rate cuts for 2024, a reduction from its previous June forecast, potentially setting the funds rate at around 5.1%.
On another note, New Zealand's gross domestic product (GDP) showed a stronger-than-expected growth of 0.9% quarter-on-quarter in the second quarter of the year, surpassing economists' expectations of 0.5%. This positive performance followed a revised 0.0% growth rate in the first quarter, preventing the country from slipping into a technical recession. The previous reported figure for Q1 was -0.1%.
In the European markets, there was a downward trend at the opening bell. This comes ahead of a series of interest rate decisions scheduled for Thursday from central banks in England, Turkey, Sweden, Switzerland, and Norway. Additionally, there are preliminary consumer confidence figures for the Eurozone in September set for release.
The Bank of England's announcement marks a busy day for European central bankers. Notably, the Swiss franc depreciated after the Swiss National Bank unexpectedly maintained its rates, while Sweden's Riksbank raised its key rate as anticipated and expressed the possibility of more rate hikes. A decision from Norway's central bank is also on the horizon.
Market Insights: Asia-Pacific Mixed, Inflation Updates, and US Government Funding Agreement

The Asia-Pacific markets displayed mixed performance as investors evaluated China's industrial data and Australia's August inflation figures, which were set to be released on Wednesday. In Australia, the weighted inflation rate for August registered a 5.2% year-on-year increase, aligning with economists' expectations polled by Reuters, while the headline inflation stood at 5.5%.

In China, industrial profits saw a year-on-year decline of 11.7% as of August, marking a more moderate contraction compared to the 15.5% drop observed during the first seven months of the year. Meanwhile, concerns in the Chinese property market persisted, exemplified by a third consecutive day of losses for a gauge of Chinese property developers. Cifi Holdings Group Co. shares tumbled after a six-month trading halt, and China Evergrande Group's founder and chairman, Hui Ka Yan, faced police control measures. Country Garden Holdings Co Ltd also confronted impending interest payment deadlines, all against the backdrop of an upcoming holiday that would suspend mainland markets for six trading days.

Turning to Japan, minutes from its monetary policy meeting in July revealed a division within the central bank board regarding the timing of when the Bank of Japan should initiate interest rate hikes. This debate stemmed from inflation consistently exceeding the BOJ's 2% target for 15 consecutive months.

Shifting focus to Europe, Wednesday's market opening was anticipated to be mixed as investors continued to assess factors such as inflation, interest rates, and the global economic outlook.

In the United States, Democratic and Republican leaders reached an agreement on Tuesday to fund the government and provide $6 billion in assistance to Ukraine, effectively averting a potential shutdown on October 1st. However, the plan still faced challenges in the House due to ongoing gridlock.
Global Market Insights: Inflation Trends, Summit Talks, and Economic Data

Asia-Pacific markets mostly gained on the week's last trading day, led by Hong Kong's Hang Seng index. Inflation in Tokyo showed a year-low increase at 2.8% for September, down from August's 2.9%, marking its lowest since September 2022, and serving as a key indicator for nationwide inflation trends. The Wall Street Journal reported discussions between China's Vice Premier He Lifeng and Foreign Minister Wang Yi regarding potential visits to the US, in preparation for a potential summit between Xi Jinping and Joe Biden.

European markets started positively on Friday, breaking a five-day losing streak from the previous session. Unexpectedly, French price growth slowed, while investors awaited euro zone inflation data following Germany's preliminary figures indicating a greater-than-expected slowdown in inflation. Germany also saw a surprising decline in retail sales for August due to persistently high inflation.

In the US, the Commerce Department's final estimate reported a 2.1% annualized increase in real gross domestic product for the second quarter, aligning with the previous reading but falling short of Dow Jones' estimate of 2.2%. Later in the day, the US personal consumption expenditures price index would be closely watched, potentially influencing whether the Federal Reserve raises rates from their 22-year highs.​
Global Economic Update: Asia-Pacific Stocks Dip, China's Manufacturing Rebounds, and European Markets Rally

Asia-Pacific stocks faced a decline in their values, even in the wake of a notable recovery in China's manufacturing sector, which managed to push its way back into expansion territory. Meanwhile, during its September meeting, the Bank of Japan's policymakers conducted a thorough evaluation of various conditions that must be met before considering the possibility of ending the central bank's ultra-loose monetary policy.
The sentiment among major Japanese manufacturers in the third quarter demonstrated a significant improvement, with the closely watched Central Bank Tankan survey reporting a score of 9, up from 5 in the previous three months.
China, on the other hand, saw its factory activity expand in September, marking the first expansion since April. Official data over the weekend revealed that China's Purchasing Managers' Index (PMI) climbed to 50.2, surpassing Reuters' expectations of 50.0, which is a positive sign for the world's second-largest economy.
In Europe, markets opened on a positive note on Monday, buoyed by indications that the recent pace of consumer price increases might be slowing down. Eurozone inflation for the month of September tumbled to 4.3%, its lowest level since October 2021, according to flash data. Notably, the European Central Bank had raised interest rates to a record level the previous month; however, economists and investors now anticipate that these rates may have reached their peak.
Shifting focus to the United Kingdom, house prices held steady in September when compared to the prior month, according to data from lender Nationwide. However, it's important to note that they were down by 5.3% year-on-year, highlighting the ongoing challenges in the British property market.
Global Economic Snapshot: Market Trends, Inflation, and Fed's Policy Stance

Overnight in the Asia-Pacific markets, Hong Kong stocks led losses by falling approximately 3%, with the Hang Seng index trading 3.12% lower after the National Day holiday. This decline was driven by the real estate and energy sectors. Meanwhile, the Reserve Bank of Australia held interest rates steady at 4.1%, aligning with Reuters' expectations. The bank's governor, Michele Bullock, mentioned that although inflation in Australia has peaked, it remains high and is expected to stay that way. She highlighted that while goods inflation has eased, many service prices are still rising, along with fuel prices.
European markets are set to open flat to lower following concerning economic data from the region. European stock markets closed lower on Monday, as manufacturing output showed signs of decline, with new orders dropping significantly. In the UK, shop prices in September increased by 6.2% annually, a decrease from August's 6.9%, marking the lowest rate in a year. Food price inflation also cooled to 9.9%, with a slight monthly decline, the first in over two years.
Weakness in bond markets followed a Treasury slump on Monday due to hawkish Fed messaging, overshadowing optimism about avoiding a US government shutdown. Yields on five- to 30-year Treasuries rose by about 10 basis points, and the 10-year note reached its highest point since 2007. Fed Governor Michelle Bowman expressed willingness to support a federal funds rate increase if inflation progress stalls. Fed Vice Chair for Supervision Michael Barr suggested that rates are approaching a sufficiently restrictive level. Fed Chair Jerome Powell, during a visit to York, Pennsylvania, reiterated the need for a restrictive policy for some time, as did the influential New York Fed Chief John Williams on Friday. Cleveland Fed leader Loretta Mester also indicated that the Fed's work is likely not complete.
U.S. Manufacturing Shows Signs of Recovery Amidst Challenges: Institute for Supply Management (ISM) reported for September

The Institute for Supply Management (ISM) reported that U.S. manufacturing showed signs of recovery in September, with increased production and employment. This positive trend was the third consecutive month of improvement, boosting expectations for stronger economic growth in the third quarter. The Commerce Department's data also indicated solid construction spending in August, fueled by housing and factory construction.
The ISM's manufacturing Purchasing Managers' Index (PMI) rose to 49.0 in September, the highest since November 2022, up from 47.6 in August. However, it's noteworthy that this marked the 11th consecutive month with a PMI below 50, indicating a contraction in manufacturing. This extended stretch of contraction is the longest since the 2007-2009 Great Recession.
Economists had anticipated a more modest increase, with the index edging up to 47.7. The PMI surpassing 48.7, which is considered a threshold for economic expansion, added to optimism. Third-quarter growth estimates ranged as high as a 4.9% annualized rate, compared to the 2.1% growth rate in the April-June quarter.
The ISM survey revealed that five manufacturing sectors reported growth in September, including textile mills and primary metals, while 11 industries, including computer and electronic products and machinery, reported contraction.
Despite the mixed responses from survey participants, some noted stable conditions while others expressed concerns about factors like the Panama Canal drought and supply chain disruptions. Nevertheless, the overall resilience of the economy has led to hope that a recession may be avoided in the near future.
In addition to the PMI, other economic indicators, such as orders for durable goods and business spending on equipment, indicated strength in the manufacturing sector. New orders in the ISM survey improved, leading to increased factory production.
Factory employment also rebounded after a slump in July, with the employment gauge rising to 51.2 in September. However, challenges like attrition and hiring freezes persisted.
In terms of prices, the survey revealed that manufacturers paid lower prices for inputs, with the prices-paid measure dropping from 48.4 in August to 43.8 in September. While this suggests goods disinflation, it's worth noting that auto workers' strikes and rising energy prices could potentially impact prices in the future.
Construction spending continued to show strength, with a 0.5% increase in August, driven by spending on housing and factory construction. However, high mortgage rates posed a potential threat to this momentum.