Investors’ attention next week will likely be on Friday’s U.S. jobs report for reassurance of the economy’s strength following the Federal Reserve’s big interest rate cuts.
Economists polled by Reuters expect the U.S. to add 145,000 jobs in September, up slightly from 142,000 in August and up from 89,000 in July. . The unemployment rate, calculated from a separate survey, is expected to remain flat at 4.2%.
U.S. stocks have edged higher since the Federal Reserve earlier this month cut interest rates by 0.5 percentage points, the first in four years, to a range of 4.75 to 5%. Federal Reserve Chairman Jay Powell said the Fed intends to support a strong U.S. labor market.
Barclays analysts said September’s jobs report could be particularly important because it will be the first time in three months that the economy will be unaffected by weather events such as July’s Hurricane Beryl.
However, the predictions in Friday’s report are very different. Citigroup analysts estimate that only 70,000 new jobs were created, pointing to a growing number of survey respondents saying jobs are becoming increasingly difficult to find. .
“Survey data shows that individuals are now finding it difficult to find work because there are fewer jobs available,” said Andrew Hollenhorst, U.S. economist at the bank. This confirms what is happening.” “As the Fed faces a rapidly softening labor market, we continue to expect more aggressive easing.” Jennifer Hughes
Will inflation in the euro area fall below 2%?
The euro zone is scheduled to release inflation data on Tuesday as investors consider how fast the European Central Bank is likely to continue cutting interest rates.
Economists polled by Reuters said the eurozone harmonized consumer price index, the ECB’s preferred inflation indicator, will grow at 2% in September, in line with the central bank’s target from 2.2% in August. We expect it to decline.
The central bank has been cutting interest rates since the summer in response to falling inflation in the eurozone and signs that the eurozone economy was at risk of grinding to a halt.
However, there are early signs that inflation may be lower than expected. Data on Friday showed France’s inflation rate fell to 1.5% from 2.2% in August, but the figure was lower than the 1.9% expected by economists.
In Spain, headline inflation fell to 1.7% from 2.3% last month. The move has led swap market traders to price in an 81% chance that the ECB will cut interest rates at its next meeting. Earlier this month, investors estimated that chance at just 25%.
“French inflation crashed in September, but if these data are representative of what happened across the eurozone (which is far from certain), then the ECB dovish market will be closed for the third time next month,” he said. “It will put us in a very strong position to force a rate cut.” Klaus Vistesen, economist at Pantheon Macroeconomics.
A decline in industrial production in Germany and Italy has also raised concerns that the eurozone economy is slowing after a brief period of growth earlier this year.
“We have long argued that if euro area core goods inflation fails to recover in September in line with our and the ECB’s new forecasts, an October rate cut will be the norm. Now that is a reality. “It seems like it’s happening,” Vystesen said. mary mcdougall
Will Japan’s business confidence recover?
Shigeru Ishiba’s first day as Japan’s new prime minister on October 1st may not be all that pleasant.
On the same day that his appointment is scheduled to be approved by Congress, the Bank of Japan is scheduled to release its quarterly Tankan survey of Japan’s business conditions. Most economists suspect that this will be a negative sign of a decline in confidence for the new leader.
Shigeru Ishiba will inherit an economy that has emerged from years of deflation, but faces headwinds from an aging and declining population © REUTERS
According to Citi, the composite confidence index for non-manufacturing is expected to remain firmly in positive territory, but for small and medium-sized enterprises, rising labor costs are likely to weigh on confidence, resulting in a 1 point drop to +32. It is said to be a possibility.
The drop in business confidence will set the tone for what is likely to be a difficult year-end as Japan’s households continue to bear the pain of rising prices.
Ishiba was elected to succeed Prime Minister Fumio Kishida as president of the ruling Liberal Democratic Party under less-than-ideal circumstances, with the sudden stock market crash in early August reminding us just how fragile investor sentiment can be. was voted as a person.
Economists at Citi said weak domestic demand in China, along with the yen’s strength to January levels, will weigh on sentiment among major manufacturers, a key indicator of the survey. .
Of particular note is how companies have responded given the large fluctuations in the yen over the summer and the fact that currency movements are more clearly factored into the Bank of Japan’s monetary policy discussions. be.
Of particular interest will be companies’ assumptions about the dollar-yen exchange rate and its impact on profit forecasts. leo lewis
