Investors may get some clues about the size of the Federal Reserve’s next rate cut this week as the latest US jobs report is released and Fed Chairman Jerome Powell speaks. Meanwhile, the final quarter of what has been a tumultuous year for the markets so far begins. Here’s your look at what’s happening in the markets for the week ahead.
US jobs report
The Fed kicked off its rate-cutting cycle with a whopping 50 basis point cut earlier this month, but the labor market remains a focus for investors gauging how quickly the central bank will need to cut rates in the coming months.
The Labor Department is due to release the October nonfarm payrolls report on Friday, with economists expecting the US economy to have added 144,000 jobs.
Investors are interested to see if the jobs data will support expectations of a soft landing scenario, in which the Fed tames inflation without hurting growth.
Weaker-than-expected data could rekindle fears about the outlook for a recession, while unexpectedly strong employment growth may raise concerns that the Fed will not cut rates as deeply as expected as it seeks to avoid a resurgence of inflation.
Powell remarks
Fed Chairman Jerome Powell is scheduled to speak on the economic outlook before the National Association for Business Economics on Monday.
In a note dated Friday, Deutsche Bank analysts said they expected Powell’s comments to largely echo his remarks after the news conference, where he justified the outsized rate cut with confidence gained about inflation and clear shifting downside risks, especially in the labor market.
Investors will also have the opportunity to hear from several other Fed officials during the week, including Fed Regional Presidents Bowman, Bostic, Barkin and Williams.
Ahead of Friday’s jobs report, Tuesday’s JOLTS report for August and Wednesday’s ADP data on private sector hiring will provide a broad picture of the state of the labor market.
It starts in the 4th quarter
The fourth quarter kicks off on Tuesday after a tumultuous few months in the markets.
August was a volatile month with the clearing of the yen’s carry trade coming almost at the same time as Mag 7 tech bulls collapsed and recession fears flared after a weaker-than-expected US jobs report.
Stocks have since rebounded to new record highs, but the yen is set for its best quarterly performance since the 2008 global financial meltdown, global benchmark borrowing costs and oil have fallen nearly 15% and China is turning on the stimulus taps .
The final quarter will be dominated by the November US election between Donald Trump and Kamala Harris, so we are likely to see more volatility.
Eurozone inflation
The euro zone is due to release September’s emergency inflation data on Tuesday, which will be closely watched as European Central Bank officials consider whether to cut interest rates again in October.
Economists expect annual inflation to come in at 1.9%, falling below the ECB’s 2% target for the first time since June 2021 thanks to lower energy prices, although it is expected to pick up again in recent months months of the year.
Investors now estimate the chance of a 25 basis point rate cut in October to be just over 50%, after just last week they saw a rate cut as unlikely as business activity in the euro zone unexpectedly shrank in September, fueling fears that the ECB has fallen behind.
Oil prices
Oil prices were higher on Friday but fell on the week as investors weighed expectations of higher global supply against fresh stimulus from top crude importer China.
On a weekly basis, Brent was down about 3%, while crude futures fell about 5%.
China’s central bank on Friday announced new stimulus measures aimed at bringing economic growth back to this year’s target of around 5%.
But concerns over oversupply weighed on reports that the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, would go ahead with plans to increase production by 180,000 bpd each month from December.
Heightened tensions in the Middle East, raising the risk of supply disruptions, continued to support the oil market.
Energy traders will be closely watching labor market data in the coming days, as interest rate cuts typically boost economic activity and energy demand.
–Reuters contributed reporting
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Reference;
Burke, N. (2024) Top 5 things to watch in markets in the week ahead By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/economy/top-5-things-to-watch-in-markets-in-the-week-ahead-3637976 (Accessed: 29 September 2024).
