Despite September’s higher-than-expected core inflation figures, several Federal Reserve policymakers signaled that they remain on track to continue easing rates. This sentiment, along with strong jobs data from the prior week, has traders pricing in a roughly 80% chance of a quarter-point rate cut at the upcoming November meeting. Meanwhile, Chinese equities are ending the week on a sour note, as investors await a key weekend briefing where Beijing is expected to announce fresh fiscal stimulus measures to revive its slowing economy.
Fed Officials Steady in the Face of Core Inflation Uptick
Higher Core Inflation Doesn't Deter Fed Policymakers
September’s inflation report showed a slight uptick in core inflation, rising to 3.3% year over year, compared to 3.2% in August. The monthly core inflation rate also held steady at 0.3%. Despite this, three Federal Reserve officials, including Chicago Fed President Austan Goolsbee and Dallas Fed President Lorie Logan, indicated that they remain comfortable with continuing to cut rates.
- Treasury and Dollar Movements: US Treasuries were steady in Asian trading, while the Bloomberg Dollar Index remained largely unchanged.
Chinese Markets Await Key Stimulus Announcement Amid Volatility
Chinese Stocks End Volatile Week Lower
Chinese equities struggled to find stability as the week came to a close, underperforming their regional peers. Investor caution is growing ahead of a key Saturday press conference, where China’s finance minister is expected to unveil further details on fiscal stimulus measures aimed at stabilizing the country’s slowing economy.
-Expected Stimulus Package: Analysts expect Beijing to deploy up to 2 trillion yuan ($283 billion) in new fiscal stimulus, including infrastructure investments and measures to boost domestic consumption. While this is seen as a positive step, uncertainty remains over whether it will be enough to reignite sustained growth.
Global Impact of China's Economic Slowdown
The uncertainty surrounding China’s economic recovery has broader implications for global markets, particularly in sectors like commodities, manufacturing, and technology.
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US Markets Drift Lower Amid Inflation Concerns and Earnings Anticipation
Stocks End Day Slightly Lower After Inflation Report
US equities ended the day mostly in the red, as investors digested the latest inflation data and looked ahead to the start of earnings season. The Dow Jones Industrial Average slipped by 0.1%, while the $S&P 500(.SPX)$ fell by 0.2%, and the $NASDAQ(.IXIC)$ edged down 0.05%. $NVIDIA Corp(NVDA)$ $Tesla Motors(TSLA)$
- Inflation’s Impact on Markets: Although the overall consumer price index (CPI) showed moderation, the persistence of core inflation left some investors wary. However, the inflation data was not seen as a game-changer, with markets still expecting the Fed to move forward with a quarter-point rate cut in November.
US Core Inflation MoM
CPI
Earnings Season Kicks Off with Big Banks
Banks Set to Report Earnings Amid Economic Uncertainty
The spotlight now shifts to earnings season, with major banks such as $JPMorgan Chase(JPM)$ and Wells Fargo set to report their quarterly results on Friday. Investors will be closely watching for insights into how the financial sector is navigating the current economic environment, particularly in light of rising interest rates and potential credit tightening.
Conclusion:
As the week draws to a close, markets remain in a wait-and-see mode, with key events in both the US and China expected to shape the next phase of market movements. While the Federal Reserve is likely to cut rates again in November, core inflation’s persistence is a reminder that the central bank’s job is not yet finished. Meanwhile, China’s looming fiscal stimulus announcement could provide a much-needed boost to global sentiment if it meets investor expectations…
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This report is for informational purposes only and should not be construed as financial advice. Market conditions can change rapidly, and investors should consult a financial professional before making investment decisions. Past performance does not guarantee future results.
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