The Davy Digest - 21st October 2024

Last week was headlined by Thursday’s European Central Bank (ECB) meeting. Christine Lagarde delivered her third cut of the year, reducing interest rates to 3.25%, and remained positive about growth in Europe and continued disinflationary trends. European equities finished higher for the week, while bond yields pushed lower. In the US, September’s retail sales data came in above consensus as consumers there continued to remain resilient. Industrial production data disappointed however, with month-on-month growth falling to -0.3% in September. In the UK, inflation surprised positively, falling to 1.7% year-on-year and setting the stage for another Bank of England cut at their November meeting. Finally, in Asia, Chinese Gross Domestic Product growth came in above consensus at 4.6% year-on-year.

Last week's highlights

	Retail Sales (17/10) - Rose by 0.4% in September, coming in above consensus. Industrial Production (17/10) – Fell to -0.3% MoM (vs -0.2% expected).
	ECB Meeting (17/10) – Reduced rates by 25bps, as expected, remained confident around European growth and ongoing disinflationary trends.
	Unemployment (15/10) - Eased to 4.0% in the three months to August, following July’s 4.1%. Inflation (CPI) (16/10) - Rose by 1.7% year-on-year, down from 2.2% in the 12 months to August.
	China Q3 GDP (18/10) – Increased 4.6% from Q3 last year, coming in above consensus.

Next week features the release of plenty of preliminary macroeconomic for October, including PMIs in the US, UK and Europe, as well as the Eurozone consumer confidence reading. On Friday, the University of Michigan will also release their consumer survey, providing detail on consumer sentiment and expectations in the US. In Asia, Japanese inflation data will be for October will be released on Thursday while, in China, the People’s Bank of China will be meeting to adjust interest rates.

What's on the radar

	Flash PMIs (24/10) University of Michigan Consumer Sentiment Survey (25/10)
	German Producer Price Index (21/10) Preliminary Eurozone Consumer Confidence (23/10) Eurozone Flash PMIs (24/10)
	Flash PMIs (24/10) Public Borrowing
	PBoC Interest Rate Decision (21/10) Tokyo Inflation (CPI) (24/10)

Chart of the moment

Christine no longer the Lagarde

Source: MIPR Bloomberg as of 17/10/2024.

• The European Central Bank (ECB) cut interest rates by 25 basis points last week amid slowing Eurozone inflation and weak growth.
• Headline inflation fell to 1.7% in September, allowing the ECB to cut rates in consecutive meetings for the first time since 2011.
• ECB President Christine Lagarde believes the Eurozone economy is still on course for a soft landing, saying “we certainly do not see a recession”.
• At the post meeting press conference, Lagarde stressed the need for fiscal and structural policies to make the Eurozone economy more productive and competitive. Lagarde said it is crucial to follow up on Mario Draghi’s proposals for enhancing European competitiveness with ambitious, concrete structural policies.