The Davy Digest - 30th September 2024

Global equities were broadly positive last week as markets continued to adjust in the wake of the US Federal Reserve cutting interest rates by 0.5%, to 5.0%. On Monday, manufacturing data in the US remained weak, however markets took their positive tone from services data, which continues to indicate growth through its 20-month long expansionary streak. The Fed’s preferred inflation measure – core Personal Consumption Expenditure – came in at 2.7% year-on-year for August, reaffirming the current disinflationary trend. The S&P 500 closed at all-time highs on 3 occasions last week, and finished higher over the week. Equity market sentiment continues to be driven by falling inflation, interest rates, oil prices, and the US dollar. Chinese authorities announced a range of monetary and fiscal measures to reverse the recent misfortunes in Chinese equities (discussed in detail below). Elsewhere in Asia, the yen strengthened on Friday while Japanese equities fell following leadership elections in Japan’s ruling party. Their newly-elected party leader and Prime Minister, Shigeru Ishiba, is supportive of Bank of Japan policy and further interest rate hikes. Europe was up for the week, supported by the positive news in China. This was despite lower-than-expected PMI (Purchasing Managers’ Index) data earlier in the week.

Last week's highlights

	Manufacturing & Services PMIs (23/09) – services above consensus at 55.4, while Manufacturing continues to lag at 47.0. US Core PCE Inflation (27/09) – Continuing to see disinflationary pressure at 2.7% YoY.
	Manufacturing & Services PMIs (23/09) – composite fell to 44.8 (vs 50.6 expected), with French Services data disappointing. Swiss National Bank (26/09) – reduced rates by 25bps.
	Manufacturing & Services PMIs (23/09) – Manufacturing and Services both decreased, coming in below consensus. Labour Conference (24/09) – Starmer and Reeves ruled out a return to economic austerity.
	Reserve Bank of Australia meeting (23/09) – kept rates on hold, as expected. Tokyo CPI (26/09) – core CPI rose 2.0% YoY, matching forecast.

Next week JOLTS and Nonfarm Payrolls releases will provide further insight into the condition of the US labour market. ISM Manufacturing and Services PMIs will be released in the US. Meanwhile, in Europe, the employment data will be released, as well as preliminary Harmonised Index of Consumer Prices (HICP) inflation print for September and the Eurozone Producer Price Index, which will offer indications on progress in the fight against inflation.

What's on the radar

	UJOLTS Job Openings (01/10) ISM Manufacturing (01/10) and Services (03/10) Labour market data & Nonfarm Payrolls (04/10)
	German Retail Sales (30/09) Preliminary Eurozone HICP (01/10) Eurozone Producer Price Index (04/10)
	Q2 GDP (30/09)
	China Caixin PMIs (30/09) Japan Industrial Production (30/09)

Chart of the moment

The Sleeping Dragon Awakens

Source: Davy, DataStream as of 26/09/2024. Total Return Index used.

Markets to digest a sweeping stimulus package:

• China A Shares surged last week as Chinese authorities announced a broad range of new stimulus measures.
• The stimulus package includes five key measures, including cuts to the main policy rate, mortgage rates and the reserve requirement ratio for banks, as well as government funding to boost the stock market.
• On top of the monetary stimulus, Chinese leaders vowed to intensify fiscal support for the economy. The politburo, led by President Xi Jinping, pledged on Thursday to “issue and use” government bonds to better implement “the driving role of government investment.”
• The politburo meeting also promised to provide more support for property developers and owners, saying the government should “promote the real estate market to stop falling and stabilise”.