Daily Global Market Overview By zForex

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"Asia-Pacific Markets Rise on Softer US Inflation Data, Global Stocks Gain Amid Signs of Inflation Slowdown"

Asia-Pacific markets experienced gains on Friday as new inflation data from the U.S. turned out to be softer than expected. This development has raised optimism that inflation may decrease without negatively impacting the labor market. Globally, stocks rose throughout the week due to the lower-than-expected U.S. consumer price index and producer price index, signaling a significant deceleration in inflation within the world's largest economy.
In June, the U.S. producer price index increased by a smaller margin than predicted, rising 0.1% year on year. The core PPI, which excludes volatile food and energy prices, also climbed by 0.1%, falling short of expectations.
Christopher Waller, a Governor of the Federal Reserve Board, expressed the belief that two more interest rate hikes are necessary to bring inflation down to the desired level. During a speaking engagement at New York University, he welcomed the recent reading of the consumer price index, which indicated a moderation in the inflation rate. However, he emphasized the importance of sustained improvement before expressing confidence in the deceleration of inflation.
The International Monetary Fund stated that China's growth is slowing due to weakened private investment, declining exports, and reduced domestic demand.
The Reserve Bank of Australia announced on Friday that Michele Bullock, the deputy governor, has been appointed as the new chief of the central bank, as revealed by the country's Treasury.
Investors have also been evaluating data from the U.K. this week. Wage growth in the country has been significant, raising concerns for the Bank of England as it grapples with the highest inflation among the Group of Seven nations. Meanwhile, the economy experienced a 0.1% contraction in May, slightly better than the consensus estimate of a 0.2% contraction.
 

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"Global Markets Respond to Lower Inflation and Speculations on Federal Reserve's Approach, while Asia-Pacific Markets React to China's GDP Miss"

The global markets experienced a boost from lower-than-expected inflation figures in the United States, alongside growing speculation of a less aggressive approach by the Federal Reserve in the future.
In Asia-Pacific, market performance on Monday was negative as investors analyzed important economic data from China. China's gross domestic product (GDP) for the second quarter grew by 6.3% compared to the previous year, falling short of the 7.3% forecast by analysts surveyed by Reuters.
The second quarter's GDP growth rate of 6.3% signifies a slower pace of expansion in comparison to the 2.2% growth recorded in the first three months of the year.
Additionally, the unemployment rate for young individuals aged 16 to 24 reached a new record of 21.3% in June.
Significantly, China, the world's second-largest economy, reported a second-quarter GDP growth of 6.3%, which was lower than economists' expectations. Furthermore, the People's Bank of China maintained its medium-term loan rates at 2.65% after providing 103 billion yuan ($14.43 billion) of one-year medium-term lending facility loans at that rate.
The upcoming week will witness a rise in earnings announcements, featuring results from Novartis, Ocado, and ASML in Europe, alongside major U.S. companies like Bank of America, Morgan Stanley, Tesla, Netflix, United Airlines, and IBM.
According to the International Monetary Fund, headline inflation appears to have reached its peak among the group of 20 nations. However, core inflation, particularly in advanced economies, remains significantly higher than the targets set by central banks.
 

zForex

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"Global Markets Respond to Lower Inflation and Speculations on Federal Reserve's Approach, while Asia-Pacific Markets React to China's GDP Miss"

The global markets experienced a boost from lower-than-expected inflation figures in the United States, alongside growing speculation of a less aggressive approach by the Federal Reserve in the future.

In Asia-Pacific, market performance on Monday was negative as investors analyzed important economic data from China. China's gross domestic product (GDP) for the second quarter grew by 6.3% compared to the previous year, falling short of the 7.3% forecast by analysts surveyed by Reuters.
The second quarter's GDP growth rate of 6.3% signifies a slower pace of expansion in comparison to the 2.2% growth recorded in the first three months of the year.

Additionally, the unemployment rate for young individuals aged 16 to 24 reached a new record of 21.3% in June.

Significantly, China, the world's second-largest economy, reported a second-quarter GDP growth of 6.3%, which was lower than economists' expectations. Furthermore, the People's Bank of China maintained its medium-term loan rates at 2.65% after providing 103 billion yuan ($14.43 billion) of one-year medium-term lending facility loans at that rate.

The upcoming week will witness a rise in earnings announcements, featuring results from Novartis, Ocado, and ASML in Europe, alongside major U.S. companies like Bank of America, Morgan Stanley, Tesla, Netflix, United Airlines, and IBM.

According to the International Monetary Fund, headline inflation appears to have reached its peak among the group of 20 nations. However, core inflation, particularly in advanced economies, remains significantly higher than the targets set by central banks.
 

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Mixed Performance in Asia-Pacific Markets, Hong Kong Stocks Lead Losses, RBA Maintains Interest Rates, and China Evergrande Group Reports Steep Losses
The Asia-Pacific markets experienced a mixed performance, with Hong Kong stocks leading the region's losses, plummeting by 2%. This decline was primarily influenced by the real estate and technology sectors. Meanwhile, the Nikkei 225 saw a marginal increase, and the Topix rose by 0.32%. Japanese investors are preparing for significant economic data to be released later this week, including trade balance and consumer price index figures for June.
The meeting minutes reveal that the Reserve Bank of Australia (RBA) recently deliberated on whether to maintain or raise interest rates by 25 basis points during its July meeting. Ultimately, the central bank decided to keep the existing rates, citing the current monetary policy as already restrictive due to the prevailing cash rate of 4.1%. The RBA acknowledged the historically high level of mortgage interest payments in May and recognized a decline in inflation, which was expected to help mitigate the risk of medium-term inflation expectations rising. Furthermore, the RBA expressed concerns that increasing rates could lead to a more significant-than-expected slowdown in output growth, highlighting the substantial uncertainty surrounding household consumption.
China Evergrande Group, a Chinese property developer, reported substantial losses in its long-delayed results for 2021 and 2022. The company recorded a total net loss of 686.2 billion yuan ($95.68 billion) in 2021 and a 125.8 billion yuan total net loss in 202
On Wednesday, the U.K. inflation figures will be released as the Bank of England prepares for its upcoming monetary policy meeting on August 1. Following strong wage growth in the three months leading up to May, there remains a possibility of a consecutive 50 basis point hike.
Additionally, U.S. retail sales data is set to be released, and a strong performance indicated by the numbers could lead to a reassessment of whether the Federal Reserve has almost concluded its interest rate hikes.
 

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Asia-Pacific Markets Slide on Japan's Inflation Data, TSMC's Net Income Decline; European Markets Await Spanish Election

Asia-Pacific markets experienced a decline on Friday as investors analyzed Japan's consumer price index figures for June. According to official data, the country's core inflation rate, excluding fresh food costs, was reported at 3.3%, aligning with economists' expectations polled by Reuters. This figure is slightly higher than May's rate of 3.2% and surpasses the Bank of Japan's 2% target. Additionally, Japan's headline inflation rate for June also stood at 3.3%, up from the previous month's 3.2%.
On the same day, Taiwan Semiconductor Manufacturing Company, the world's largest chipmaker, faced a 3.11% drop in morning trade after reporting its first quarterly net income decline in four years. In the second quarter, the company's revenue decreased by 10% compared to the same period last year, amounting to NT$480.84 billion, while net income fell by 23.3% year-on-year to NT$181.8 billion.
As European markets prepared to open on Friday, investor enthusiasm was tempered due to the upcoming Spanish election and anticipation for a significant week of corporate earnings. The U.K. Prime Minister Rishi Sunak's Conservative Party faced setbacks in a series of by-elections, losing two seats in parliament to the main opposition Labour Party and centrist Liberal Democrats. These results signal potential challenges for Sunak's party in the forthcoming general election in 2024.
Spain was also gearing up for a pivotal snap general election on Sunday that could potentially lead to a shift in power from left-wing Prime Minister Pedro Sanchez's four-year tenure to a more right-leaning government in Europe's sixth-largest economy.
In other news, U.K. retail sales experienced a boost of 0.7% month on month in June, attributed to unusually warm weather, as reported by the Office for National Statistics on Friday. Economists polled by Reuters had projected a more modest monthly rise of 0.2%.
Meanwhile, the Bloomberg Commodity Index was on track to record its third consecutive weekly gain, mainly driven by surging wheat prices following escalated tensions between Russia and Ukraine in the Black Sea region.
 

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Chinese Property Stocks Tumble on Debt Fears, Japan's Business Activity Holds Steady, Australia's Private Sector Contracts

On Monday, Chinese property stocks experienced a significant decline, with Country Garden's shares leading the way by reaching their lowest point in over eight months. This was triggered by renewed concerns about the debt situation of Chinese real estate developers. In response, China is implementing a series of measures to bolster its economy, especially ahead of a crucial Politburo meeting scheduled for this week, which will assess the country's economic performance for the first half of the year.
In the past week, the authorities made several pledges aimed at specific sectors and intended to reassure private and foreign investors about a more favorable investment environment. However, many of these measures were broad and lacked specific details.
Meanwhile, Japan's business activity showed growth for the seventh consecutive month, according to preliminary estimates by au Jibun Bank. The country's composite purchasing managers index (PMI) remained at 52.1 for July, unchanged from the previous month. However, the services PMI slightly decreased from 54 in June to 53.9, while manufacturing activity continued to contract, with the PMI declining from 49.8 to 49.4.
In Australia, private sector business activity declined for the first time since March, mainly due to a contraction in the services sector. Juno Bank's flash estimates showed a drop in the composite purchasing managers index to 48.3 from 50.1 in June. The services PMI fell below the no-change mark of 50, reaching 48, compared to 50.1 in June. On the other hand, manufacturing activity saw a milder contraction at 49.6, improving from 48.2 in June.
It's important to note that a PMI reading above 50 signifies an expansion in the sector, while a reading below 50 indicates a contraction.
Additionally, the HCOB Germany Composite PMI declined to 48.3 in July 2023 from June's 50.6, falling below the forecast of 50.3, as indicated by preliminary estimates. This suggests the first contraction in private sector activity so far this year and the most significant downturn since November. The decline was attributed to manufacturing production falling at the fastest rate since May 2020, mainly due to the rapidly declining demand for goods. Lastly, Spanish equities underperformed following an inconclusive outcome in the recent election held on Sunday, which generated uncertainty and weighed on investor sentiment.​
 

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Asia-Pacific Markets Show Mixed Performance Amid China's Factory Contraction, Unemployment Rate Declines in Japan, and UK Housing Market Struggles in July 2023

On Tuesday, the Asia-Pacific markets exhibited mixed performance, triggered by China's factory activity entering contraction territory for the first time since April, as per the Caixin survey by S&P Global. The Purchasing Managers Index (PMI) for July registered at 49.2, falling short of economists' expectations of 50.3, as revealed by Reuters polls. This comes after yesterday's official statistics, indicating China's factory activity contracted for the fourth consecutive month, with a PMI reading of 49.3.

Meanwhile, in Japan, the seasonally adjusted unemployment rate for June decreased to 2.5%, slightly below the previous month's 2.6%, aligning with economists' predictions based on government data. Additionally, Japan's jobs to applicants ratio for June stood at 1.3, slightly lower than the Reuters forecast of 1.32.

Contrary to economists' expectations from Reuters polls, the Reserve Bank of Australia decided to maintain rates at 4.1%, instead of implementing a 25 basis points hike.

In Europe, several companies, including Euroapi, Uniper, Daimler Truck, DHL Deutsche Post, Covestro, BP, HSBC, Travis Perkins, and Diageo, are expected to release their earnings reports. Additionally, Eurozone unemployment data will be published.

In the United Kingdom, the Nationwide House Price Index for July 2023 experienced a notable decline of 3.8% compared to the previous year, accelerating from the 3.5% decrease observed in June, marking the largest fall in house prices since July 2009. This decrease in housing prices is attributed to subdued housing market activity due to stretched housing affordability for prospective homebuyers with mortgages.
Throughout the day, PMI updates will continue, encompassing figures from the Eurozone, including Germany, as well as from the UK and the US.​
 

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Central Banks' Moves and Economic Indicators: Japan's Policy Adjustment, New Zealand's Rising Unemployment, and Fitch's Rating Cut

The Bank of Japan has pushed back on speculation its recent policy adjustment marked the start of a tightening cycle.
Deputy Governor Shinichi Ichida on Wednesday reiterated the central bank’s flexible threshold for tolerance on long-term bond yields is merely a necessary modification to sustain its ultra-easy monetary policy position.
New Zealand’s unemployment rate increased to 3.6% in the second quarter, up from the 3.4% in the first quarter and higher than the 3.5% expected in a Reuters poll.
Most notably, job growth climbed 1% quarter on quarter, sharply higher than Reuters forecast of 0.5%.
Fitch Ratings cut the United States’ long-term foreign currency issuer default rating to AA+ from AAA on Tuesday, citing an erosion of governance and expected fiscal deterioration over the next three years.
In particular, the agency called out brinksmanship in Washington around debt ceiling negotiations earlier this year
 

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Service Sector Growth in China, Bank of England's Rate Hike Expectations, and Global Stock Market Performance

In July, China's service sector activity showed a stronger expansion, as indicated by the Caixin survey compiled by S&P Global. The service sector purchasing managers index reached 54.1, slightly up from June's 53.9. The survey report attributes this growth to a solid rise in business activity across the sector and a significant increase in overall new business, leading to six consecutive months of firms expanding their payroll numbers
In June, Australia's trade surplus declined to 11.3 billion Australian dollars ($7.4 billion) from May's AU$11.7 billion.
Private payrolls data showed that US companies added 324,000 workers last month, surpassing the consensus forecast of 190,000. In addition, investors reacted to news that the Treasury will issue $103 billion of securities next week, slightly more than forecast, and this comes shortly after Fitch Ratings' downgrade of the US.
The Bank of England (BOE) is considering a 25-basis point hike after last month's inflation rate showed some improvement, sitting at 7.9%, down from 8.7% in May. Despite the BOE's divergent stance from other central banks, high inflation levels and mixed labor and wage data may cause market apprehension about any unexpected moves similar to the half-point curve ball thrown at their previous meeting.
 

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zForex

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Asian Shares Decline, Bank of Japan Holds Negative Rates, Fed Officials Weigh Interest Rates, and German Production Slips

Asian shares mostly declined on Monday, alongside European equity futures, as traders analyzed a mixed US jobs report to anticipate the Federal Reserve's next move. Additionally, the escalating Ukraine-Russia conflict added to the negative sentiment.
The Bank of Japan maintained its negative interest rate policy and stressed the importance of continuing monetary easing to reach its 2% inflation target. During its recent meeting, the bank pledged to adopt a more flexible approach to yield curve control, using upper and lower bounds as references instead of strict limits. However, the bank also acknowledged the potential adverse impact of capping 10-year Japanese government bond yields at 0.5% on bond and financial markets. Nevertheless, it remains committed to supporting wage hikes through continued monetary easing.
Federal Reserve officials, Raphael Bostic and Austan Goolsbee, suggested that slower US employment gains might prompt the central bank to consider how long to maintain elevated interest rates. Meanwhile, their colleague, Michelle Bowman, stated that the Fed might need to raise rates further to fully restore price stability.
German industrial production fell by 1.5% in June, surpassing the predicted 0.5% decline, according to data from the federal statistics office. The manufacturing sector in Europe's largest economy is facing challenges amid a downturn. It's expected that the German economy will contract again in the second half of 2023 following a winter recession that ended in the second quarter.
On Monday, oil prices surged to their highest since mid-April, driven by an attack on a crucial Russian oil export hub and extended production cuts by OPEC kingpin Saudi Arabia and Russia.
 

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Global Business Activities Vary Amidst Contractions and Expansions

Japan experienced an accelerated business expansion in August, primarily driven by strong growth in its service sector, as indicated by a private survey conducted by au Jibun Bank. The country's flash Purchasing Managers Index (PMI) for August reached 52.6, surpassing July's figure of 52.2. However, Japan's manufacturing PMI remained in contraction territory for the third consecutive month, registering a reading of 49.0. In contrast, the service sector demonstrated a more substantial expansion, with its PMI climbing from 53.8 to 54.3.

In Australia, business activity contracted at the sharpest rate in 19 months during August, according to surveys conducted by Juno Bank. The country's flash composite PMI for August was recorded at 47.1, a decline from July's 48.2. The manufacturing PMI in Australia stood at 49.4, while the services sector PMI was even lower at 46.7, hitting a 19-month low.
Shifting to Germany, the Composite PMI for August 2023 dropped to 44.7 from the previous month's 48.5, significantly below the anticipated 48.3. This contraction marked the most severe decline in private sector activity since May 2020, post the COVID-19 pandemic. The decline resulted from a deepening manufacturing downturn and renewed contraction in the services sector.
With these economic developments, there is ongoing speculation about the tone Federal Reserve Chair Jerome Powell will adopt in his speech at Jackson Hole on Friday. Market participants are eager to discern whether his comments will be neutral or have a more pronounced effect on the markets than originally anticipated. Richmond Fed President Thomas Barkin noted that the US economy is showing signs of a "reacceleration scenario," with persistently high inflation and a strengthening economy, potentially justifying further interest rate hikes. Notably, retail sales and consumer confidence have remained resilient in the US Barkin also indicated that the recent increase in Treasury yields has not led him to believe that the Federal Reserve has excessively tightened financial conditions.
 

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Global Economic Insights: Inflation Trends, Market Volatility, and Monetary Policy Perspectives

Tokyo's core inflation rate, an indicator of price stability, showed a decrease to 2.8% from July's 3%, falling below the anticipated 2.9% forecasted by economists surveyed by Reuters. This marks the slowest growth in the city's core inflation since September 2022. The metric excludes volatile fresh food prices from the consumer price index.
Despite efforts by policymakers to stabilize the struggling Chinese stock market through major financial institutions, investor pessimism persists, leading to a decline in Chinese stocks. Additional policy measures were introduced, including relaxed mortgage policies, as reported by the official Xinhua news agency.
Philadelphia Federal Reserve President Patrick Harker expressed a view that further interest rate hikes may not be necessary, with potential rate cuts in 2024 depending on economic data. Harker highlighted feedback from business leaders in his district, who suggest that the Federal Reserve should maintain its current stance to allow the impact of previous rate increases to permeate the economy.
The German economy remained stagnant in the second quarter, as confirmed by the Federal Statistics Office. The GDP recorded no growth from the previous quarter when the country experienced a winter recession.
Market participants are closely watching the annual gathering of prominent central bankers in Jackson Hole, Wyoming. Federal Reserve Chair Jerome Powell's scheduled speech is anticipated to outline the criteria for assessing potential rate adjustments, both upward and downward, based on evolving economic conditions. Powell's address is expected to shed light on the Fed's future policy directions..
 

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Insights from the Jackson Hole Economic Symposium: Navigating Uncertainty in Monetary Policy and Economic Shifts

The annual Jackson Hole Economic Symposium, held in the scenic state of Wyoming, is a magnet for economists, reporters, and investors eager to glean insights into the economic horizon. This year's gathering saw prominent central bankers emphasize the continued necessity of elevated interest rates until inflation is brought under control. The discussions, taking place at the Federal Reserve's yearly assembly in Jackson Hole, delved into the challenges posed by shifting economic landscapes.
Keynote speeches from Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde underscored the complexities they confront in determining whether to prolong the sequence of rate hikes that commenced the previous year. Despite their speeches, their intentions for the future remained veiled.
The symposium became a crucible for dialogues encompassing diverse concerns including productivity, innovation, the architecture of bond markets, the interconnectivity of global supply chains, and the ascent of public debt. It was acknowledged that central banks confront limitations in addressing structural transitions, exacerbating the intricacies of monetary policy formulation.
Internal debates within the Federal Reserve and the European Central Bank harmonized with the symposium's discussions, revolving around the quandary of heightening borrowing costs amidst persistent inflation and economic ambiguity. Powell and Lagarde admitted the challenges but abstained from divulging their forthcoming strategies.
Among the inner circle of Powell and Lagarde, dissenting viewpoints arose regarding the necessity of further rate hikes. While some urged cautious progression, taking into account potential repercussions, others championed a bolder approach.
The event dissected the potential effects of evolving trade patterns on the sensitivity of monetary policies and the overall economic robustness. Policymakers also scrutinized the ramifications of burgeoning budget deficits on the orderly functioning of the Treasury market.
In a gesture of humility, Lagarde accentuated the importance of acknowledging the uncertainties inherent in the current economic panorama. She stressed that embracing uncertainty is pivotal to upholding the credibility of central banks and fostering public trust.
 

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Asia-Pacific Gains, German Consumer Sentiment Decline, GBP/USD Momentum, and European Stock Surges

Asia-Pacific markets recorded widespread gains following Wall Street's successful performance on Monday. Leading the surge were Hong Kong and Mainland Chinese stocks, building upon their Monday advances.
For July, Japan's unemployment rate rose to 2.7%, surpassing both June's 2.5% and the anticipated 2.5% forecasted by Reuters-polled economists. Notably, the country's jobs-to-applicants ratio slipped from June's 1.3 to 1.29 in July, marking the third consecutive month of decline, contrary to economists' expectations of stability.
Although Japan's government suggested a potential turning point in its 25-year battle against deflation, the yen remained largely unaffected, holding close to its 10-month low from Monday.
Predictions from the GfK Institute's survey indicate a forthcoming decrease in German consumer sentiment for September. This projection results from diminishing income expectations and reduced inclination to make purchases, with the consumer sentiment index declining to -25.5 for September, down from August's slightly revised -24.6.
Concerns about supply disruptions caused by impending stoppages at two Chevron (CVX.N) liquefied natural gas facilities in Australia elevated European gas traders' apprehension, subsequently raising prices.
Later in the day, the focus shifts to US job openings. A minor decline could signal a potential slowdown in broader labor statistics due to be released on Friday.
Investors are still navigating the path of monetary policy, with Federal Reserve Chairman Jerome Powell reiterating the possibility of further interest rate hikes if inflation remains below target. Powell emphasized the Fed's dedication to combating inflation, stating that although it has decreased from its peak, it remains elevated.
 

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China's Credit Trends, Central Banks, and Inflation Prospects

China has witnessed an improvement in credit demand and a reduction in deflationary pressures, suggesting positive signs for both its economy and financial markets. This development has boosted optimism in European stocks and US futures, as it hints at China's economic stability and expectations that the US can manage inflation without harming growth.
In the midst of China's economic challenges, Country Garden, the country's largest private developer, faces a series of creditor votes, attempting to avoid default by extending debt repayments to onshore creditors over three years.
Meanwhile, the yen strengthened by over 1% against the US dollar after BOJ Governor Kazuo Ueda suggested that there might be enough information by year-end to assess wage growth, a crucial factor in determining the Bank of Japan's monetary policy adjustments.
Although Europe had a slow start, the focus this week centers on monetary policy decisions. The ECB is set to announce its rates on Thursday, with expectations of a potential rate hike, driven by hawkish comments from officials and rising crude oil prices.
The Bank of England's announcement is scheduled for September 21, following the Fed. BOE chief economist Huw Pill is addressing the situation today, paving the way for British jobs data on Tuesday and GDP figures on the following day.
Regarding the Federal Reserve, officials have conveyed a clear message lately – they are not eager to raise rates this month but remain cautious about inflation. Investors are eagerly awaiting key US inflation data, including the consumer price index on Wednesday and the producer price index on Thursday.
US Treasury Secretary Janet Yellen has expressed growing confidence that the US can manage inflation without causing significant harm to the job market.
 

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China's Credit Trends, Central Banks, and Inflation Prospects

China has witnessed an improvement in credit demand and a reduction in deflationary pressures, suggesting positive signs for both its economy and financial markets. This development has boosted optimism in European stocks and US futures, as it hints at China's economic stability and expectations that the US can manage inflation without harming growth.
In the midst of China's economic challenges, Country Garden, the country's largest private developer, faces a series of creditor votes, attempting to avoid default by extending debt repayments to onshore creditors over three years.
Meanwhile, the yen strengthened by over 1% against the US dollar after BOJ Governor Kazuo Ueda suggested that there might be enough information by year-end to assess wage growth, a crucial factor in determining the Bank of Japan's monetary policy adjustments.
Although Europe had a slow start, the focus this week centers on monetary policy decisions. The ECB is set to announce its rates on Thursday, with expectations of a potential rate hike, driven by hawkish comments from officials and rising crude oil prices.
The Bank of England's announcement is scheduled for September 21, following the Fed. BOE chief economist Huw Pill is addressing the situation today, paving the way for British jobs data on Tuesday and GDP figures on the following day.
Regarding the Federal Reserve, officials have conveyed a clear message lately – they are not eager to raise rates this month but remain cautious about inflation. Investors are eagerly awaiting key US inflation data, including the consumer price index on Wednesday and the producer price index on Thursday.
US Treasury Secretary Janet Yellen has expressed growing confidence that the US can manage inflation without causing significant harm to the job market.
 

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Asia's Stock Fluctuations, European Optimism, and Key Economic Events Ahead

Stocks in Asia fluctuated and Chinese shares were back in the red. Gains triggered by news on Country Garden Holdings Co. — which secured payment extension approval from its bondholders — were not enough to keep the positive sentiment going for long.
European stock markets are poised to open higher on Tuesday, extending the positive momentum from the previous session. This comes as we enter a busy week for economic data.
Taiwan Semiconductor Manufacturing Corp saw a 1.6% increase in its shares following a deal between Apple and Qualcomm. Qualcomm will supply 5G chips to Apple until at least 2026.
TSMC is a manufacturer of both Qualcomm's chips and Apple's chips, which power its devices.
Bank of Japan boss Kazuo Ueda's weekend comments that the end of stimulus is possible during 2023 is still reverberating in the local bond market, with the benchmark 10-year yield pushing to a new near-decade peak.
In the May to June period, the UK unemployment rate rose by 0.5 percentage points to 4.3%, in line with expectations.
The annual growth in employees' average total pay, including bonuses, reached 8.5%, influenced by one-off payments in June and July 2023 from the NHS and Civil Service.
Notably, annual growth in pay, excluding bonuses, remained stable at 7.8%, marking a record high. Overnight, BOE uber-hawk Catherine Mann warned it's too soon to stop raising rates.
Germany’s economic recovery is in the spotlight as well with the release of the ZEW survey, with sentiment likely weighed down by tighter monetary conditions.
The focus shifts to US inflation data, with the consumer price index figures scheduled for Wednesday and the producer price index for Thursday.
Additionally, China will release a plethora of data on Friday, encompassing house prices, industrial production, retail sales, and unemployment.
 

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Global Markets Brace for US Inflation Data with Rising Oil Prices and Economic Indicators

Asian markets declined following a shaky performance on Wall Street as investors awaited crucial US inflation data, all while concerns grew over rising oil prices and their impact on ongoing inflationary pressures, complicating the outlook for interest rates.
In Japan, the corporate goods price index for August saw a 3.2% year-on-year increase, slightly lower than the revised figure of 3.4% in July. This index reflects the prices charged by Japanese companies when trading with each other. Moreover, corporate sentiment in Japan took a hit in September, with both large manufacturers and non-manufacturers showing diminished optimism.
Meanwhile, the UK experienced a 0.5% drop in gross domestic product in July, falling below the 0.2% contraction predicted by economists in a Reuters poll. The Office for National Statistics attributed this decline primarily to a 0.5% drop in services output. However, the economy outperformed expectations for the second quarter, with the ONS confirming 0.2% growth.
Market sentiment is shifting towards expectations of a quarter-point interest rate hike by the European Central Bank (ECB) due to ongoing concerns about high inflation in the region. Money markets now indicate a 70% probability of a rate increase, up significantly from just 20% earlier in the month. This change in outlook is driven by reports suggesting that the ECB's forthcoming economic forecasts will project inflation exceeding 3% in 2024, reinforcing the case for further tightening.
Economists are estimating a 3.6% year-over-year increase in US inflation, according to Dow Jones. This would represent an uptick from the previous month's reading of 3.2%. Additionally, the core consumer price index, which excludes food and energy costs, is expected to show a 4.3% rise in August, down slightly from the 4.7% gain observed in July.
 

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ECB Raises Interest Rate to Record 4.5% in Fight Against Inflation

The European Central Bank (ECB) has raised its main interest rate for the 10th consecutive time as it prioritizes the battle against inflation over a weakening economy. The rate has now climbed from -0.5% in June 2022 to a record 4.5%. The decision was influenced by revised macroeconomic projections for the euro area, showing higher inflation at 5.6% this year and 3.2% next year. However, the ECB adjusted its medium-term forecast slightly downward to 2.1%.
The ECB suggested that further rate hikes may not be immediate, stating that the current rates would contribute significantly to combating inflation.
This move also increased interest rates on the ECB's main refinancing operations and marginal lending facility to 4.5% and 4.75%, respectively. Economic growth projections for the euro area were lowered for 2023, 2024, and 2025.
While there was uncertainty leading up to this meeting, the majority of governors agreed with the decision. ECB President Christine Lagarde emphasized that future rate decisions would be data-dependent. Headline inflation in the euro area was 5.3% in August, with Germany facing a deteriorating economy. Euro zone business activity also declined to its lowest level since November 2020 in August.
Market focus is now on the ECB's statement language, especially the 2025 inflation forecast and the mention of rates being maintained for a "sufficiently long duration," indicating a flat path for some time to come.

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ECB Hike Signals, China's Economic Surge, and Arm Holdings' Strong Debut

European markets were poised for a positive opening on Friday in response to the European Central Bank's indication that their latest interest rate hike could be their last. Simultaneously, global stocks were experiencing a rally.
Meanwhile, oil prices surged to their highest point in 10 months, driven by robust August data on Chinese retail sales and industrial production. Chinese retail sales surpassed expectations by growing 4.6% compared to the previous year, exceeding the Reuters poll forecast of 3%. Similarly, industrial production in August increased by 4.5% year-on-year, surpassing the 3.9% forecast.
Furthermore, industrial production, which also rose by 4.5% in August from the previous year, exceeded both the 3.9% forecast and the 3.7% increase reported for July. The People's Bank of China maintained the interest rate on its one-year medium-term lending facility and injected additional liquidity into the markets via a key policy loan for the 10th consecutive month, following a recent reduction in lenders' reserve requirements.
The European Central Bank raised interest rates by 25 basis points, marking its 10th consecutive rate hike and pushing its main rate to a historic high of 4%. The bank revised its inflation forecasts slightly upward for the current year and the next, projecting rates of 5.6% and 3.2%, respectively. However, it lowered its 2025 inflation forecast from 2.2% to 2.1% and also adjusted its economic growth expectations for the Eurozone downwards.
Notably, a significant development emerged as ECB Governing Council members suggested they do not anticipate further rate hikes at this time, indicating a potential period of stable rates.
In other market news, Arm Holdings Plc had a strong trading debut in New York, with a 25% jump in its stock price. Conversely, Ford Motor Co. and General Motors Co. faced challenges as workers at Detroit carmakers-initiated strikes following the expiration of contract deadlines. Additionally, traders were preparing for the triple witching options event on Friday, which had the potential to cause volume spikes and increased market volatility.