Global Macro and Markets
US stocks made modest gains on Tuesday. The S&P 500 rose 0.25% and the Nasdaq rose 0.56%. Both indices are up more than 20% ytd. Chinese stocks loved the rate cuts and other supportive measures yesterday. The Hang Seng and CSI 300 both rose more than 4%.
G-7 Macro: There were big falls in the Conference Board’s consumer sentiment indices for September. The headline index dropped from 103.3 to 98.7 while the expectations index fell to 81.7 from 82.5. While this looks bad, this index has been bumping along at similar levels for some months now, and the trend level hasn’t done much despite these latest disappointing figures. James Knightley has written more on this and what it may portend for the US labour market in this note. Today is very quiet, with just US August new home sales to consider.
Australia: August CPI inflation data will decline from the 3.5% YoY rate in July. The consensus believes it will fall to 2.7%, which is within the RBA’s 2-3% target range, and at odds with the Reserve Bank’s belief that inflation won’t fall sustainably within the target range until 2026. We don’t expect it to fall as far this month. In any case, much of this decline will likely reflect lower retail gasoline prices due to the decline in crude oil prices. Core measures of inflation may fall far less, so the market response may not be substantial.
China: The PBOC is set to announce its medium-term lending facility rate this morning. After yesterday’s monetary policy stimulus package, we expect a corresponding cut of at least 20bp in the MLF today. Similar to what we saw in July, we think there is a decent chance the cut to the MLF comes in larger than the cut to the 7-day reverse repo rate, and we are looking for the MLF to be cut to 2.0% today.
Taiwan: Industrial production data will be published for Taiwan in the afternoon today. After strong July growth of 12.3% YoY, we are looking for a moderation of growth to 8.5% YoY in August.
South Korea: The composite consumer sentiment index fell to 100 in September from 100.8 in August, the second consecutive decline. Households’ spending plans and the current index and outlooks for domestic economic conditions deteriorated further while the other three subcomponents remained unchanged compared to last month. Inflation expectations edged down to 2.8% in September (vs 2.9% in August).
Today’s CSI results should support an October Bank of Korea rate cut. Household spending will likely weaken while inflation expectations continue to ease, so the BoK’s policy focus will likely shift from inflation targeting to supporting growth. However, the outlook for house prices rose for the fourth consecutive month, thus the BoK’s pace of easing will be very gradual. We expect the BoK to cut 25bp in October.
What to look out for: South Korea consumer confidence, Japan PPI services, Australia CPI
September 25thS. Korea: September consumer confidenceJapan: August PPI servicesChina: 1Y MLF ratesAustralia: August CPITaiwan: August industrial productionPhilippines: August budget balanceS Korea: August retail sales (25th – 30th September)September 26thAustralia: August job vacanciesSingapore: August industrial productionJapan: August Final machine tool ordersUS: 2Q T GDP, August Durable goods ordersSeptember 27thJapan: September Tokyo CPIS Korea: October business survey manufacturingChina: August industrial profitsUS: August core PCE index, September U. of Mich SentimentMore By This Author:National Bank Of Hungary Review: Back In Business The Commodities Feed: Supportive Measures From ChinaThe PBOC Has Unveiled A Monetary Policy Easing Package In A Bid To Support Growth
