U.S. Markets:

• On Friday, the daily performance of the Nasdaq index showed a 0.14% increase, reaching its highest level since late November. In contrast, the S&P 500 index closed with a 0.27% decrease, while the Dow Jones index recorded a 0.47% decline.
• The S. Dollar Index closed the previous week at 106.2, indicating a 0.6% gain.
• Brent crude oil prices closed the previous week with a 0.3% increase at $92.2 per barrel.
• The yield on the 10-year U.S. Treasury note ended the week at 4.57%, showing a 14-basis point increase. Meanwhile, the 2-year U.S. Treasury yield, which is more sensitive to monetary policy developments, rose by 7-basis points to 5.04%.

European Markets:

• European stocks were higher Friday, with the Stoxx Europe 600 index rising by 0.4%.
• The FTSE 100 index in the UK increased by 0.08%, the CAC 40 index in France by 0.26%, and Germany’s DAX Performance index by 0.4%.

Asian Markets:

• The Hang Seng Index in Hong Kong advanced by 2.5%. The Shanghai Composite Index, edged slightly up by 0.1%.
• Japan’s Nikkei 225 index lost 0.05% on Friday.

In the US, August data on the Personal Consumption Expenditures (PCE) deflator, personal income, and spending were closely watched, particularly in the context of the Federal Reserve’s monitoring of monthly price developments.

• PCE Deflator

The monthly increase in the PCE deflator for August rose from 0.2% to 0.4%, below expectations of a 0.5% increase. However, on an annual basis, it inched up from 3.4% to 3.5%, marking its highest level in the past three months.

The core PCE deflator’s monthly rate of increase slowed down from 0.2% to 0.1%, falling below expectations of a 0.2% increase. On an annual basis, it decreased from 4.3% to 3.9%, reaching its lowest level since September 2021.

• Personal Income and Spending

In August, the monthly rate of increase in personal income rose from 0.2% to 0.4%, aligning with expectations. However, the monthly rate of increase in personal spending dropped from 0.9% to 0.4%, falling below expectations of a 0.5% increase.

• Consumer Confidence

The University of Michigan’s Consumer Confidence Index for September was revised slightly upward from 67.7 to 68.1. Looking at the details, the sub-index for current conditions in September was revised up from 69.8 to 71.4, while the sub-index for expectations was revised downward from 66.3 to 66.

In the US, upcoming events include speeches by Federal Reserve officials throughout the week, with a keen focus on potential new signals related to monetary policy. Additionally, key economic indicators such as the final S&P Global Manufacturing PMI and ISM Manufacturing Index for September will be released today.

On Wednesday, the final S&P Global Services PMI and ISM Non-Manufacturing Index for September will also be closely watched.

• Manufacturing and Services Data

Preliminary data for September showed that the manufacturing PMI increased from 47.9 to 48.9, indicating a slowing rate of contraction in the manufacturing sector. However, the sector continued to contract for the fifth consecutive month. In contrast, the ISM Manufacturing Index for August rose from 46.4 to 47.6, signifying a mild slowdown in the rate of contraction. Weak demand and a decrease in new orders had prolonged the contraction in the sector for ten months.

In September, the services PMI declined from 50.5 to 50.2, suggesting a slight slowdown in growth in the services sector, the weakest since February. It had remained in the growth zone for the past eight months, despite expectations for a slight increase to 50.6. In addition, the ISM Non-Manufacturing Index for August unexpectedly increased from 52.7 to 54.5, indicating accelerated growth in non-manufacturing sectors and marking the strongest growth in the last six months, extending growth for an eighth consecutive month.

• Durable Goods Order

On Wednesday, the final data for August durable goods orders and factory orders will be released.

Following a 5.6% monthly decline in July, durable goods orders in August showed a slight increase of 0.2%, contrary to expectations of a minor decrease based on preliminary data. Looking into details, the notable increase in orders for defense aircraft and parts (+19.2%) in August had a significant impact on the overall increase in durable goods orders. Additionally, non-defense capital goods orders excluding aircraft, which is an indicator of business investment, rebounded with a 0.9% increase in August, following a 0.4% decline in July.

Factory orders, on the other hand, declined by 2.1% in July, marking a slight decrease compared to expectations, after four months of consecutive growth.

• Trade Balance

The trade balance data for August will be released on Thursday. In August, monthly exports increased by 1.6% to $251.7 billion after a four-month decline, while monthly imports increased by 1.7% to $316.7 billion following a three-month decrease. Consequently, due to the increase in monthly imports outpacing the increase in exports, the monthly trade deficit rose from $63.7 billion to $65 billion in July.

• Construction Spending

On Monday, construction spending data for August will be released. It is expected that the monthly rate of increase in construction spending will slow down from 0.7% to 0.5% in August.

• Employment Data

In terms of shaping the Federal Reserve’s monetary policy, labor market data will be closely monitored. Within this context, various labor market indicators will be watched closely this week, including the August JOLTS job openings data to be released tomorrow, the September ADP private sector employment data on Wednesday, weekly initial jobless claims data on Thursday, and non-farm payroll, unemployment rate, and average hourly earnings data for September on Friday.

The July JOLTS job openings data showed a weakening trend in response to the Fed’s rate hikes, declining from 9.17 million to 8.83 million, surpassing expectations for a decrease and marking the lowest level since March 2021. While the decline in job openings above expectations suggested a continued loss of momentum in labor demand, it remained significantly above pre-pandemic levels, reinforcing the view of a tight labor market in the US.

The August ADP private sector employment increase, which fell from 371,000 to 177,000, was the lowest in the last five months, exceeding expectations (195,000). Additionally, the previous month’s data was revised upward by 47,000. This data indicated a partial cooling in the labor market due to the effects of Fed rate hikes.

The most recent weekly initial jobless claims, which increased slightly from 202,000 to 204,000, continued their low levels, maintaining a pattern of the last seven months. These claims also remained below the historical averages and indicated a tight labor market.

In August, non-farm payrolls increased from 157,000 to 187,000, reaching the highest level in the last three months. However, the previous month’s data was revised downward by 30,000. Expectations were for a slight slowdown in employment growth (from 187,000 to 170,000). Although non-farm payrolls showed an acceleration in August, they continued to trend below the 12-month average (257,000).

• Unemployment Rate

Contrary to expectations of a flat performance in August, the unemployment rate increased from 3.5% to 3.8%, marking the highest level since February 2022.

• Average Hourly Earnings

Looking at the trajectory of inflation, average hourly earnings, which represent the rate of increase in wages, declined from a monthly rate of 0.4% to 0.2% in August, slowing down more than expectations (0.3%) and reaching the lowest level since February 2022. On an annual basis, the rate of increase also decreased from 4.4% to 4.3%. These data on average hourly earnings indicated a partial slowdown in inflationary pressures stemming from wages.

• Employment Data Outlook

The labor market data to be released this week is expected to generally show a partial weakening in response to the Fed’s rate hikes. Accordingly, it is anticipated that the August JOLTS job openings data will remain flat at 9.83 million, the September ADP private sector employment increase will slow from 177,000 to 150,000, non-farm payroll employment will decrease from 187,000 to 165,000, the unemployment rate will slightly decrease from 3.8% to 3.7%, and average hourly earnings will increase from a monthly rate of 0.2% to 0.3%, with the annual rate of increase remaining at 4.3%, similar to the previous month.

• Eurozone Inflation

In the Eurozone, the preliminary Consumer Price Index (CPI) data for September was closely watched, as it would also influence the European Central Bank’s (ECB) monetary policy. In September, the monthly increase in headline CPI in the Eurozone slowed down from 0.5% to 0.3%, falling below expectations of a 0.5% increase. On an annual basis, it decreased from 5.2% to 4.3%, reaching the lowest level since October 2021. Expectations had been for it to fall to 4.5%.

• Core Inflation

Similarly, core CPI in the Eurozone slowed down from a monthly increase of 0.3% to 0.2% in September. On an annual basis, it decreased from 5.3% to 4.5%, marking the lowest level since August of the previous year. The annual core CPI had reached a record level of 5.7% in March.

• UK GDP Growth

In the UK, final GDP growth data for the second quarter of the year were released. On a quarterly basis, the UK economy, after recording marginal growth of 0.1% in the final quarter of the previous year, had grown by 0.3% in the first quarter of this year. In the second quarter, growth remained at 0.2%, in line with preliminary data. On an annual basis, the growth rate increased from 0.5% to 0.6%.

In Europe, ECB President Lagarde’s speech on Wednesday and speeches by ECB members throughout the week will be closely monitored for potential new signals regarding the central bank’s monetary policy. Additionally, final Manufacturing and Services PMI data for September from HCOB will be released on Monday and Wednesday, respectively.

According to preliminary data, both Manufacturing and Services PMIs in the Eurozone remained in contraction territory below the 50 threshold in September due to the tightening financial conditions and weakening demand resulting from the ECB’s ongoing interest rate hikes.

• Producer Price Index (PPI)

Producer Price Index (PPI) data for August will be released on Wednesday. In July, PPI in the Eurozone had declined by 0.5% on a monthly basis, mainly due to a decline in intermediate and energy prices, marking its seventh consecutive monthly decrease. On an annual basis, the rate of decline had increased from 3.4% to 7.6%, recording the sharpest decrease in producer prices since 2009.

• Retail Sales

Retail sales data for August, which will provide information on the state of domestic demand, will be released on Wednesday. Retail sales in the Eurozone had declined by 0.2% on a monthly basis in July following a 0.2% increase in June. On an annual basis, the rate of decline had remained at 1%, signaling weakness in domestic demand. Due to tightening financial conditions affecting consumer demand, retail sales are expected to remain under pressure in the coming period as well.

• Germany’s Exports and Imports

Germany’s foreign trade data for August will be announced on Thursday. In July, exports had declined by 1.6% on a monthly basis, while imports had decreased by 0.9%. As a result of the increase in imports exceeding the increase in exports on a monthly basis in July, the monthly foreign trade deficit had increased from $63.7 billion to $65 billion.

• Germany’s Factor Orders

Factory orders data for August, reflecting the course of production in Germany, will be monitored on Friday.

In Germany, factory orders had shown strong growth of 7.6% on a monthly basis in June, marking the highest increase since June 2020 and the third consecutive month of increase. However, in July, factory orders had recorded a sharp decline of 11.7% on a monthly basis, well above expectations, signaling weakness in industrial production. This decrease in factory orders in July had been the first decline since March and had also been recorded as the sharpest drop since April 2020.

• China’s Economic Indicators

China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) for September indicates a slight slowdown in the growth of the manufacturing sector. It decreased from 51 to 50.6, suggesting a mild deceleration in manufacturing growth. However, it still remains in the expansionary territory.

In contrast, the Caixin Services PMI for China in September declined from 51.8 to 50.2, signifying a slowdown in the service sector’s growth. This marks the lowest level observed since the beginning of the year.

China’s official manufacturing PMI for September increased from 49.7 to 50.2, indicating that the manufacturing sector has returned to growth territory since April.

The official non-manufacturing PMI, which provides insights into the performance of the service and construction sectors, rose from 51 to 51.7 in September, suggesting a slight acceleration in non-manufacturing growth. This indicates nine consecutive months of growth in the non-manufacturing sector.

• China’s Financial Markets

Chinese financial markets will be closed this week due to the Golden Week holiday.

• Central Banks in Australia and New Zealand

The Reserve Bank of Australia (RBA) is scheduled to hold its meeting on Tuesday. In the previous meeting, the RBA kept its policy interest rate steady at 4.10%, in line with expectations. The central bank hinted at the possibility of further tightening in the near future.

It is expected that the RBA will maintain the policy interest rate at its current level in this week’s meeting.

The Reserve Bank of New Zealand (RBNZ) is set to hold its meeting on Wednesday. In its August meeting, the RBNZ also kept its policy interest rate unchanged at 5.50%, in line with expectations. The central bank emphasized that the current level of interest rates was restraining spending and easing inflation pressures, indicating a need for interest rates to remain at restrictive levels in the foreseeable future.

It is expected that the RBNZ will maintain the policy interest rate at its current level in this week’s meeting.

U.S. Economic Events:

• PCE deflator for August increased by 0.4% monthly and 3.5% annually.
• Core PCE deflator for August increased by 0.1% monthly and 3.9% annually.
• Personal income in August increased by 0.4%, and personal spending increased by 0.4%.
• University of Michigan’s Consumer Confidence Index for September was revised upward to 68.1.
• Upcoming US economic indicators include speeches by Federal Reserve officials, S&P Global Manufacturing PMI, ISM Manufacturing Index, and more.

European Economic Events:

• Eurozone’s CPI for September showed a monthly increase of 0.3% and an annual increase of 4.3%.
• Core CPI in the Eurozone for September increased by 0.2% monthly and 4.5% annually.
• UK GDP growth for the second quarter remained at 0.2% quarterly and increased to 0.6% annually.
• Upcoming events in Europe include speeches by ECB officials, final Manufacturing and Services PMI data, PPI, retail sales, and more.

Asian Economic Events:

• Caixin Manufacturing PMI for China in September decreased to 50.6.
• Caixin Services PMI for China in September decreased to 50.2.
• China’s official manufacturing PMI for September increased to 50.2.
• China’s official non-manufacturing PMI for September increased to 51.7.
• Chinese financial markets were closed due to the Golden Week holiday.
• The Reserve Bank of Australia and the Reserve Bank of New Zealand are holding meetings.