📈 Weekly Market Update | Week Ending 01 Sep 2023

• 🇺🇸 Busy week for the US economy

• 🇨🇳 China manufacturing PMIs exceed expectations

• 🇪🇺 Eurozone inflation rate unexpectedly stabilises

1. Busy week for the US economy

It was a busy week for the US economy as fresh batches of economic data were released. Firstly, the US grew at an annualised rate of 2.1% in the second quarter of 2023, compared to preliminary figures of 2.4% and the first quarter’s expansion of 2.0%. Secondly, the Job Openings and Labour Turnover Survey (“JOLTS”) revealed that job openings in the US declined by 338,000 from the previous month to 8.827 million in July 2023, marking the lowest level since March 2021 and below the consensus of 9.465 million. Thirdly, US Core PCE rose 0.2% month-over-month in July 2023, maintaining the same pace as in June and aligned with market expectations. Fourthly, nonfarm payrolls increased by 187,000 in August, ahead of estimates of 170,000, but the unemployment rate unexpectedly rose sharply to 3.8% in August, above forecasts of 3.5%. The increase in the jobless level came as the labour force participation rate rose to 62.8%.

Average hourly earnings also increased 0.2% for the month and 4.3% from a year ago, both below expectations and possibly signal that inflation pressures are easing. Lastly, the ISM Manufacturing PMI climbed to 47.6 in August 2023 from the previous month’s 46.4, slightly exceeding the market consensus of 47. However, the reading indicates that the manufacturing sector has been in contractionary territory for ten consecutive months. For the week, the Dow Jones, S&P 500 and Nasdaq recorded 1.43%, 2.50% and 3.25%, respectively.

2. China manufacturing PMIs exceed expectations

Meanwhile, in China, manufacturing PMI came in above expectations. The official NBS Manufacturing PMI rose to 49.7 in August 2023 from 49.3 in July, exceeding market expectations of 49.4 and is the softest drop in factory activity since an expansion in March. Additionally, the Caixin China General Manufacturing PMI rose to 51 in August 2023 from 49.2 in July, beating market estimates of 49.3. This was the strongest pace of expansion in factory activity since February and is also the fifth time an increase since the start of the year amid efforts from Beijing to revive its economy. Additionally, The People’s Bank of China (“PBoC”) announced on Friday (1 September 2023) that it would slash the foreign exchange Reserve Requirement Ratio (“RRR”) by 200bps to 4% on 15 September 2023. This is the first such reduction this year as the PBoC looks to stem the weakness in the Chinese Yuan and boost its economy.

3. Eurozone inflation rate unexpectedly stabilises

Lastly, the annual inflation rate in the Eurozone remained stable at 5.3% in August 2023 but is still more than 2.5x above the European Central Bank’s (“ECB”) target of 2% and above estimates of 5.1%. Core inflation, which excludes volatile food and energy prices, came in at 5.3%, down from July’s 5.5%. The most recent ECB meeting minutes revealed that ECB policymakers are maintaining the possibility of a September rate hike. Still, arguments for a rate pause are gaining traction due to views that the cumulative tightening’s impact is sufficient to bring down inflation. The minutes also revealed that future rate hike decisions will be data-dependent.

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This Weekly Market Update is sourced from Bloomberg and various financial news.

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