Take Two: Eurozone inflation falls below target; stocks enjoy strong end to September
- 07 October 2024 (3 min read)
What do you need to know?
Eurozone annual inflation fell below the European Central Bank’s (ECB) 2% target for the first time since mid-2021, raising expectations it will lower interest rates quicker than anticipated. Headline inflation fell to 1.8% in September from 2.2% in August, reflecting lower energy costs, according to the flash official estimate. Core inflation, which excludes energy, food, alcohol and tobacco, eased to 2.7% from 2.8% - below consensus expectations and the ECB’s own projections. Comments by ECB Governing Council members last week also reinforced expectations of a rate cut - AXA IM forecasts a 25-basis-point cut at the ECB’s October meeting.
Around the world
The S&P 500 and Dow Jones indices hit record highs again last week, ending a strong third quarter for US markets. On Monday, Federal Reserve (Fed) Chair Jerome Powell repeated his prediction that two more interest rate cuts this year were likely “if the economy performs as expected”. Year to date the S&P 500 is up 21% while the Dow Jones is ahead 13%. Meanwhile China’s CSI 300 stock index saw its biggest one-day gain since 2008, as investors continued to digest its government’s recently announced stimulus package. However, escalating Middle East tensions weighed on market sentiment - over the week to Thursday’s close the MSCI World index was down 1%.1
Figure in focus: 52.0
A softer, but solid increase in Japan’s services sector was partly offset by a renewed contraction in manufacturing output in September, according to its final Purchasing Managers’ Index (PMI) for the month. The composite PMI, which includes both services and manufacturing, was revised down to 52.0 from a flash reading of 52.5 against 52.9 in August - a figure above 50 indicates expansion. Elsewhere, China’s Caixin composite PMI showed output rose at the slowest pace in nearly a year at 50.3 in September compared to 51.2 in August. The Eurozone composite PMI fell to a seven-month low of 49.6, from 51.0 in August, while the US combined measure eased to 54.0 from 54.6.
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Words of wisdom
Dark Oxygen: The oxygen cycle in oceans has been evidenced for many years. However, a recent study revealed that oxygen is not only consumed but also produced on the Pacific Ocean’s abyssal seafloor.2 So-called dark oxygen could be greatly important in the fight against climate change, challenging the long-held view that oxygen can only be produced with sunlight via photosynthesis. It could have an impact on deep-sea mining regulations and activities and support increased alignment of climate and nature goals.
What’s coming up?
Minutes from the Reserve Bank of Australia’s latest monetary policy meeting are published on Tuesday. The Fed reports its own meeting minutes on Wednesday when the Reserve Bank of India meets to decide on interest rates. The International Monetary Fund publishes its latest World Economic Outlook on Thursday when the latest US inflation rate data is also announced. Friday sees UK monthly GDP and Germany’s inflation numbers reported.
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