​ ​US

Losses extended in the US equity markets, as recessionary fears and monetary tightening continue to impact market sentiment. Over the past 5 days ending Thursday, the 3 major equity indices lost 2.83-3.13%. Over the week, several Fed members commented on the market and policy, St. Louis Fed President James Bullard agreed that recessionary risks are present, but reiterated that inflation is still the priority for the Fed. Cleveland Fed President Loretta Mester took a more hawkish stance, stating that interest rates have to go higher to keep inflation down, claiming that the Fed is still not yet ‘in restricted territory on the funds rate’. Atlanta Fed President Raphael Bostic supported a 75 bps at the next meeting, while Chicago Fed President Charles Evans projects the Fed rates to peak at March next year. According to Bloomberg interest rate futures data, markets are also pricing in a high chance for another 75 bps rate hike at the coming November meeting.

On the economic front, housing data was somewhat mixed, with new home sales better than expected, while pending home sales slumped in August, falling 2% MoM, lower than both market forecasts of a 1.4% decline and July’s -0.6% figure. On the other hand, Consumer Board Consumer Confidence Index was 108 in September, better than both the expected 104.5 and August’s 103.6, and it was also the highest since February 2022. The labour market remains red hot, both initial and continuing jobless claims were at recent lows, beating market expectations and previous values. The tightness in the labour market continue increases the risk for further monetary tightening due to persistent inflation. Next week, we will have more important data coming from the US, including ISM PMIs for September, as well as more labour market data in form of unemployment rate, ADP nonfarm employment change, as well as nonfarm payrolls for September.

 ​Europe

European markets saw larger corrections over the week, as markets faced further headwinds in form of an energy crisis, in addition to the recessionary fears and monetary tightening. The UK, French, and German indices were down 3.88-4.44% over the past 5 days ending Thursday. Markets expressed disapproval towards the UK government’s ‘mini-budget’, voices in the market including the IMF criticised the unfunded tax cut in the midst of an inflation crisis. UK Gilt yields surged amidst market volatility, and the Bank of England had to announce an emergency market operation to purchase long dated UK bonds, pledging to buy around 65 billion pounds in UK bonds until 14^th October to maintain market stability. Over in Italy, the Brothers of Italy led by Giorgia Meloni became the largest party in the new parliament, a right wing government will likely be formed. ECB President Chirstine Lagarde mentioned that fighting inflation is important, and the Bank will raise rates in the coming few meetings. On the economic front, German Ifo data was 84.3 in September, lower than both the expected 87 and the 88.5 in August, it was also the lowest reading since May 2020. Next week, August data on German factory orders will be released, alongside Eurozone PPI and retails sales data, ECB will also release the minutes of the September meeting.

​China

Hong Kong and Chinese equity markets continued to slip, as market sentiment remains weak. The Hang Seng Index briefly touched a new low of 17,016.28 for the year on Friday intraday, before recouping losses later on. Over the week, the CSI 300 was down 1.33%, while the Hang Seng Index was further down 3.96%. Trading activity was relatively muted ahead of the National Day holidays, and the 20^th National Congress of the Chinese Communist Party, investors are still split on the policy direction expectations. To further support the property sector, the government has allowed several cities to lower mortgage rates for first time home buyers. China’s economic data were mixed this week, NBS Official Manufacturing PMI returned to expansionary zone in September at 50.1, which was better than the expected 49.6 and the August figure of 49.4. However, Caixin Manufacturing PMI slipped further to 48.1, missing both forecasts and the previous value. China markets will be close in the coming week to celebrate the National Day Holidays.