International markets concentrate on US inflation info
Date
10/7/2024 7:29:45 AM
(MENAFN) Last week, global markets displayed a mixed performance, influenced by rising tensions in the Middle East and contradictory indicators from the U.S. economy. As investors brace for key inflation data from the United States, there is a palpable sense of anticipation regarding its potential impact on monetary policy and market sentiment.
Optimism surrounding a “soft landing” for the U.S. Economy has gained traction, with projections suggesting a potential decrease in inflation to the Federal Reserve's target of 2 percent. However, concerns about a possible recession continue to loom, complicating the economic outlook. In a recent address, Federal Reserve Chairman Jerome Powell indicated that the labor market does not require further cooling, suggesting that if the current economic trajectory holds, there could be two additional rate cuts this year, amounting to a total reduction of 50 basis points.
Other officials within the Federal Reserve echoed Powell's sentiments, indicating a willingness to consider significant rate cuts if labor market conditions deteriorate. They emphasized that weak employment data could prompt a more urgent response from the central bank, reinforcing the idea that economic conditions are still in flux.
On the geopolitical front, the situation in the Middle East has escalated dramatically. The Iranian Revolutionary Guards conducted a ballistic missile attack on Israel, further heightening tensions in a region already fraught with conflict. Despite the U.S. employment data indicating a path towards a soft landing, the geopolitical risks emanating from the Middle East have dampened investors' risk appetite, creating an uncertain market environment.
Amidst these developments, the U.S. Institute for Supply Management (ISM) reported a notable increase in its services Purchasing Managers’ Index (PMI), which rose by 3.4 points month-on-month in September. The PMI reached its highest level since February 2023, coming in at 54.9 points. This uptick signals resilience within the services sector, suggesting that economic activity remains robust despite external pressures.
Estimates in the money markets indicate a growing consensus that the Federal Reserve is poised to implement a 25-basis-point rate cut in November, reflecting a response to evolving economic conditions. As global markets await the impending inflation data, the interplay between domestic economic indicators and international tensions will be crucial in shaping investor sentiment and policy decisions in the coming weeks.
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