Weekly Recap: Markets Soar Amid Stimulus and Rate Cuts 🚀💰

In an electrifying week for global markets, indices in the US and Europe reached new record highs! The US dollar, however, took a hit, plummeting to a 14-month low. 📉 What fueled this dramatic shift? A surge in risk sentiment, buoyed by promising data hinting at further Federal Reserve (Fed) rate cuts and significant stimulus from China.

Chinese Equities Make Waves 🌊

Chinese stocks experienced a staggering 15% surge, marking their best weekly performance since 2008. This boost followed Beijing’s announcement of an extensive economic stimulus package, which includes a whopping $114 billion to invigorate the stock market. 📈

This package is the most comprehensive since the global financial crisis, coinciding with the Fed’s recent 50 basis point rate cut. The prospect of more lenient monetary policies in the world’s two largest economies has sparked a rally in both equities and industrial metals. Gold also soared, hitting new record highs. 🌟

Fed’s Next Moves: What to Expect? 🔍

As the market digests this news, all eyes are on Federal Reserve Chair Jerome Powell, who will be speaking at the National Association for Business Economics conference on Monday. Investors are eager for clues regarding a potential further 50 basis point rate cut at the November meeting. Currently, the market is pricing in a 50% probability of this move.

This week’s key economic indicators include the US ISM Manufacturing PMI and the non-farm payroll report. Scheduled for release on October 1st and Friday, respectively, these reports will be crucial in shaping market expectations. 📅

Manufacturing PMI is projected to tick up to 47.5 from 47.2 in August, indicating continued contraction.
The non-farm payroll report is expected to reveal 146,000 jobs added in September, keeping the unemployment rate steady at 4.2%.

Market Reactions: The Ripple Effect 🌊

Should the non-farm payroll report underperform, it might bolster expectations for a 50 basis point rate cut in November, potentially leading to a drop in the USD and stocks. Conversely, a stronger-than-expected reading could see the Fed opt for a smaller 25 basis point cut, allowing the USD to recover.

For USD/JPY traders, Friday’s session saw significant movement, driven by Japan’s new hawkish Prime Minister and soft US core PCE inflation. The upcoming US NFP report is anticipated to be a major influence on this currency pair’s trajectory.

Eurozone Outlook 📊

Across the Atlantic, the Eurozone is also bracing for key inflation data. The CPI is expected to ease to 1.9% YoY in September, down from 2.2% in August. The European Central Bank (ECB) is already expected to implement back-to-back 25 basis point cuts in October, which could further weaken the Euro if inflation data disappoints.

Oil Market Dynamics ⛽

In contrast to the surging equities, oil prices fell over 5% last week. As OPEC+ prepares for a 180,000 barrel-a-day production increase in December, concerns over oversupply are rising. The upcoming OPEC JMMC meeting on Wednesday will be pivotal for clarifying the oil market’s future direction.

Conclusion: A Week of Contrasts 🎢

As we head into a new week, the financial landscape remains dynamic and ever-changing. With critical economic data on the horizon and global central banks poised to respond, investors will be keenly observing developments. Will the stimulus efforts and rate cuts continue to bolster market optimism, or will caution return?

Stay tuned for next week’s recap! 🌍✨

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