Market sentiment: RiskOn – 6 days
Recap of the past week:
The past week was dominated by anticipation for the first rate cut from the Federal Reserve. The Fed did not disappoint and performed a cut. However, the unexpected element was the cut being 50 bps, which came across as abrupt and almost panicky. During the subsequent press conference, Jerome Powell made an effort to calm the markets, explaining that this was a “hawkish cut” rather than an emergency one. Regardless of the true reasoning, the markets are now more sensitive to incoming macroeconomic data as they attempt to shake off the fear of an eventual recession in the US. Market sentiment indicator remained in positive RiskOn territory:
Outlook for the following week:
Let’s have a look at the following week from the economic calendar perspective.
We’re about to witness an unusually busy Monday. Global PMI data will be released, with a focus on both services and manufacturing sectors. In the US, the key issue will be whether manufacturing rebounds after two months of decline and whether the growth in services continues. This could serve as a significant catalyst for market movement.
Tuesday brings the Australian Central Bank’s interest rate decision (no change is expected) followed by the closely-watched German IFO index, which has been declining across all its components for several months. During the US session, we will get the Housing Price Index, Consumer Confidence (Sep), and the Richmond Fed Manufacturing Index (Sep).
Wednesday is expected to be the calmest day of the week. Noteworthy releases include the Australian CPI and the Swiss ZEW survey.
On Thursday, we’ll get the BoJ minutes, the German GfK consumer climate survey, and the Swiss National Bank’s interest rate decision (a cut of 0.25 basis points is expected). In the US, the weekly jobless claims, quarterly Personal Consumption Expenditures Prices, Durable Goods Orders, updated US GDP, and the Kansas Fed Manufacturing Activity (Sep) will be in focus. In the afternoon, Jerome Powell will give a speech.
Friday, the main macro day of the week, will start with Japan’s CPI. In Europe, we’ll get new CPI numbers from France and Spain, which are expected to indicate demand trends rather than price levels. In the afternoon, the US will release the key macro data of the week: monthly Core Personal Consumption Expenditures (August). This will be followed by an update on the Michigan Consumer Sentiment Index (Sep).
Long-term sentiment
Currently, the markets are experiencing a robust positive RiskOn sentiment (see more on waves statistics). Given the circumstances surrounding the Fed’s 50 bps cut, all macroeconomic data will be under close scrutiny. Based on Monday’s PMI developments, we will decide on the scale of long trade allocations. Apart from macroeconomic news, we see growing risks in the situation in Lebanon. It seems that a wider conflict is on the brink of erupting, and the market would immediately begin pricing in the escalating risk in the region.
Good luck! Team moodix!