PMIs Set the Stage for Rate Cuts, According to Reuters

Market Overview: Anticipated Economic Developments in Europe and Globally

As we look ahead to Thursday, the release of Services PMIs across Europe is set to reveal a further slowdown in economic activity, reinforcing expectations for potential interest rate cuts in the region. Furthermore, upcoming monetary policy decisions in New Zealand and the United States are closely monitored by investors.

Market speculation indicates that the European Central Bank may opt for a 25 basis point reduction in rates during its next two meetings scheduled for October and December. This expectation follows comments from prominent hawk Isabel Schnabel, who expressed a more optimistic view on managing inflation.

While the services sector is growing in the UK, composite PMIs from Germany and other parts of Europe are predicted to indicate continued contraction in September’s data.

In the U.S., the day’s key data will include jobless claims and the ISM services survey, with considerable attention on the payroll figures to be released on Friday.

In New Zealand, economists are increasingly anticipating a substantial cut of 50 basis points in interest rates during the central bank’s meetings in October and November.

Keeping an eye on global markets, Singapore’s manufacturing PMI maintained its expansion in September, showing an increase in new orders and reaching its highest electronics PMI since 2018. However, analysts caution about potential future weaknesses due to rising input costs that may signal supply chain disruptions and decreasing backlogs in electronics orders.

Asian markets had a mixed performance, with the MSCI ex-Japan index declining by 1.4% after hitting a 32-month high. This downturn was led by a 3.5% drop in Hong Kong’s market, which had previously surged by 30% within three weeks.

In Hong Kong, tech stocks fell over 5%, and the property market faced its largest single-day decline in nearly two years, plummeting by 7.2%.

A notable development in Japan saw a 2.3% rally in stocks following comments from newly elected Prime Minister Shigeru Ishiba, who suggested that the Bank of Japan should not pursue further rate hikes. BOJ policy dove Asahi Noguchi echoed this sentiment, emphasizing the need for a patient approach in maintaining loose monetary policy.

While this seems beneficial for Japanese equities, the yen experienced a drop to its lowest level in a month, falling 2% overnight to 146.9 against the dollar. Current market indicators suggest an almost negligible chance of BOJ tightening in the upcoming October meeting, predicting only a slight increase in December.

Key market developments to watch out for on Thursday include:

• HCOB Eurozone Services PMI
• U.K. S&P Global Services PMI
• U.S. jobless claims and ISM services PMI releases
• Speeches from Fed Bank of Atlanta President Raphael Bostic and Bank of Minneapolis President Neel Kashkari.