Global News Update: 9 to 13 September 2024
United States
- Economic Growth: The US economy showed signs of slowing, with job openings dropping to 7.7 million in July, below the 8.1 million expected, reflecting cooling in the labour market. August inflation fell to 2.5%, lower than July’s 2.9%, setting the stage for the Federal Reserve to consider gradual rate cuts. Traders speculated a possible half-point rate cut in September, but momentum shifted toward a quarter-point cut.
- Jobs: Nonfarm payroll additions fell short by 23,000, with payrolls increasing by only 142,000 in August. The unemployment rate edged down to 4.2%, marking the first decline in five months.
- Debt Securities: Treasury yields fluctuated, and Wall Street’s VIX rose above 22 amid market uncertainty. The dollar saw a dip, reflecting increased bets on Fed rate cuts.
- AI: OpenAI aimed to raise $5 billion at a $150 billion valuation, with major investors like Apple, Nvidia, and Microsoft. Venture capital firm Sequoia Capital predicted most AI unicorns would come from applications rather than models.
United Kingdom
- Economic Growth: UK GDP stagnated in July for the second consecutive month, held back by a drop in construction and manufacturing. The services sector grew by only 0.1%, adding to concerns about the Labour government’s ability to boost growth.
- Jobs: Wage growth slowed to 5.1% in July, as payroll employment fell by 6,000 in July and 59,000 in August.
- Debt Securities: The UK Treasury cited a £22 billion fiscal “black hole” as part of Chancellor Rachel Reeves’ efforts to repair public finances, sparking debate about the need for fiscal tightening.
Europe
- Economic Growth: German GDP contracted by 0.1% in Q2, with capital investment plunging 2.2%. Spain reconsidered its stance on EU tariffs on Chinese electric vehicles, while Germany joined Spain in calling for a reconsideration of the EU’s trade policy toward China.
- Debt Securities: The European Central Bank (ECB) was expected to cut rates by 25 basis points, but officials cautioned against declaring victory over inflation too soon.
Japan
- Monetary Policy: The Bank of Japan maintained a cautious stance on rate hikes. Former Governor Kuroda suggested Japan’s neutral interest rate could be around 1.5%, while board member Naoki Tamura indicated the central bank should raise rates more aggressively if inflation trends continue.
Canada
- Jobs: The Canadian unemployment rate rose to 6.6%, the highest since 2017 (excluding the pandemic). Job gains of 22,100 in August were driven by part-time positions, while full-time employment fell.
Australia
- Consumer Confidence: Australian consumer confidence dipped as concerns about the economic outlook grew. The country’s GDP rose by 0.2% QoQ in Q2, with annual growth reaching 1%, falling short of expectations.
- Debt Securities: Australia’s banking regulator proposed phasing out AT1 bonds, the type that was wiped out after the Credit Suisse collapse, with a transition starting from 2027.
New Zealand
- Monetary Policy: The Reserve Bank of New Zealand was expected to cut interest rates further, with investors predicting a 2.5% rate by mid-2026, down from the current 5.25%.
China
- Trade: The People’s Bank of China halted gold purchases in August after 18 consecutive months of buying, leaving reserves at 72.8 million troy ounces.
Global Markets and Commodities
- Inflation: Inflation in the US slowed to 2.5%, while the UK’s wage growth and job market weakened. The ECB prepared for a rate cut as inflation across Europe eased.
- Stocks: US stocks rose sharply toward the end of the week, with the S&P 500 up 0.5% and small-cap stocks gaining 2.5%. Bitcoin and Ethereum saw gains, while oil prices rose, reflecting broader market optimism.