As the third quarter of the year comes to a close and the global financial markets prepare to enter the fourth quarter, investors are gearing up for a series of important economic data releases. Next week, key data on US employment, inflation figures for both the US and the Eurozone will serve as critical indicators for market expectations on future interest rate movements.
Simultaneously, uncertainties persist in the Middle East and Ukraine, with energy price trends complicating the global inflation outlook further. In addition, the upcoming US midterm elections on November 3 will be a pivotal political event in the fourth quarter, with markets closely monitoring its potential impact on US policies and financial assets.
The fourth quarter is set to officially kick off next Thursday (October 1). Reuters noted increased volatility in the bond market during the third quarter, citing factors such as the Iran conflict, concerns over fiscal deficits, and financing demands related to AI driving up global borrowing costs. The yield on the US 10-year Treasury bonds has reached over 5%, its highest level since 2007. Elevated long-term yields indicate that the long-term financing costs for governments, businesses, and households will remain high, continuing to weigh on asset valuations like stocks and bonds.
Geopolitical tensions continue to influence market sentiment. Uncertainties persist in the peace prospects of the Middle East and Ukraine, while the US midterm elections on November 3 will determine the control of Congress for the next two years.
Upcoming US economic data releases next week will be closely watched, with the most anticipated being the September nonfarm payrolls report to be released on Friday, October 2. Economists surveyed by Reuters expect an addition of around 100,000 nonfarm jobs in the US for September, with an unemployment rate forecast of 4.2%. The Personal Consumption Expenditures (PCE) price index report on Wednesday, September 30, will offer the latest clues on whether inflation continues to approach the Federal Reserve’s 2% target.
Recently, heightened vigilance has been raised regarding corporate input costs. A survey released this week revealed that businesses’ input prices have surged to near four-year highs, heightening concerns in the market about secondary inflation pressures. Regarding interest rate bets, market pricing on September 24 showed that traders viewed the possibility of the Fed raising rates by another 25 basis points at their October meeting close to 70%, a significant increase from the previous week’s expectations.
The latest data released on September 25 provided clues about the end of the third quarter in the US economy:
• Durable goods orders: The US Census Bureau reported that new orders for durable goods in August remained largely flat month-on-month, increasing by 0.3% excluding transportation equipment.
• Consumer confidence and inflation expectations: The University of Michigan’s September consumer confidence index decreased to a final value of 48.1, lower than August’s 51.7; while one-year inflation expectations rose from 4.0% in August to 4.6%, indicating increased concerns among households about inflation eroding purchasing power.
• GDPNow dynamic estimate: The Atlanta Fed’s GDPNow model estimated on September 25 the latest figure for the annualized GDP growth rate for the third quarter at 5.0%, indicating continued strong economic momentum, serving as a dynamic reference to observe the economic temperature of the season, although it is not an official final data. The initial official GDP report for the third quarter in the US is expected to be released on October 29.
The core focus currently in the market lies on whether the rising energy prices will sustain for a prolonged period, potentially generating wider spillover effects: escalating costs for businesses and living, and transmitting to wages, prices, and interest rates levels in major economies. Therefore, the inflation data for the Eurozone and the Tokyo CPI data from Japan to be released next Friday will be crucial indicators for assessing the future monetary policy direction of major central banks.
However, oil prices are not only susceptible to upward risks. On September 25, with market evaluations indicating a potential easing of tensions between the US and Iran and risks of disruptions in energy supply from the Middle East, oil prices dropped over 1%; Brent crude oil fell to $105.46 per barrel at one point, while West Texas Intermediate crude dropped to $93.56. Hence, whether oil prices can sustain at high levels in the fourth quarter, and if energy prices will further transmit to a broader range of goods and services, will be critical factors in determining the global interest rate trends.
Micron Technology is scheduled to release its financial report after the US stock market closes next Wednesday, with its performance closely monitored by the market as a litmus test to gauge whether the AI investment boom can continue.
As a key supplier of high-bandwidth memory (HBM) for NVIDIA AI processors, Micron has benefited from the wave of data center constructions, with its stock price already soaring over 280% year-to-date. However, Micron’s stock has retreated over 6% this quarter, while the Philadelphia Semiconductor Index (SOX) has dropped by 14%. Investors are eager to find answers from its financial report: How long can the massive AI capital expenditures be sustained? Can the demand growth rate be maintained?
If Micron provides better-than-expected performance guidance, it will help alleviate concerns in the market about a slowdown in AI infrastructure investment and supply restrictions; conversely, it could signal a cooling off of the AI investment frenzy.
Australia is currently facing a complex situation of “declining house prices, rising unemployment” alongside “high inflation.” Data from the Australian Bureau of Statistics revealed that the unemployment rate unexpectedly rose to 4.6% in August, hitting a new high in nearly five years; although there were 39,500 new jobs added that month, they were primarily driven by part-time positions. However, Australia’s core inflation rate remains at 3.6%, significantly higher than the Reserve Bank of Australia’s (RBA) target range of 2%–3%, amplifying policy dilemmas for the central bank.
Market analysts and economists widely expect the RBA to announce a 25 basis points rate hike at its meeting next Tuesday, pushing the benchmark rate to a new 15-year high of 4.6%, with the end point of this round of rate hikes projected to approach 5%.
Reuters pointed out that in previous instances of declining house prices in Australia, interest rate policy has often shifted to looseness; however, in the current environment where inflation rates remain high above the target, the property market may not necessarily receive policy support through rate cuts as it did in the past.