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What you need to know: A quick breakdown of the current market news

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2023-09-11

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US and Chinese economic data will dominate the coming week, oh, and so will Apple and its new iPhone, not to mention the health of the Australian jobs market.

Our August jobs data (out on Thursday) here is expected to show a 15,000 gain in employment after the 14,600 fall in July with unemployment steady at 3.7%.

The Westpac/MI consumer sentiment survey for September and the NAB business survey for July will be also released on tomorrow and give us a useful update on sentiment across the economy.

Offshore, Thursday will also see a decision on rates by the European Central Bank. no rate change is tipped by market pricing and forecasters.

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Friday sees more important data about the health of China’s economy.

China’s recovery since removing anti-COVID restrictions has fallen well short of expectations, which has removed a big driver of global growth.

Last week’s weak trade data again confirmed it as did the August inflation figures out on Saturday.

That showed a slight improvement for China with the Consumer Price Index retreating from deflation in August.

The CPI rose 0.3% from July, when it rose 0.2%. Annually, inflation climbed out of deflation to be up 0.1% last month after the 0.3% fall in the 12 months to July.

Pork prices rose 11.4% month-on-month, versus no change in July, due to the impact of extreme weather in some areas. They were down 17.9% from a year earlier, narrowing from a 26% drop on July (which helped produce the monthly deflation reading).

Chinese economists say that with heavy rain and floods in much of the country in the past month or so, food prices look like they will continue to rise over the rest of 2023, dragging the CPI higher.

Core inflation, which excludes food and fuel prices, was unchanged at an annual 0.8% in August which is nit really strong at all.

Chinese activity data on Friday for retail sales, production and investment (especially in property) will hopefully be a bit stronger than July’s weak outcomes.

Trade was a tough better in August but the falls in exports and imports in August, while smaller than in July, were still a sign of the lacklustre of the health of the Chinese economy.
The weak inflation figures are a prime sign of the gathering stagnation in the Chinese economy - that's a situation very different to the US, UK, Australia and elsewhere.

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US inflation is back in market focus this week.

While it has been generally cooling since peaking at 9.1% in June, 2022 and the worry is that there could be a renewed rise as oil prices rise and could remain at high levels into 2024.

Economists expect it to show headline prices were 3.6% higher in August than a year earlier.

That will be well above the 3% (2.97% unrounded) reached in June and 3.2% in July.

And if it is any higher, watch the fear and loathing meter rise ahead of the Fed meeting next week.
The extension of cuts in oil production and strongish data (jobs and retail sales) have helped rekindle rate rise fears in US markets especially last week.

Strategists at Bank of America say they’re hearing the belief that the Fed is done hiking rates and the acceptance that rates will stay higher for longer.

“We disagree on the former and agree on the latter,” the strategists led by Mark Cabana wrote in a BofA Global Research report. “Both imply higher rates.”

US core inflation will be watched closely and AMP Chief Economist, Shane Oliver says it will remain at a monthly rate of 0.2% and easing to 4.3%. Producer price inflation will remain around an annual 1.5%, according to Dr Oliver.

August’s retail sales figures are out on Thursday and industrial production on Friday are forecast to slow a little - meaning less pressure on the Fed the week after

With more signs the EU economy is slowing (and battling continuing bad weather)the European Central Bank meetings Thursday and is expected to leave its key policy rates on hold at 3.75% for its deposit rate and 4.25% for its main refinancing rate, however, its likely to maintain a hawkish bias and the risk of a rate hike is high given concerns about sticky inflation.

And with Apple shares sliding 6% last week, cutting more than $US250 billion from its market value, there will be a lot of attention on the launch of the new iPhone early Wednesday, Sydney time.

The share price has weakened since the Chinese government banned iPhones from being used for work in some agencies and departments - both at work and at home.

The launch is being held at Apple’s HQ in California.

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