Highlights
U.S. equities ended the week lower, halting a 3-week streak of gains, after comments from Federal Reserve officials and upgraded second-quarter GDP growth tempered expectations for aggressive rate cuts. The Nasdaq Composite posted the steepest decline, down 0.50%, followed by the Russell 2000, which broke its streak of weekly gains since early August. Energy stocks bucked the trend and advanced as oil prices rose following President Trump’s call for Europe to halt Russian energy purchases. Fed Chair Jerome Powell cautioned that the economy faces “upside inflation risks” and “downside labour market risks,” while noting that stock valuations remain elevated. Other officials, including St. Louis Fed President Alberto Musalem and Atlanta Fed President Raphael Bostic, also signalled resistance to additional easing given persistent inflationary pressures. Meanwhile, the Fed’s preferred inflation measure, the core PCE price index, rose 0.2% month over month in August, steady with July and matching expectations. The Bureau of Economic Analysis also upgraded second-quarter GDP growth to 3.8% from 3.3%, citing stronger consumer spending as the key driver. S&P Global’s flash U.S. PMI surveys showed business activity slowing in September but remaining in expansion. Manufacturing PMI fell to 52.0 from 53.0, while services slipped to 53.9 from 54.5. Over in Europe, the pan-European Euro STOXX 600 ended the week little changed, while country indexes were mixed but mostly positive as investors weighed policy and trade risks. Trade tensions resurfaced as President Trump announced a sweeping 100% tariff on branded or patented pharmaceutical products, while the European Commission secured a 15% cap on US pharma tariffs. Sweden’s Riksbank lowered rates by 25 bps to 1.75%, its third cut this year, and signalled no further changes through 2028. The Swiss National Bank left its key rate at 0%, noting inflation at 0.2% remains within target. In Asia, Japanese stocks advanced, with the Nikkei 225 up 0.69% and the TOPIX climbing 1.25%. Gains were supported by tempered expectations of near-term Bank of Japan rate hikes after Tokyo inflation undershot forecasts. Tokyo’s CPI rose 2.5% year over year in September, steady from August but below the 2.8% consensus with subsidies contributing to the softer print. Still, recent dissent within the BoJ board suggested a hike could remain on the table later this year. Chinese equities posted gains despite limited fresh news. The CSI 300 rose 1.07% and the Shanghai Composite added 0.21%. No major data or earnings releases shaped trading, but abundant domestic liquidity and strong retail inflows continued to support the rally. Investor optimism has also been buoyed by progress in local AI innovation and Beijing’s efforts to curb excessive price competition, even as growth slows and deflation risks persist.
Data Highlights
The U.S. economy grew strongly in Q2, with GDP rising 3.8% quarter-on-quarter, ahead of the 3.3% forecast and sharply higher than the prior -0.6%. U.S Personal Consumption Expenditure in August increased by 2.7% year-on-year, in line with market expectations. Australia’s CPI Indicator for August came in at 3.0%, slightly above the 2.9% forecast and also higher from the prior 2.8%.
Week Ahead
Australia Interest Rate Decision | Eurozone Inflation Rate YoY – Wednesday | Eurozone Unemployment rate – Thursday | Japan Unemployment Rate, U.S Unemployment Rate, U.S Non-Farm Payroll- Friday
