European markets on the rise

• European markets on the rise.

• US jobs report reigns in hopes of a 50bp rate cut.

• Chinese prices highlight ongoing economic weakness.

A positive start for European equity markets has seen indices throughout the region clawing back some of the losses seen in the wake of Friday’s jobs report. That report had a little for everyone, but there is a fear that the tentative tick lower in unemployment means we see the Fed cut rates by just 25- basis points despite the ongoing cooling of the US jobs market. Hiring remains weak, although we are yet to see a major pickup in layoffs that signal an impending recession built on demand destruction. With the CME signalling a deterioration in pricing around a 50-basis point cut next week (from 50% to 25%), we are looking ahead to Wednesday’s CPI inflation release as the key determinant of sentiment going forward. September has a reputation as the toughest month for stocks, but there is a hope that a slump in US CPI could see the buyers step in as the soft landing calls come back into play.

Chinese inflation data served to highlight the continued weakness of the consumer, as the world’s second largest economy struggles to gain traction under the weight of real estate and credit woes. A worrying -1.8% producer price metric highlights the ongoing struggles for Chinese manufacturers, with a mix of weak demand and weak international commodity prices keeping this factory price figure depressed. Nonetheless, the low input prices faced by Chinese manufacturers does provide the basis for global disinflation, helping to keep import prices low for Western economies. Coming after WTI fell to the lowest level since June 2023, the inflation outlook does at least provide the basis for optimism amid calls for a potential second wave of US inflation should the Fed slash rates in spite of above target CPI and PCE metrics.