Last week, the People’s Bank of China introduced significant easing measures targeting interest rates, the real estate market, and the stock market, leading to a nearly 16% rebound in the CSI 300 Index from its low. Meanwhile, although the S&P 500 had already priced in the Federal Reserve’s 50 basis point rate cut, it continued to hit record highs, buoyed by ongoing gains in tech stocks. In the bond market, the yield spread between the U.S. 10-year and 2-year Treasuries remained steady at around 20 basis points. The U.S. Dollar Index continued its downward trend, consolidating around 100.

Key Economic Data Review for Last Week:

U.S. PCE: The Personal Consumption Expenditures (PCE) index for August increased by 2.2% year-over-year (previously 2.5%) and 0.1% month-over-month (previously 0.2%). The decline in PCE growth was mainly due to falling goods prices, which saw a year-over-year decrease of -0.9% (previously -0.2%), while services prices remained steady with a year-over-year increase of 3.7%. Excluding food and energy, core PCE rose by 2.7% year-over-year, a slight increase from the previous month’s 2.6%.

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China Industrial Enterprises Total Profits: China Industrial Enterprises Total Profits fell by 17.8% year-over-year in August, a sharper decline from July’s 4.1% drop, marking the largest decrease this year. High-tech manufacturing profits, the largest contributor, declined in August, with cumulative year-over-year growth for January to August standing at 10.9% (previously 12.8%). Additionally, profits in mining and consumer goods manufacturing continued to fall due to weak demand, further exacerbating the downward pressure on overall industrial profits.

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Australia Monetary Policy: The Reserve Bank of Australia (RBA) kept interest rates unchanged in its September meeting. The meeting statement indicated that restrictive financial conditions are slowing the economy. While household consumption is expected to rebound in the second half, if the recovery pace falls short of expectations, economic output may remain weak, leading to further slack in the labor market. The RBA also noted that recent data has heightened inflationary risks, and inflation is now expected to return to the target range by the end of 2025 (previously mid-2025).

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Key Data to Watch This Week:

China PMI (September 30): China’s August Manufacturing PMI was 49.1 (previously 49.5), marking the fourth consecutive month of contraction. Nearly all sub-indices declined in August, remaining in contraction territory. Given the still-weak domestic demand and the incomplete impact of monetary policies, the market expects the September PMI to hold steady around 49.5.

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U.S. ISM PMI (October 1): The U.S. Manufacturing PMI for August was 47.2 (previously 47.4). New orders and production indices fell to 44.6 (previously 47.4) and 44.8 (previously 45.9), continuing to reflect the restrictive financial conditions and uncertainties surrounding the presidential election, which have dampened corporate investment. The market expects manufacturing to exhibit uneven recovery, with the September PMI to remain around 47.6.

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U.S. ISM NMI (October 3): The Non-Manufacturing PMI (NMI) for August was 51.5 (previously 51.4). Despite declines in business activity and employment indices, all indices remained in expansionary territory, indicating overall healthy growth in the services sector. With the U.S. holiday season approaching, the market expects the September NMI to hold steady around 51.5, continuing a trend of moderate growth.

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U.S. Employment Situation (October 4): The U.S. unemployment rate for August was 4.2% (previously 4.3%), remaining near historic lows, with nonfarm payrolls increasing by 142,000, within the safe range of 100,000 to 200,000. Additionally, recent initial jobless claims have stopped rising, indicating a slowdown in labor market weakening. Moving forward, it will be important to monitor whether the job market can maintain its current state without deteriorating following the Fed’s rate cuts. The market currently expects the September unemployment rate to stay at 4.2%, with nonfarm payrolls increasing by around 140,000.

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The U.S. Bureau of Labor Statistics released the July employment report on August 2, indicating that the unemployment rate increased to 4.3% from 4.1% in June. Although the unemployment rate remains near historical lows and close to the natural rate of unemployment, it has been rising for four consecutive months.

At the same time, nonfarm payrolls increased by only 114,000, significantly below the 12-month average of 215,000. The year-over-year growth in average hourly earnings also declined from 3.8% to 3.6%, continuing its downward trend. Additionally, the number of initial jobless claims continues to rise.

During the July FOMC meeting, the Federal Reserve noted that it would more carefully balance the risks between the labor market and inflation. Fed Chair Jerome Powell also explicitly stated that he did not want to see further cooling in the labor market.

In light of the series of data showing a slowdown in the labor market, the market has started to anticipate more aggressive rate cuts at the September FOMC meeting. According to FedWatch data, the probability of a 50-basis-point rate cut has surged from 11.5% a week ago to 77.5%.

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