The start of September is playing an already familiar tune as risk appetite has been poor on most days and volatility increased, while USD and short-term interest rates declined. September is the worst month of the calendar year over the past 25 years for the S&P 500. Underperformance in the tech sector has been linked to sector rotation and earnings disappointments. But rising stock market volatility is also in line with weaker macro momentum and could continue, at least into the FOMC meeting next Wednesday.

It’s another busy week which includes the last US inflation data before the Fed’s policy decision, a major central bank meeting and the first Harris-Trump US presidential TV debate. Most estimates for US August CPI due on Wednesday point to stable price pressures, though upside risks could come from a rebound in core services inflation. Inline prints would mean steady volatility as markets focus more on the employment picture to determine the policy path. Recent Fedspeak and data suggest a 25bps September rate cut, though the market still prices in over 100bps of policy easing across the next three Fed meetings.

The ECB meeting on Thursday will see another 25bps cut, with markets seeing close to a 50% chance of an additional move this year. Weak productivity and labour force growth suggest that the region’s potential GDP will continue to struggle. Wage growth did decline significantly in the second quarter, but the jobless rate remains at record lows and services inflation sticky. Going forward, that means rate setters will likely remain cautious and data dependent.

In Brief: major data releases of the week

Tuesday, 10 September 2024

– UK Jobs: The key number will be wage growth, which is likely to tick down due to base effects. The unemployment rate is also seen lower, though this might be looked through on account of reliability issues with this data.

– US Presidential Debate: The race to the White House has tightened dramatically and is now too close to call since Harris became the Democratic nominee. Can Harris establish her own identity? Will Trump go into all-out attack mode?

Wednesday, 11 September 2024

– UK GDP: July GDP is expected to remain solid, after June printed flat and the quarterly figure at 0.6%. Attention is on sticky price pressures, though this data could reinforce better relative UK growth prospects.

– US CPI: Consensus expects both the headline and core CPI to remain unchanged at 0.2%. That would leave the headline annual print at 2.6%. The FOMC is in blackout mode ahead next week’s meeting. Since the NFP data, markets have sided with a 25bps rate cut.

Thursday, 12 September 2024

– ECB Meeting: Markets have virtually fully priced in a 25bps rate cut, taking the deposit rate to 3.5%. Subdued growth contrasts with still elevated services (wage) inflation. Watch out for the updated 2025 inflation forecasts.