The past few trading days were characterized in particular by a renewed escalation of the Middle East conflict. Investors have remained cautious in this context to this day. However, encouraging inflation figures for the eurozone gave rise to hopes of further ECB interest rate cuts. Finally, investors expect the official US labour market report to provide important impetus on Friday afternoon.
DAX Chart
Source: Tradingview
German and European inflation on the retreat
Preliminary data on German inflation rates caused a stir at the start of the week. At 1.6%, consumer prices in September were the lowest they have been since February 2021.
In the eurozone, inflation stood at 1.8%, well below the ECB's target of 2%. In this context, hopes of further interest rate cuts by the European Central Bank (ECB) this year are likely to have risen.
Fed chief holds out the prospect of interest rate cuts of 50 basis points for 2024
On Tuesday, it was Fed Chairman Jerome Powell who held out the prospect of further interest rate cuts for the current year at a financial conference in Nashville (Tennessee). "If the economy performs as expected, interest rate policy will move toward a more neutral stance over time." "We will make our decisions on a meeting-by-meeting basis," said Powell. Overall, market participants are hoping for interest rate cuts of 50 basis points in 2024.
Meanwhile, the widely observed ISM index for the manufacturing industry was a disappointment. At 47.20 points, it is still below the growth threshold of 50 units.
ADP data significantly stronger than expected - ISM non-manufacturing index convincing
As expected, the so-called ADP data on Wednesday gave a first foretaste of today's publication of US labor market data. The change in non-farm payrolls showed a total increase of 143,000 units, significantly more than expected (120,000) after 99,000 in the previous month.
However, the counterpart to the ISM index for the non-manufacturing sector was convincing on Thursday. At 54.90 points, the index was well above expectations (51.70 points).
US labor market report should provide decisive impetus - further interest rate cuts possible
As expected, investors are likely to focus on the non-farm payrolls today (14:30). According to the latest estimates, economists expect an increase in jobs (excluding agriculture) of 140,000 units, after 142,000 in August. In this context, the unemployment rate is likely to remain at 4.2%, the same level as in the previous month.
At the end of the week, the NFPs have the potential to provide the decisive impetus for today and the coming trading days. However, if the jobs report is too strong, the recent dominance of interest rate cut fantasies could be dashed.
