WEEKLY MARKET RECAP SEP 08-12

Markets Overview: Slow Week Ahead of FOMC

Overall, market activity this past week was muted, with low volume and limited volatility. Most fundamentals and economic data were already priced in leading to minimal to normal market movements.
Market participants are now focused on next week’s FOMC meeting and other central bank interest rate decisions, to gauge the future path of monetary policy.

Here’s a breakdown of the key drivers that shaped markets this week.

Table of Contents

1. Macro Overview: Global Economic Data
2. Fundamental Analysis Highlights
3. Technical Analysis Highlight
4. Looking Ahead: Key Market Events Next Week
5. Stay Ahead with MRKT

Macro Overview: Global Economic Data

U.S. Economic Data

• Core inflation remained steady at 3.1%, highlighting stickiness and suggesting a neutral Fed tone at the upcoming FOMC.
• Inflation came in at 2.9%, in line with forecasts, further supporting the current market sentiment.
• Initial jobless claims rose unexpectedly to 263k, reinforcing sentiment around labor market weakness.
• PPI YoY came out at 2.6%, slightly above expectations, supporting the Fed rate cut narrative. Markets further added the bet on a potential December rate cut, even though the last Fed’s SEP signaled only two cuts in 2025.
• Michigan Consumer Sentiment fell to 55.4, reflecting consumer pessimism over business conditions, the labor market, and inflation.

UK & Japan Economic Data

• UK GDP remained unchanged from the prior month while the Industrial and manufacturing production missed expectations, reinforcing the stagflationary environment as inflation remains elevated at 3.9%, nearly double the Bank of England’s target.
• Japan GDP rose 0.5% QoQ, above the prior 0.1%, supported by stronger exports while also the Japan PPI increased to 2.7%, heightening expectations for a potential BoJ rate hike.
• Japan industrial production fell sharply to -0.4% YoY from 4.4%, pressured by U.S. trade uncertainty, soft demand, and weakness in key sectors such as autos and steel.

Europe: ECB Rate Decision

• The European Central Bank held rates steady at 2%, signaling that they are not in a rush to adjust monetary policy. With inflation back near the ECB’s 2% target, officials are taking a cautious approach, keeping the current policy stance in place while monitoring economic developments.

China Inflation & Policy Outlook

• CPI fell to -0.4% YoY from 0%, increasing the likelihood of continued accommodative measures to achieve the 2% inflation target.

Fundamental Analysis Highlights

Economic data painted a mixed picture this week:

• U.S. labor market weakness and dovish signals support expectations for rate cuts while inflation still remained sticky above the Federal Reserve's goal of 2%.
• UK and Japan data reflect mixed economic challenges: the UK is in a stagflationary situation while Japan's economy registered a modest improvement.
• China’s weak inflation supports further accommodative measures.

Overall, the market remained calm, with most data largely priced in. Attention is now shifting to next week’s central bank meetings

Technical Analysis Highlights

• Dollar Index (DXY)
  • Outflows continued, supported by weak U.S. labor data and dovish rate-cut expectations.

• Gold:
  • Benefiting from dovish Fed sentiment, with safe-haven demand supported by ongoing market uncertainty, however there was minimal impactful market movement as the safe haven remained steady in the current intraday consolidation
• Risk Assets
  • Forex markets remained relatively stable as participants priced in expected central bank policy decisions, with muted volume and low volatility, while equity indexes such as the Nasdaq, S&P 500, and Dow Jones reached new all-time highs.

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Looking Ahead: Key Market Events Next Week

• U.S.: FOMC meeting & inflation reports (critical for Fed guidance)
• Europe: ECB rate decision (expected to hold steady)
• UK: GDP MoM
• Japan: GDP QoQ
• China: Inflation YoY

Markets will closely watch these releases for signals on central bank policy direction. Softer-than-expected readings would reinforce dovish expectations, while upside surprises could shift central bank guidance toward neutral or hawkish.

Stay Ahead with MRKT

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