Focus on U.S. Jobs Data, Powell’s Comments, and Central Banks as Q4 Begins

As the U.S. narrowly averts a government shutdown with an eleventh-hour deal, investors are turning their attention to key events shaping the financial landscape in the coming week. The spotlight will be on U.S. job data, insights from Federal Reserve Chair Jerome Powell, and a speech by European Central Bank President Christine Lagarde. Additionally, central bank meetings in Australia and New Zealand are poised to impact global markets as they grapple with the mantra of ‘higher for longer’ interest rates.

1. U.S. Jobs Data: The much-anticipated nonfarm payrolls report for September, set to be released on Friday, is expected to reveal the addition of 163,000 jobs, a slight deceleration from the 187,000 jobs added in August. A stronger-than-expected reading could reinforce the Federal Reserve’s commitment to prolonged higher interest rates, potentially influencing market sentiment. Prior to this, the JOLTS jobs report for August, due on Tuesday, and the ADP National Employment report on Wednesday are expected to provide additional insights into the labor market, possibly signaling a moderation in job growth.

2. Powell’s Insights: Federal Reserve Chair Jerome Powell, alongside Philadelphia Fed President Patrick Harker, will engage in a roundtable discussion with workers and community leaders on Monday. In the wake of Friday’s data showing a dip in underlying inflation, Powell’s comments will be closely scrutinized. While the Fed has left rates unchanged, indicating a likely rate hike later this year, concerns persist about rising oil prices impacting the path to achieving the 2% inflation target. Throughout the week, appearances by other Fed officials, including Loretta Mester, Raphael Bostic, and Mary Daly, will offer additional perspectives on monetary policy.

3. Equity Markets in Q4: As the final quarter commences, equity markets are rebounding from a lackluster Q3. The S&P 500, Dow, and Nasdaq faced declines, with surging bond yields causing unease. Tech and growth companies, including Apple, Microsoft, Alphabet, and Amazon, experienced setbacks amid concerns about inflated valuations. With Q4 ushering in another earnings season, questions loom about the sustainability of profits, especially within the context of the ongoing AI boom.

4. Lagarde’s Speech: ECB President Christine Lagarde’s speech on Wednesday will be closely monitored for signals regarding the future trajectory of interest rates. Recent data indicating a two-year low in Eurozone inflation has sparked expectations that the ECB may have reached a zenith in rate hikes to steer inflation back to its 2% target. Lagarde’s insights will offer guidance on the ECB’s stance in the aftermath of last autumn’s double-digit inflation, triggered by energy costs, supply chain disruptions, and elevated government spending.

5. RBA and RBNZ Meetings: The Reserve Bank of Australia, under new governor Michele Bullock, will convene on Tuesday. Investors are eager for clues regarding the RBA’s stance on rate hikes amid indications of persistent price pressures. While a consensus leans toward a pause, market watchers are attentive to any shifts in policy. On Wednesday, the Reserve Bank of New Zealand’s meeting is not expected to yield a rate hike despite its hawkish stance. Attention is focused on whether officials will hint at a potential move in November, adding an element of uncertainty to the central bank’s trajectory.

As global markets brace for these pivotal events, the dynamics of interest rates, job markets, and central bank strategies will undoubtedly shape the narrative for the weeks ahead. Investors are advised to navigate these waters with vigilance, considering the potential impact on various sectors and asset classes.