Week ahead: Markets about to hit September turbulence?

The Labor Day holiday on Monday is likely to mean some thinner liquidity, particularly during the US trading hours, but it’s a jam-packed week for traders. The Reserve Bank of Australia and Bank of Canada are due up, whilst Chinese inflation data is the main highlight on the economic calendar. As September gets underway, it’s worth remembering it’s usually the worst month of the year for the S&P 500.

Here are the week’s key events:

Monday

The Labor Day holiday means things may be a little quiet during the US session, but there is a smattering of European data releases to watch out for. These include German trade balance figures, Swiss GDP data and the Sentix investor confidence survey, which last month arrested its steep decline though it remains in negative territory. Importantly the overall index for Germany fell for the fourth time in a row to -30.7 points.

Tuesday

The Reserve Bank of Australia paused for a second consecutive month in August and may well choose to stand pat again this week. Australia’s inflation rate eased to 4.9% in July, down from 5.4% in June to its lowest level in 17 months. Although this is still too high, the RBA is likely to choose to wait and see if it comes down further before committing to what would likely be a final 25bps to 4.35% some time later in the year. Also look out for China’s Caixin services PMI.

Wednesday

Signs of a slowdown in Canada’s economy are likely to ensure the country’s central bank stays on the sidelines at its September meeting. The Bank of Canada paused rate hikes in March and April, resuming with two further 25bps hikes through to July as inflation remained too high. Having raised rates to 5%, it’s now likely the BoC will stay on hold until its gets more data on the economy and prices, leaving the door open to further hikes if necessary. Look out for the ISM services PMI and Fed Beige Book for more colour on the US economy.

Thursday

Is the inflation genie slowly going back in the lamp? China slipped into outright deflation in July and is likely to see report a similar story for August. China saw a 0.3% decline in consumer prices in July from a year ago, and a 4.4% year-on-year drop in producer prices. Whilst the CPI points to waning domestic demand amid a property crisis, the PPI figure is considered an important leading indicator for global consumer prices. US weekly unemployment claims data is due later in the session.

Friday

More from China in the shape of data on new loans issued to consumers and businesses and M2 money supply figures, revealing whether moves to ease policy and stimulate growth are working. In a similar fashion, traders will watch the US consumer credit figures late in the day. Between these we have Canadian employment data and final German CPI inflation.