Key facts
- Global borrowing costs are at their highest since the 2007-08 financial crisis.
- US nonfarm payrolls are expected to rise by 100,000 jobs in September.
- The US unemployment rate is forecast to be 4.2% in September.
- US Personal Consumption Expenditures price index data will be released on Wednesday.
- Euro zone inflation data is due Friday.
- Micron Technology's shares have fallen more than 6% this quarter.
- The Reserve Bank of Australia is expected to raise interest rates by a quarter point on Tuesday.
- Australia's jobless rate rose to a five-year high.
- Australia's house prices are falling.
As the third quarter concludes, investors are bracing for a potentially pivotal fourth quarter, marked by elevated global borrowing costs and a backdrop of geopolitical uncertainty. Turbulent bond markets, influenced by factors including the conflict in the Middle East and fiscal concerns, have pushed global borrowing costs to their highest levels since the 2007-08 financial crisis. Despite this, major world stock indexes remain close to all-time highs, largely driven by enthusiasm for artificial intelligence.
Looking ahead, key economic data releases will be central to market sentiment. In the coming week, investors will focus on US nonfarm payrolls data due Friday and the monthly Personal Consumption Expenditures price index on Wednesday, which will provide insights into inflation trends and the Federal Reserve's potential future interest rate decisions. Futures pricing indicates a roughly 50/50 chance of another quarter-point rate hike by the Fed in October.
Euro zone inflation data is also expected on Friday, alongside price figures from Tokyo, which are seen as an indicator for the broader Japanese economy. The market is grappling with whether recent energy price surges will lead to sustained inflationary pressures, potentially prompting further global monetary tightening. Ten-year Treasury yields have already surpassed 5%, a level not seen since 2007, raising concerns about the sustainability of current market valuations.
In the corporate sphere, semiconductor maker Micron Technology's earnings report on Wednesday will be a key test for the AI trade, which has shown signs of fatigue. Micron, a supplier of memory chips crucial for AI infrastructure, has seen its shares fall over 6% this quarter, mirroring a broader decline in the semiconductor index. Positive guidance from Micron could ease concerns about AI spending momentum, while disappointing results might signal a loss of steam in the AI boom.
Meanwhile, in Australia, the Reserve Bank of Australia is expected to raise interest rates by a quarter point on Tuesday, despite falling house prices and an unexpected rise in the jobless rate to a five-year high. Core inflation remains above the RBA's target range, and markets anticipate the cash rate peaking near 5%. This marks a shift from previous economic conditions where falling house prices might have prompted rate cuts.