30 September to 6 October: Showdown in DC

A series of macroeconomic data were released in the US during the week, which left the market questioning the duration and the sustainability of the current economic cycle’s pace. The ISM manufacturing index fell below the 50-point threshold for the second month in September signalling that industrial production could contract soon. Although industrial output growth has considerably slowed, an outright decline in volume has not been confirmed by hard data yet. The usual monthly labour market metrics soothed the market jitters to some extent, as the jobs report as a whole indicated that the weakness in the manufacturing sector has not spread to the US consumer yet, which is undoubtedly among the most important drivers of economic growth.

All eyes will be on US-China trade negotiations, scheduled to resume in Washington DC and likely to begin in the middle of this week. The outcome of the talks will most likely affect global investor sentiment. In our view, any positive headline could boost global market sentiment and could also reduce the probability of a policy mistake, which could further hurt global growth.

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