PMI to pave way for rate cuts By Reuters

A look at the day ahead in European and global markets from Stella Qiu

Services PMI due across Europe on Thursday is likely to show further moderation in activity and bolster expectations of rate cuts in the region, while potential rate moves in New Zealand and the US are also in focus .

Investors are already betting that the European Central Bank will cut interest rates by 25 basis points at its next two meetings in October and December after top hawk Isabel Schnabel sounded more optimistic about getting inflation under control.

While services expand in the UK, composite PMIs in Germany and elsewhere in Europe are expected to continue to show a contraction in the September data.

In the US, jobless claims and the ISM services survey will top Thursday’s data book, although Friday’s payrolls will be the main event.

In New Zealand, expectations among economists that the central bank will cut by 50 bps at each of its October and November meetings.

Singapore’s global trade manufacturing PMI remained in expansionary territory in September, data showed late on Wednesday. New orders rose and the electronics PMI hit its highest level since 2018, although analysts warned of possible weakness ahead as rising prices could point to supply chain challenges, while delays in electronic orders are reduced.

Meanwhile, Asian markets had a mixed day, with the MSCI ex-Japan index falling 1.4 percent, retreating from a 32-month peak. This was driven by a 3.5% drop in Hong Kong’s level, which retreated after a meteoric rise of 30% in just three weeks.

Hong Kong tech stocks fell more than 5 percent and property shares headed for their biggest one-day decline in nearly two years, falling 7.2 percent.

The other big driver was , which rose 2.3% as newly elected Prime Minister Shigeru Ishiba shed his hawk feathers and essentially told the Bank of Japan to stop raising rates. BOJ policy Asahi Noguchi reinforced this message, saying the central bank must patiently maintain an easy monetary policy.

That’s good for Japanese stocks, but not so much for the yen, which has fallen to its lowest level this month. The currency fell 2% overnight and was last at 146.9 per dollar.

Markets now point to almost no chance of BOJ tightening in October and a hike of just 4.6 basis points in December, or less than the even chance of a 10bp move. Rates are seen reaching just 0.5% by the end of next year, from the current 0.25%.

Key developments that could influence markets on Thursday:

— HCOB Eurozone Services PMI

— UK S&P Global Services PMI

— US Jobless Claims, ISM Services PMI

— Appearances by Fed Bank of Atlanta President Raphael Bostic and Bank of Minneapolis President Neel Kashkari,

(By Stella Qiu; Editing by Edmund Klamann)