New York·Shanghai markets, will the US lower rates…retail sales in focus

This week, the New York stock market is likely to move depending on the results of the U.S. central bank (Fed) Federal Open Market Committee (FOMC) meeting to be held on the 16th–17th (local time). With a cooling U.S. labor market, the market has come to regard a 0.25%percentage point cut in the policy rate this month as a fait accompli, and attention is also focused on the 'dot plot' that the Fed will present in the Summary of Economic Projections (SEP). In particular, the key question is whether the dot plot, which reflects Fed officials' rate projections, will meet expectations for three rate cuts this year.

Interest in Fed Chair Jerome Powell's press conference has become higher than ever. Depending on whether Chair Powell places more weight on the cooling labor market or on sticky inflation, one can gauge the likelihood of additional Fed rate cuts within the year. According to the Chicago Mercantile Exchange (CME) FedWatch, futures on the federal funds rate imply a 74% probability of a 0.75%percentage-point cut in the U.S. policy rate by December this year, and a 5.1% probability of a 1%percentage-point cut.

Among U.S. economic indicators this week, August retail sales to be released on the 16th are the most important. They provide insight into consumer flows that account for two-thirds of the U.S. economy. The market expects a 0.3% month-on-month increase. Given that markets have recently been sensitive to employment data, weekly initial jobless claims to be announced on the 18th also warrant attention.

In an uncertain trade environment, Chinese economic indicators also merit attention. On the 15th, August Chinese retail sales and industrial production will be released. Because last month's economic indicators were generally weak, concerns have been raised that growth momentum may worsen in the second half of the year. The Chinese unemployment rate will also be published on the same day. On the 20th, the People's Bank of China will announce the September Loan Prime Rate. The 5-year LPR, which serves as the benchmark for mortgage rates, has been kept at 3.5% since May.

Reporter Han Kyung-jae hankyung@hankyung.com