Global market update September

It is a topsy-turvy global market as each geographical region balances between easing monetary policies, persistent inflation, and geopolitical pressures. While the medium-term outlook remains constructive, near-term volatility is expected. Here’s how key regions are shaping the global economic landscape.

Australia’s Reserve Bank cut its benchmark lending rate by 25 basis points to 3.6%, its lowest since April 2023. This marks the third rate cut of the year and signals that further easing may follow if data softens. The move is expected to bolster discretionary spending and support corporate earnings.

At the same time, the NAB business confidence survey showed stronger-than-average sentiment, reinforcing the economy’s resilience. However, inflation presents a challenge: the monthly CPI rose 2.8% year-on-year to July, above expectations and higher than June’s 1.9%. While monthly data holds less weight than quarterly numbers, the trend suggests sticky inflation could limit the RBA’s ability to deliver deeper cuts.

The US economy is sending mixed signals. On the inflation front, the consumer price index (CPI) rose 0.2% month-on-month and 2.7% year-on-year, broadly in line with expectations. This has increased hopes for a September rate cut, but policymakers remain cautious as inflation sits above target.

Meanwhile, producer prices surged 0.9% in July, the fastest pace in three years, reflecting higher costs tied to tariffs. With companies passing on these costs, inflationary pressures may persist. Activity indicators also highlight fragility: the Services PMI slowed to 50.1, barely in expansion territory, while firms trimmed staff amid weaker demand.

Fiscal policy is stimulatory, adding to the complexity. The “One Big Beautiful Bill,” a sweeping tax and spending package coupled with deregulation, could offset some tariff-driven headwinds. Yet rising deficits and global uncertainty weigh on sentiment.

Europe remains less directly exposed in the current data but sits at the crossroads of global inflation and tariff spillovers. The region benefits from resilient corporate earnings and fiscal stimulus, but persistent inflation pressures mirror global trends. With global central banks leaning toward easing, Europe faces the challenge of balancing currency stability against the need to support growth.

Overall, Europe’s trajectory hinges heavily on external factors, particularly US tariffs and energy dynamics that could amplify volatility in the months ahead.

Asia shows both strength and uneven momentum. In China, trade data surprised to the upside: imports grew 4.1% and exports surged 7.2% year-on-year in July, beating expectations. Still, retail sales rose just 5.1%, underscoring ongoing challenges in boosting consumer demand. Policymakers are expected to lean on liquidity injections to sustain activity.

In Japan, GDP growth exceeded expectations last quarter, supported by robust business investment (+1.3%) and solid domestic demand. Yet volatility persists. Factory output fell 1.6% in July, while retail sales rose only 0.3%. Tariff effects continue to ripple through its economy.

Global markets are supported by fiscal stimulus, structural growth themes, and liquidity injections. Inflation, however, remains sticky outside China, keeping central banks cautious. With rate cuts on the horizon, opportunities in risk assets, infrastructure, and inflation hedges look compelling. Investors should embrace volatility as an opportunity, staying flexible as global policy and trade dynamics evolve.