Last week was filled with significant events, so we anticipated a quieter week, at least in terms of data releases. The main focus was on the ISM Services PMI data from the U.S. and U.S. unemployment claims. However, various global events, including a week of riots in the UK, escalating tensions between Israel and Iran, and Ukraine’s surprise offensive into Russian territory, could have had a significant impact. In the end, the growing anticipation of a U.S. recession became the primary talking point.
Starting with the key data points, on Monday, the U.S. ISM Services PMI was released. After last week’s disappointing ISM Manufacturing results, the Services PMI took on greater importance. The U.S. was hoping to stay above the critical 50-point threshold, especially with Manufacturing dropping further below 50 than expected. The final Services PMI result came in at 51.4, slightly above the forecast of 51.1. Although a marginal gain, it was a strong result considering the previous reading of 48.8. This outcome helped ease concerns about the U.S. economy.
Next, the U.S. unemployment claims were released. Following last Friday’s poor employment data, which sparked fears of a U.S. recession, this release was particularly noteworthy. Once again, the U.S. surprised on the upside. The forecast predicted a drop in unemployment claims from 250,000 to 241,000, but the actual figure came in even better at 233,000. This further alleviated recession fears, with Federal Reserve member Schmidt stating that the U.S. is not yet “quite there” to begin cutting interest rates. However, last week’s results have heightened concerns about a potential recession, making upcoming data releases crucial.
Globally, the UK faced intense pressure as far-right supporters rioted following a stabbing in Southport that claimed the lives of three young children. This led Prime Minister Starmer to convene three COBRA meetings and deploy significant police forces to quell the violence. The “big night” for the rioters was expected to be Wednesday, but anti-racist protesters took to the streets and effectively ended the far-right riots. The government remains on high alert for potential unrest over the weekend.
In the Middle East, tensions between Israel and Iran escalated following the assassination of Ismail Haniyeh in Tehran, raising concerns about a broader regional conflict and increasing pressure on the U.S. to intervene. Additionally, Ukraine’s offensive into Russian territory has heightened fears of a potential World War III, though such a scenario is not yet inevitable.
Looking ahead to next week, the focus will once again be on the U.S., with the release of PPI, CPI, and Retail Sales figures – key indicators for assessing the strength of the U.S. economy. The UK will also release its Retail Sales figures, so we can expect a fair amount of market volatility.
