As an awful August gives way to an uncertain September, investors hope this month will confirm that the seemingly relentless rise in interest rates will end soon, meaning respite for both stocks and bonds.
But there are a few snags. This September is chock-full of risk events, including central bank meetings, a G20 summit and make-or-break data, not to mention that it tends to be the worst month of the year for the mighty S&P 500.
Here's a look at the week ahead in markets from Ira Iosebashvili in New York, Kevin Buckland in Tokyo, Dhara Ranasinghe, Libby George and Naomi Rovnick in London.
1/ SCARY SEPTEMBER
Now the Federal Reserve's Jackson Hole confab is over, investors are strapping in for a potentially volatile month.
The S&P 500 tends to post its worst monthly performance in September, with an average decline of 0.7%, according to CFRA data going back to 1945.
There are plenty of catalysts for volatility. The Sept. 13 U.S. inflation reading would likely have to support the narrative of cooling consumer prices and resilient growth that has boosted stocks for most of the year.
Investors will also scrutinise the message from Fed Chairman Jerome Powell after the central bank's Sept. 20 meeting to determine the likelihood of another hike this year.
Meanwhile, there's a risk of a fourth federal government shutdown in a decade if squabbling lawmakers cannot reach a deal by Sept. 30, when funding runs out with the end of the current fiscal year. On the data front, U.S. services sector activity is due Wednesday.
2/ THE SICK MAN OF EUROPE
Germany looks likely to be the only major economy to contract this year. Business activity there shrank at the fastest pace in over three years in August, business sentiment has deteriorated and the economy stagnated in the second quarter.
No wonder the region's economic powerhouse is once again being called the sick man of Europe.
July industrial orders and production data in the coming week may reinforce that perception, supporting the case for the ECB to leave rates unchanged in September.
Germany's coalition just agreed a 7 bln euro ($7.56 bln) corporate tax relief package to give the economy what Chancellor Olaf Scholz called a "big boost".
But economists are sceptical, noting that at just 0.2% of GDP, the package is no game-changer and that the sick man will need more medicine.
3/ A BRIGHTER G20?
Some progress this summer on debt deals for the string of struggling emerging economies in, or facing, default has sharply driven up year-to-date returns for the sovereign bonds for Pakistan, Sri Lanka, Ghana and Zambia.
This bright spot could, during the G20 Summit in Delhi, support ongoing efforts to tackle the persistent, damaging debt crisis among developing nations.
Multilateral institutions and creditor countries have used most international gatherings to refine the Common Framework agreement that was meant to make recovering from debt distress quicker and easier.
But the absence of China’s President Xi Jinping in Delhi could cast a pall. China has become the biggest bilateral lender to some developing nations in recent years, and its reluctance to make bigger concessions during restructuring efforts has been a core sticking point.
4/ SMOOTH TRANSITION
The Reserve Bank of Australia is set to hold rates steady for a third straight meeting on Tuesday, as Governor Philip Lowe prepares to pass the baton to deputy Michele Bullock.
A sharp cooling of inflation hints at an easier road for Bullock, after Lowe's controversy-filled legacy of painful backtracks and abrupt shifts that cost him a second term.
Rates are at an 11-year high of 4.1% after 400 bps of tightening since May 2022. Traders expect that to be the peak, after inflation unexpectedly eased to a 17-month trough below 5% in July.
But it won't be all plain sailing. Economic risks in top trade partner China are ramping up right as things at home look rosier.
5/ BoE ON THE CUSP
Is Britain's economy slowing enough for the Bank of England to end its battle against inflation?
UK retail sales for August, as measured by the British Retail Consortium on September 5, may harden the view expressed in other surveys that consumers are deeply cautious.
Sentiment has soured alongside a slowing housing market, following 14 back-to-back rate increases. Monthly house price data from Halifax on September 7 will indicate whether the 9-trillion pound ($11.37 trillion) UK residential property sector has weakened further.
But the economy, which has defied recession forecasts, could still get a boost.
Headline inflation dropped to 6.8% in July, energy costs are set to fall from October and wage growth is now positive in real terms.
If this sends Brits flocking back to the shops, it could strengthen the BoE's resolve to stay tough on inflation.
($1 = 0.7914 pounds)
(Compiled by Amanda Cooper; editing by John Stonestreet)
