Worsening Economic Outlook: Market Rallies May Be Short-Lived

Market Overview

U.S. initial jobless claims surged to 263,000 last week, the highest level in four years. The data highlighted further weakness in the labor market and fueled expectations of a Fed rate cut in September. Risk appetite drove all three major U.S. equity indexes to fresh record highs.

Meanwhile, the U.S. dollar index slipped on easing bets, supporting gold prices, which remained above $3,600/oz and held firmly at the 5-day moving average—a sign of continued bullish momentum. The 10-year Treasury yield hovered near 4%, close to its April 4 low, showing little reaction to labor market data. However, with weaker job conditions weighing on domestic demand, the U.S. economy is in a passive inventory liquidation phase. Investors should remain alert to the possibility of a market pullback.

Hot Topics to Watch

1. OPEC Monthly Report: Tight Oil Market Outlook

OPECs latest report highlighted resilient global economic performance in H1 2025, with momentum expected to carry into the second half. The organization forecasts global oil demand will rise by 1.3 million barrels per day this year—roughly 40% above estimates from some investment banks such as Goldman Sachs. OPEC noted that average demand for OPEC+ crude will reach 43.45 mb/d in H2, well above the 42.40 mb/d produced in August. Demand for OPEC+ crude is projected to remain high in 2026 at 43.10 mb/d.

2. U.S. Inflation Pressure Persists—But Fed Still on Track for Rate Cut

August CPI rose 2.9% YoY, the fastest pace in seven months, and 0.4% MoM, exceeding both expectations and Julys increase. While the data points to renewed inflationary pressure, the Fed is still expected to deliver its first rate cut of the year next week given the weakening labor market. Markets remain confident that inflation alone will not derail the policy shift, but persistent price pressures could force the Fed to move more cautiously going forward.

Key Data to Watch

22:00 (GMT+8) – U.S. Michigan Consumer Sentiment Index (Preliminary, September)