The People's Bank of China left its key lending rates at record lows for a 16th straight month in September 2026, even as the yuan continued to strengthen, in line with market expectations. The move reflected caution over the impact of the conflict in the Middle East, although exports remained strongly supported by AI-related demand. The one-year loan prime rate (LPR), the benchmark for most corporate and household borrowing, was kept at 3.0%, while the five-year LPR, a reference rate for mortgages, remained at 3.5%. Meanwhile, industrial production grew more than expected, while retail sales growth eased and was softer than estimated. At the same time, new yuan loans extended returned to growth in August, though below forecasts, as weak demand from the household and corporate sectors continued to weigh on credit growth. Meanwhile, housing prices continued to decline in August, though the pace of contraction was the softest in eight months, supported by government measures.

Crude oil prices tumbled below $100 a barrel on Friday, erasing gains after a volatile session and falling for a third consecutive session. Markets expect the closure of Saudi Arabia’s key pipeline to have a smaller impact on supplies than initially feared. Satellite imagery suggests Saudi Arabia moved 2.8 million bpd through the Strait of Hormuz over the past six days, compared with just 700,000 bpd in August. Saudi Arabia has reportedly sold as many as 60 million barrels of crude from the Persian Gulf port of Ras Tanura for September and October loadings outside the strait through ship-to-ship transfers. Reports that Aramco expects to restore half of the pipeline’s daily flows also eased supply concerns. Still, only four commodity vessels were detected moving through Hormuz on Thursday. Volumes from Hormuz are being picked up mostly by refiners in China and South Korea. China exported 6.01 million tons of refined fuels in August, up 12.7% yearly. Oil prices fell 0.5% on the week.

US stock indices closed mixed on Friday as Treasury yields rebounded, rekindling concerns about a deteriorating macroeconomic backdrop. The S&P 500 inched 0.2% higher and the Dow inched 95 points lower, while the Nasdaq added 0.7%. The 10-year yield rebounded as persistent uncertainty over Middle Eastern oil supplies drove fuel and natural gas prices higher. The threat of energy-driven inflation has affected underlying consumer prices, prompting the Fed to hike rates this week. Most FOMC members saw the need for another hike. Credit-sensitive sectors fell, with banks and asset managers posting losses. Bank of America lost 0.8%, while Goldman Sachs fell 1%. AI hyperscalers were mostly lower amid their debt issuance spree to fund capital expenditures. Meta shed 2.4%, while Oracle lost 2%. Chipmakers were mostly higher, with Broadcom up 3% and Micron rising 3.9%, offsetting losses in the Nasdaq. On the week, the Dow shed 733 points, the Nasdaq rose 2.6% and the S&P 500 gained 0.7%.

The war in the Middle East will continue to dictate energy prices and financial markets as major central banks have hiked rates to combat inflation, while calls to slow AI advancement could impact the sector that has supported global stocks, credit issuance, and commodities. These matters, in addition to trade, are expected to lead focal points in the highly anticipated meeting between US and Chinese Presidents Trump and Xi. US economic data releases will be headlined by durable goods orders. The US will also join the Eurozone aggregate and major economies, Japan, Australia, and India in PMI results. In turn, Australia will release its labor data, and India is set to publish infrastructure output. Lastly, central bank decisions are awaited in China, Switzerland, Sweden, Norway, Mexico, and Indonesia.

Industrial production in the US was unchanged in August after increasing 0.2% in July, falling short of market expectations for a 0.3% rise. Manufacturing output, which accounts for around 78% of total industrial production, declined 0.3%, ending a seven-month streak of consecutive increases. Mining activity edged up 0.1%, while utilities output climbed 1.8%. The increase in utilities was driven by stronger electric utility production, which more than offset a decline in natural gas utilities. Capacity utilisation was unchanged at 76.3%, remaining 3.1 percentage points below its long-run average for 1972–2025.

The Bank of Japan raised its key short-term rate by 25bps to 1.25% in a 7-2 vote at its September meeting, taking borrowing costs to their highest level since April 1995. The split decision highlighted growing divisions over the pace of policy normalization as the BOJ responds to persistent inflation, including higher oil prices. While most policymakers signaled support for further rate increases, Toichiro Asada and Ayano Sato dissented, indicating resistance to a faster tightening cycle. The hike came just three months after the previous increase, the shortest interval between hikes since 1990, and followed increased pressure from Washington, including calls from US Treasury Secretary Scott Bessent for higher rates. Looking ahead, the BOJ expects inflation to remain above the 2% target in the coming years, with analysts forecasting price growth to approach 3% by early next year.