US stocks finished mixed with two-way action seen following the FOMC, SEPs and Fed Chair Powell’s presser. An initial dovish reaction was seen after the Fed cut rates by 25bps, as expected, which was accompanied by dovish SEPs, as 50bps of further rate reduction is now seen in 2025, against the prior, and expected, 25bps of additional cuts. Do note, it was a tight call as 10/19 saw 50bps (or more) of cuts, while the other 9 saw 25bps (or less). The Fed also adjusted its guidance to signal a clearer path of easing ahead. In reaction, the Dollar was sold while Equities and Treasuries saw upside; however, the moves had started to pare as participants awaited the Powell presser. In the press conference, he was notably more hawkish than the statement and SEPs implied, which saw these moves reversed. The Fed Chair said he doesn’t feel the need to move quickly on rates, and that you could think of today’s cut as a risk management cut, and that decisions will be taken on a meeting-by-meeting approach.
USD ultimately strengthened in the aftermath of the FOMC with initial selling seen in reaction to the Fed’s decision to cut interest rates by 25bps, which was as expected, and as the SEPs showed projections for two more cuts this year. However, the dollar rebounded during the post-meeting press conference, where Powell provided hawkish-leaning comments in which he noted that he feels they don’t need to move quickly on rates and argued the need for further data to ensure higher inflation from tariffs is a one-time rise, while he called the cut a risk management cut amid labour market concerns and noted a meeting-by-meeting situation.
Looking ahead, highlights include New Zealand GDP, Japanese Machinery Orders & Australian Jobs Data.
More Newsquawk in 2 steps:
1. Subscribe to the free premarket movers reports
2. Trial Newsquawk’s premium real-time audio news squawk box for 7 days
LOOKING AHEAD
Highlights include New Zealand GDP, Japanese Machinery Orders & Australian Jobs Data.
Click for the Newsquawk Week Ahead.
US TRADE
US stocks finished mixed with two-way action seen following the FOMC, SEPs and Fed Chair Powell’s presser. An initial dovish reaction was seen after the Fed cut rates by 25bps, as expected, which was accompanied by dovish SEPs, as 50bps of further rate reduction is now seen in 2025, against the prior, and expected, 25bps of additional cuts. Do note, it was a tight call as 10/19 saw 50bps (or more) of cuts, while the other 9 saw 25bps (or less). The Fed also adjusted its guidance to signal a clearer path of easing ahead. In reaction, the Dollar was sold while Equities and Treasuries saw upside; however, the moves had started to pare as participants awaited the Powell presser. In the press conference, he was notably more hawkish than the statement and SEPs implied, which saw these moves reversed. The Fed Chair said he doesn’t feel the need to move quickly on rates, and that you could think of today’s cut as a risk management cut, and that decisions will be taken on a meeting-by-meeting approach.
SPX -0.10% at 6,600, NDX -0.21% at 24,224, DJI +0.57% at 46,018, RUT +0.18% at 2,407.
Click here for a detailed summary.
FOMC
Fed cut rates by 25bps to 4.00-4.25%, as expected, citing a shift in risk balance. Bowman and Waller joined consensus, calling for a 25bps reduction; new Governor Miran dissented, preferring a 50bps cut. Nine of the 19 officials see two additional cuts in 2025, two see one cut, and six see no more reductions. Fed adjusted guidance to state that “in considering additional adjustments to the target range for the federal funds rate…” from “in considering the extent and timing of additional adjustments”. It also tweaked its labour market view, downgrading the language which is no longer ‘solid’, while it stated unemployment has edged up but ‘remains low’ and that ‘job gains have slowed’, as well as noted that inflation has moved up, and remains ‘elevated’.
FOMC Summary of Economic Projections showed Fed Funds Rate was projected for 2025 at 3.625% (exp. 3.875%, prev. 3.875%), 2026 at 3.375% (exp. 3.375%, prev. 3.625%), 2027 at 3.125% (exp. 3.125%, prev. 3.375%), 2028 at 3.125% (exp. 3.125%) and the Longer run at 3.00% (exp. 3.125%, prev. 3.00%). Furthermore, this year’s unemployment rate forecast, PCE and core PCE were unchanged; for next year, unemployment was revised lower, while PCE and core PCE were raised.
Fed Chair Powell (post-meeting statement) said inflation has risen recently and remains somewhat elevated, while a moderation in GDP growth largely reflects a consumer spending slowdown and the balance of risks has shifted, although he added that the Fed is well-positioned to respond in a timely way. Powell also said that payroll job gains have slowed significantly, reflecting lower immigration and lower participation.
Fed Chair Powell (Q&A) said they welcomed new Committee member Miran, while the Committee is united in pursuing dual mandate goals, and is strongly committed to independence of the Fed. Powell said it is possible that tariffs are a reason for some slowing in the labour market, as well as noted that over this year, policy has been at a restrictive level, and can no longer say the labour market is solid. Powell also noted that risks are moving toward equality and the change in balance of risks suggests a need to move in the direction of neutral. Powell stated there was no widespread support for a 50bps cut today and he doesn’t feel the need to move quickly on rates, while he added the Fed was right to wait. Powell commented could think of today’s cut as a risk management cut and they need to remain fully committed to restoring 2% inflation, and at the same time, need to weigh risks to the two Fed goals, while he added that risks of higher inflation are less than in April and that they are in a meeting-by-meeting situation, and are going to be looking at the data, as well as stated that markets are pricing in a rate path, though not blessing that path.
TARIFFS/TRADE
Mexico has commenced the consultation process to acquire information on the USMCA’s functioning, within the framework of its joint review.
UK Secretary of State for Science, Innovation and Technology Kendal said the UK government has not given up on reducing steel tariffs to zero, though it appears the Americans have, according to Times Radio.
EU’s von der Leyen said she and Indian PM Modi discussed progress in ongoing trade talks.
US President Trump’s TikTok deal could face a hitch over billionaires’ stakes in China parent ByteDance, according to the NY Post citing sources.
Chinese Foreign Minister Wang Yi said China and South Korea should jointly oppose trade protectionism, while he added that they agreed to coordinate on APEC meetings.
India is said to be holding off on plans to hike its export duty on low-grade iron ore and pellets amid growing resistance from the domestic mining industry, according to Reuters sources.
NOTABLE HEADLINES
US House Speaker Johnson said the continuing resolution is “on course” and is going to discuss timing with the leadership, according to Punchbowl’s Sherman who suggested “…as of now, they are trending for a Friday vote.”
DATA RECAP
US Building Permits Number (Aug) 1.312M vs. Exp. 1.37M (Prev. 1.362M)
US Housing Starts Number (Aug) 1.307M vs. Exp. 1.365M (Prev. 1.428M, Rev. 1.429M)
FX
USD ultimately strengthened in the aftermath of the FOMC with initial selling seen in reaction to the Fed’s decision to cut interest rates by 25bps, which was as expected, and as the SEPs showed projections for two more cuts this year. However, the dollar rebounded during the post-meeting press conference, where Powell provided hawkish-leaning comments in which he noted that he feels they don’t need to move quickly on rates and argued the need for further data to ensure higher inflation from tariffs is a one-time rise, while he called the cut a risk management cut amid labour market concerns and noted a meeting-by-meeting situation.
EUR saw two-way price action but retreated amid the firmer buck as all focus was centred on the Fed decision and presser.
GBP faded the initial knee-jerk reaction to the FOMC and reverted to sub-1.3700 territory, while attention now turns to the BoE.
JPY swung between gains and losses with USD/JPY testing the 147.00 level to the upside post-FOMC and with the BoJ to kick-start its 2-day meeting.
Bank of Canada cut its policy rate by 25bps, as expected, to 2.50% (prev. 2.75%). BoC stated that with a weaker economy and less upside risk to inflation, the GC judged that a reduction in the policy rate was appropriate to better balance the risks, while it was noted that considerable uncertainty remains.
BoC’s Macklem said the labour market inflation picture has not changed much since January and there are some mixed signals on inflation. Furthermore, he noted a readiness for further action if risks escalate, and said decisions would be made on a meeting-by-meeting basis.
FIXED INCOME
T-notes were ultimately lower and saw two-way action in the wake of the Fed, as a dovish reaction to the decision and dot plots, was counterbalanced by a hawkish presser.
COMMODITIES
Oil prices crude complex was choppy, albeit within thin ranges and despite the larger-than-expected draw in headline crude stockpiles.
US EIA Weekly Crude Stocks -9.285M vs. Exp. -0.857M (Prev. 3.939M)
Top energy security official said Poland held “very good” talks with the US to raise LNG supplies to Europe via Poland.
GEOPOLITICAL
MIDDLE EAST
Israel Secretary of State Dermer is scheduled to meet in London tonight with White House envoy Witkoff to discuss the possibility of renewing negotiations on a comprehensive deal for the release of all hostages and an end to the war, via Axios’ Ravid citing sources. Qatari officials are also in London and will likely hold separate meetings with the US envoy.
Israel Broadcasting Corporation Quoted Palestinian sources familiar with the negotiations who stated “We Are Ready to Discuss Stopping the War But in a Different Way Than In the Past”, according to Sky News Arabia.
European Commission has proposed the suspension of the FTA covering Israeli goods, due to the Gaza conflict, while an EU official said the EU sanctions proposal includes Israeli ministers Itamar Ben-Gvir and Bezalel Smotrich.
Iranian Foreign Minister, in a call with European counterparts, stated a willingness to reach a fair and balanced solution on sanctions and nuclear issues.
RUSSIA-UKRAINE
Ukrainian President Zelensky said Russia continues to strike civilian targets, hitting energy infrastructure and railway facilities.
EU is exploring using EUR 170bln of Russia’s frozen assets to fund Ukraine, according to FT.
ASIA-PAC
NOTABLE HEADLINES
China’s CAC reportedly informed firms such as Alibaba (9988 HK) and ByteDance to terminate their testing and orders of NVIDIA’s (NVDA) RTX Pro 6000D, in order to focus on China’s domestic semiconductor industry, according to FT citing sources.
NVIDIA (NVDA) CEO said they can only be in a market if that nation wants them to be, while they remain supportive of the Chinese government and Chinese firms. Furthermore, he noted disappointment with what is being seen in China, but stated there are larger agendas to be worked out between China and the US.
Japan is to revise investment rules for startups to woo foreign capital, according to Nikkei.
Indonesian Central Bank unexpectedly cut rates by 25bps to 4.75% (exp. 5.00%, prev. 5.00%).
EU/UK
NOTABLE HEADLINES
ECB’s Nagel said they are well advised to remain cautious given the uncertainties, and its approach of making decisions based on data and on a meeting-by-meeting basis has proven successful. Nagel added that with the current monetary policy stance, the ECB are well positioned to respond to unexpected changes.
DATA RECAP
UK CPI YY (Aug) 3.8% vs. Exp. 3.8% (Prev. 3.8%)
UK Core CPI YY (Aug) 3.6% vs. Exp. 3.6% (Prev. 3.8%)
UK CPI Services YY (Aug) 4.7% vs. Exp. 4.8% (Prev. 5.0%)
EU HICP Final YY (Aug) 2.0% vs. Exp. 2.1% (Prev. 2.1%)
EU HICP-X F&E Final YY (Aug) 2.3% vs. Exp. 2.3% (Prev. 2.3%)
Loading…