Stocks Grind Higher as Fed Officials Confirm More Cuts to Come – S&P up 0.3%
US markets consolidated at recent highs yesterday, as Fed officials confirmed that further rate cuts are expected from the central bank before the end of the year. There was no dramatic surge, as these cuts are already largely priced into the market, but indices did move higher on the back of the confirmation. The Dow gained 0.15%, the Nasdaq rose 0.14%, and the S&P increased by 0.28%. The currency market experienced more volatility; however, the dollar ultimately finished only slightly higher, up 0.05% on the index for the day. Treasury yields initially climbed before retreating in later trading, with the 2-year yield closing up just 1 basis point at 3.582% and the benchmark 10-year yield rising by 1.5 basis points to 3.743%.
Oil prices took a hit following disappointing data from Europe that dampened growth optimism. Brent crude was down 0.8% to $73.90, while WTI fell 0.9% to $70.37. Gold hit another record high at $2,635.29, though the increase was more muted this time, and it settled slightly lower at $2,627.28 an ounce by the close.
Euro Dives on Weaker Data
A raft of disappointing data from Europe last night led to sharp corrections in the euro, both against the dollar and on the crosses. Traders anticipate that this move could gain momentum over the coming days. Flash Services and Manufacturing figures from France, Germany, and the Eurozone as a whole fell well below expectations, causing the euro to drop immediately by 80 pips. It recovered somewhat later in the session but now appears vulnerable to further downside moves, particularly if sentiment shifts in favour of the dollar. The dollar has been under pressure in recent weeks due to Fed rate cuts; however, if weak data continues to emerge from Europe, we could see a much more dovish European Central Bank and a potentially deeper rate-cutting cycle, which would add considerable weight to the single currency.
Full Event Calendar Ahead for Traders Today
A packed calendar awaits global markets today, and traders are bracing for more volatility throughout the sessions. During the Asian session, focus will be on Australian markets and the latest rate decision from the Reserve Bank of Australia. The expectation is that the central bank will remain an outlier among its peers by keeping rates on hold and maintaining a relatively hawkish stance. We are also set to hear from Bank of Japan Governor Kazuo Ueda as he speaks in Osaka.
The European session is relatively light on data, with only the German IFO Business Climate index due for release. However, the US session has a couple of high-risk events scheduled, including the CB Consumer Confidence data and the Richmond Manufacturing Index, before we then hear from the Bank of Canada’s Governor Tiff Macklem later in the day.
