Doing little more than soothing uneasiness, last night’s Fed rate cuts was less of a tidal wave and more of a tide-over. J. Powell has already opposed what he views as overly exuberant accommodation, but the latest cut did enough to satisfy indices on Thursday. Phase one of tariff tension resolution will soon be underway, and markets seemed happy to largely ignore Lloyds Banking Group’s (LON: LLOY) disappointing update and China’s underwhelming PMI results.
Speaking on market opening movements in his usual humorous manner, Spreadex Financial Analyst Connor Campbell stated,
“As expected Jerome Powell and his FOMC buddies slashed interest rates by another 25 basis points on Wednesday.”
“However, it seems like that’ll be it for the foreseeable future. The Fed chair even went as far to say that monetary policy is now in a ‘good place’ after his trio of historic cuts, downplaying the likelihood of any further move lower while also stating the US would need a ‘really significant’ rise in inflation before a hike was considered.”
“The great unknown hanging over all this, of course, is the US-China trade situation. ‘Phase one’ of a deal may be nearing completion, but that’s only the first baby steps towards properly ending the war.”
“Nevertheless, the Fed sufficiently pleased the markets without doing too much to excite them, leading to a broadly, blandly positive open on Thursday. One, admittedly, that required investors to ignore the pair of worse than forecast PMIs out of China overnight (the manufacturing reading was particularly alarming, hence the red start for commodity stocks).”
“With the Dow Jones looking to cross 27200 this afternoon, the DAX and CAC added 0.3% apiece. The FTSE, meanwhile, quickly managed to reduce its early 0.6% decline to a milder 0.1% dip in the early moments of the session.”
Other causes for concern and excitement in commodities in recent weeks, have included; a general election on the horizon, a new Brexit deal being agreed and the UK economy looking likely to avoid recession.
“It was another rough morning for its banking sector, with Lloyds the latest firm to disappoint. The horsiest finance firm around revealed a 97% plunge in underlying pre-tax profit, after setting aside another £1.8 billion to cover PPI claims – that takes its total payouts related to the scandal to more than £20 million.”
“Despite Goldman Sachs (NYSE: GS) advising forex traders to steer well clear of sterling in the coming months, the pound continued its post-election confirmation gains on Thursday. Rising 0.4%, cable struck a 9-day high of $1.2946, while a 0.2% increase against the euro lifted the currency above €1.16.”
Elsewhere in the banking sector, Deutsche Bank (ETR: DBK) reported losses during the third quarter.
