Market Report.
📉 Crosswinds complicate the Fed’s decision. Finally, the labour market shows signs of deterioration, which justify rate cuts, but inflation is still there, and a cut in rates could feed it even more.
📊 The U.S. consumer prices increased more than expected in August, posing a dilemma for the Federal Reserve as it grapples with rising inflation and softening labor market conditions. The 12-month CPI increase of 2.9% was the largest since January, fanning fears of stagflation and complicating the Fed’s policy decisions.
📈 The rise in inflation was broad-based, with increases in prices for shelter, food, gasoline, and other goods and services – likely reflecting the pass-through of tariffs and higher business costs. However, a surge in first-time jobless claims last week suggests the labor market may be weakening, creating a policy dilemma for the Fed as it balances inflation and employment concerns.
⚖️ Trump asks appeals court to let him fire Fed governor. A U.S. federal court on Tuesday blocked Trump from terminating Fed Governor Lisa Cook. He has appealed that decision and wants a ruling to come before the Federal Reserve’s meeting on Tuesday.
🌍 The IMF has indicated that the U.S. economy is showing some strains after years of resilience: Domestic demand has been moderating and job growth is slowing in the U.S. economy. The IMF spokesperson, Julie Kozack, said inflation is on a path to meet the Federal Reserve’s 2% target, but there are risks that could push it higher, largely due to the tariffs imposed by the Trump administration. The IMF sees scope for the Federal Reserve to lower interest rates, though it should proceed cautiously while monitoring emerging data.
📉 The IMF acknowledged a larger-than-average downward revision in U.S. employment data, suggesting job growth was stalling BEFORE the implementation of Trump’s tariffs and refused to comment on the credibility of U.S. economic data, but emphasized the importance of accurate, timely, and reliable data for all its member countries.
🇪🇺 European Central Bank President Christine Lagarde has signaled no rush to intervene in the bond market to support France, which is facing a political and budget crisis. France’s political instability and failure to tackle growing public debt have unnerved investors, who are demanding a higher premium to lend to the French government.
💰 The ECB has the power to step in and buy government bonds to stem an “unwarranted, disorderly” rise in borrowing costs, but Lagarde appeared to play down the prospect of such intervention. Lagarde said governments must adhere to EU budget rules, suggesting the ECB may be reluctant to intervene if France does not comply. Investors are now demanding a similar premium from France as from Italy, around 80 basis points over German bond yields, reflecting concerns about France’s fiscal situation.
📉 This stance contrasts with the ECB’s actions during the eurozone debt crisis, when it took bold steps to preserve the single currency.
📊 France’s economy is expected to grow marginally faster than previously forecast this year, with a projected growth rate of 0.8% compared to the previous estimate of 0.6%. However, INSEE, the national statistics agency, warned that this growth is mainly due to a temporary boost from companies rebuilding their inventories, rather than from strong consumer demand. The agency cautioned that persistent political uncertainty following the collapse of the previous government could weigh on economic activity.
💵 Consumers have been saving rather than spending, due to concerns about unemployment and inflation, which is expected to average only 1% this year. The jobless rate is forecast to rise slightly to 7.6% by the end of 2023, further dampening household spending.
📢 France has recently experienced large-scale protests and unrest under the banner “Block Everything,” with demonstrations erupting nationwide against government austerity policies and political elites. The protests peaked on September 10, leading to around 200,000 participants, hundreds of arrests, street fires, and major disruptions—setting the stage for even bigger strikes planned for September 18.
🛢️ Oil prices fell on Friday, continuing a decline from the previous session, due to a combination of factors: Expectations of increased oil supply, with the International Energy Agency forecasting a more rapid rise in world oil supply this year due to planned output increases by OPEC+. OPEC itself maintained relatively high global oil demand growth forecasts, but the market is focused on the potential for oversupply pressures. Geopolitical risks from conflicts in the Middle East and the war in Ukraine have provided diminishing support for oil prices, as the market prioritizes supply and demand fundamentals. U.S. crude oil inventories rose more than expected last week, further contributing to the oversupply concerns.
🇧🇷 Brazil’s Supreme Court sentences former President Jair Bolsonaro to 27 years and 3 months in prison for plotting a coup. Jair Bolsonaro’s son asked Donald Trump to send F-35 fighter jets and warships to Brazil to “save” his father from prison.
🌍 In relation to the Middle East, and the conflict in Gaza, Netanyahu said recently: “We are going to fulfil our promise that there will be no Palestinian state, this place belongs to us.”
💥 In just 3 days, Israel has carried out strikes in 6 different countries in the Middle East and North Africa – Palestine, Lebanon, Syria, Tunisia. The attack in Qatar was part of a wider wave of Israeli strikes extending beyond its immediate borders, marking the 7th country attacked by Israel since the start of this year. The scale and geographic spread of these Israeli strikes suggest an escalating military campaign that extends well beyond the borders of Palestine and into surrounding countries in the region.
⚖️ Netanyahu continues to have pending court cases that are being postponed given the continuing state of war in which Israel finds itself.
🔫 In the US, most details suggest that Charlie Kirk was killed by a professional execution squad rather than a random person, as multiple individuals were involved in the incident. Witnesses reported seeing people making hand gestures behind his back before the murder, and the police arrested two individuals who turned out to be fake shooters, later releasing them. Meanwhile, the actual shooter managed to escape while attention was diverted to the arrest of these decoys.
📈 Market View:
📊 Futures in the United States have risen above historical highs for the S&P 500, driven by new data that reinforces the notion of a deterioration in the US labour market, as well as persistent inflation in line with expectations. Mini S&P 500 futures reached 6,600 points and are currently trading at 6,588 points. Nasdaq 100 futures surpassed 24,000 points, currently trading at 24,014 points.
💵 The dollar index finally experienced a setback after reaching 98 points, having fallen to the current 97.62 points. It is permissible for EUR/USD to recover to 1.17, currently trading at 1.1730.
📈 European stock markets saw some recovery during yesterday’s session, but DAX 40 futures have failed to exceed 23,800 points, with the current price at 23,747 points. Euro Stoxx 50 futures have attempted to recover to 5,400 points and are currently at 5,393 points.
📉 Crude oil is again experiencing significant declines, dropping nearly 3% since Wednesday, with Brent crude falling to $65.80. We have explained the fundamental details in the news section.
💰 Gold remains exceptionally strong, with futures reaching $3,689 per ounce and very close to their historical highs.
💸 Bitcoin has finally surpassed its barrier of $113,000, managing to exceed $116,000 in recent hours, and is currently retreating to $115,335.
