Market Report.
📉 The Federal Reserve on Wednesday approved its second straight interest rate cut, lowering the benchmark overnight borrowing rate to a range of 3.75%-4%. However, Fed Chair Jerome Powell threw doubt on whether another rate cut is coming in December.
📊 The 10-2 vote saw two dissenting votes, with one member preferring a more aggressive 50-basis point cut and another opposing any cut at all. Powell cautioned that a further rate reduction at the December meeting is “not a foregone conclusion”, noting there is a “growing chorus” among Fed officials to “at least wait a cycle” before cutting again.
📉 The Fed also announced it will be ending the reduction of its QT (quantitative tightening) on December 1. This decision marks a significant shift in the central bank’s monetary policy, moving away from the contractionary stance it had maintained to combat high inflation.
📉 The Hong Kong Monetary Authority (HKMA), the city’s de-facto central bank, has lowered its base interest rate by 25 basis points to 4.25%, tracking a similar cut by the U.S. Federal Reserve. Hong Kong’s monetary policy moves in lockstep with the United States, as the Hong Kong dollar is pegged to the U.S. dollar in a tight range.
💶 The European Central Bank (ECB) is widely expected to leave interest rates unchanged for a third consecutive meeting Today, as the eurozone economy maintains a delicate balance of low inflation and steady growth. However, ECB President Christine Lagarde is unlikely to completely rule out future policy easing, as uncertainty around U.S. trade policy and the risk of inflation drifting too low still linger.
💶 The strong euro also poses a challenge for the ECB in terms of its inflation outlook, though this has stabilized somewhat in recent weeks. If inflation rises again, it would block new measures to lower the euro. There is still a roughly 50% chance of one final rate cut by next June, according to market pricing.
🤝 President Trump announced significant steps to improve U.S.-China relations following an “amazing” meeting with President Xi at the international airport in Seul. The new features include a reduction in tariffs on Chinese fentanyl exports from 20% to 10%, expressing confidence in President Xi’s efforts to curb the flow of fentanyl into the U.S. The two leaders agreed on measures to ease trade tensions, including China resuming purchases of U.S. soybeans and pausing its rare-earth minerals licensing regime for at least a year. They also discussed Chinese access to Nvidia’s chips, though Trump ruled out access to the company’s advanced Blackwell line. On geopolitics, Trump and Xi agreed to collaborate on the situation in Ukraine and to remove certain shipping tariffs and fees. Notably, Taiwan was not addressed during their 90-minute meeting.
🛠️ The Group of Seven (G7) nations are set to announce a critical minerals production alliance. The alliance aims to counter China’s dominance in the critical minerals sector. The alliance will involve “offtake agreements” that commit buyers to a certain percentage stake of a mine’s output at a fixed price. It will also feature price floors and stockpiling deals. The pact will encompass a range of critical minerals and firms in G7 nations, but is expected to particularly benefit Canada’s economy given its vast deposits of these minerals.
📈 The price of copper has risen to a record high, driven by a combination of factors: Optimism around a potential trade deal between the U.S. and China. Supply disruptions and setbacks at major copper mines around the world, including a mudslide at Freeport McMoRan’s Grasberg mine in Indonesia. Expectations of increased copper demand to support the global energy transition and growth in artificial intelligence data centers. China’s pledge to boost the share of consumption in its economy, which could drive greater copper usage. Weakness in the U.S. dollar, which makes commodities priced in dollars more attractive for overseas buyers and finally, declining copper inventories in LME-tracked warehouses, indicating a tightening of the global supply-demand balance.
💷 The British pound is coming under pressure as investors brace for potential tax hikes and spending cuts in the upcoming UK budget, which could exacerbate the economic slowdown: The pound has hit its weakest level against the euro since 2023 and is on track for its longest monthly losing streak in 9 years. Options pricing shows the most bearish sentiment on the pound in 3 months. Falling gilt yields have lowered the government’s borrowing costs, as mentioned in previous reports, thanks to the deceleration of the BoE’s QT from $100 billion to $70 billion, but also reduced the appeal of the pound compared to other currencies.
💴 The Bank of Japan (BOJ) kept interest rates steady this morning, at its latest policy meeting, but signaled a potential rate hike as soon as December: The BOJ maintained its long-term economic and inflation forecasts, but elaborated on overseas risks that could hurt Japan’s recovery, such as the impact of U.S. tariffs. Two BOJ board members dissented, proposing a rate hike to 0.75% instead of the current 0.5%. Inflation remains elevated. However, political challenges have complicated the BOJ’s decision, with the new Prime Minister Sanae Takaichi known as an advocate of loose monetary policy.
💻 Nvidia’s valuation is over $5 trillion. Nvidia stock rose 3% on Wednesday. Its market capitalization reached $5.03 trillion, making it the first company to surpass the $5 trillion mark. The stock price has increased more than 50% since the beginning of the year.
📊 If the technological sector is in a state of bubble, it seems that it will inflate more. The major tech companies are significantly increasing their capital expenditures (capex) for the coming years:
📈 Alphabet (Google’s parent company) has raised its capex estimate for fiscal year 2025 to a range of $91 billion to $93 billion, up from its earlier forecast of $75 billion to $85 billion. It also expects a “significant increase” in capex for 2026.
📈 Meta (Facebook’s parent company) has hiked the low end of its capex guidance for 2022 to $70 billion, up from $66 billion previously. CEO Mark Zuckerberg said this larger investment is “very likely to be a profitable thing.”
📈 Microsoft’s capex in its fiscal first quarter came in at $34.9 billion, higher than the $30 billion estimate it provided in July. The company also said its capex growth rate for fiscal 2026 will surpass that of 2025.
Market View.
📈 Wall Street remains unaffected following Powell’s remarks. Mini S&P 500 futures are holding above 6,925 points, while Nasdaq futures are trading around 26,275 points, keeping the indices near all-time highs.
💵 The dollar responded by strengthening, with the DXY index surpassing 99 points before slightly retreating to its current level of 99.15 points. EUR/USD briefly fell below 1.16 but has since recovered, currently trading above 1.1615.
📉 US 2-year bond yields reacted bearishly to Powell’s comments yesterday and the lack of commitment to a December rate cut. The 2-year bond yield rose by 10 basis points to 3.60% following his remarks.
📉 European markets are holding at similar levels to yesterday. However, the DAX 40 is showing clear resistance above 24,400 points, which could invite bearish movements, with futures currently trading at 24,285 points. On the other hand, EuroStoxx 50 futures remain above 5,700 points, offering a more optimistic outlook.
🛢️ Crude oil showed some strength for a few hours yesterday, with Brent crude approaching $65 per barrel, but it has since retreated to its current level of $63.80.
🥇 Gold futures attempted to reclaim $4,000 per ounce but failed and are now trading at $3,975.
💰 Bitcoin approached the support level of $108,000 before bouncing back upwards to its current level of $111,130.
