Markets in a Minute 23rd September 2024

FEDERAL UNRESERVED

Last week, global stock markets rallied to new all-time highs after the Fed cut rates by 50bps and signalled more reductions to come in the next 12 months.

This week, focus is set to be on today's global PMIs - a survey of businesses - to gauge current conditions and the growth outlook. Policy guidance from Fed Chair Powell when he speaks on Thursday may also be of note.

The Fed cut its key rate by 50bps to a target range of 4.75-5.00% at its meeting last week. This was larger than expected and showed that the central bank is now more concerned about downside growth, rather than upside inflation, risks. The Fed projects 50bps more cuts in 2024 and 100bps in 2025.

US retail sales unexpectedly rose in August and those for July were revised up. This suggested that household demand remains robust.

Last week, the S&P 500 rallied by 1.2% while the Euro Stoxx 600 fell by 0.2%. The rally in the US was driven by expectations for lower rates over the next 6-12 months, which would likely be supportive of economic and earnings growth. European stocks were weighed down by profit taking towards the end of the week.

The greater than expected rate cut by the Fed and guidance around 150bps more cuts through end-2025 helped push bond yields higher (bond prices fall as bond yields rise). This was due to larger than expected rate reductions being supportive of growth, after recent growth scares, which pushed yields higher.

Last week, the US Treasury 10-year yield rose by 10bps to 3.75% and the equivalent German Bund was up by 7bps to 2.22%.

• Mon 23rd Global PMIs
• Tue 24th US - consumer confidence • Germany - IFO business survey
• Thu 26th US - Initial jobless claims, durable goods, Fed Chair Powell speaks • Germany - GfK consumer confidence
• Fri 27th US - Personal consumption expenditures (PCE) • Eurozone - Consumer confidence • Germany - Labour market data