London (AFP) – Stock markets diverged and the dollar steadied as investors expected the US Federal Reserve to cut interest rates Wednesday to shore up the world’s biggest economy. Traders took a breather from the global rally that lifted several indexes to record highs over recent weeks, as they anticipated the Fed decision and post-meeting comments by bank boss Jerome Powell.
Wall Street stocks were mixed in late morning trading, with the blue-chip Dow rising while the tech-heavy Nasdaq Composite slipped. In Europe, London and Frankfurt stocks ended the day higher while Paris dipped. “The Fed meeting…is one of the most hotly anticipated for the year so far,” said Kathleen Brooks, research director at XTB trading group.
While a 25-basis-point reduction — the first of 2025 — has been baked into valuations for some time, the main debate has revolved around how many more cuts are in the pipeline and how big they will be. “(Donald) Trump will be central to this meeting,” Brooks said, citing the pressure the US president has put on Powell and the Fed to cut rates.
Expectations for an extended period of easing have grown out of a string of data showing the US labour market is not as healthy as first thought. That comes even as inflation remains stubbornly above the Fed’s two-percent target, though the feared spike in prices caused by Trump’s tariff war has not fully materialized. Economists expect to see divisions among decision-makers as they try to walk the line between tempering inflation and supporting jobs.
Investors will be looking to the Fed’s updated Summary of Economic Projections (SEP), released after the meeting, to get an idea whether the voting members on the Fed’s monetary policy committee see a similar pace of interest rate cuts. The Fed Funds futures market predicts two more rate cuts this year and three in 2026. Investors will also be listening to what message Fed Chair Jerome Powell delivers after the meeting.
“The market wants some tacit assurances that this is not a one-and-done rate cut,” said Briefing.com analyst Patrick O’Hare. In particular, investors will be listening to whether the Fed is currently worried more about employment or price stability, and more about labour market concerns, said O’Hare. “Failing that, and a projected pathway for two more rate cuts this year and at least three cuts next year, there will be room for disappointment in the price action,” he said.
In Britain, data showing UK inflation held at 3.8 percent in August reinforced expectations that the Bank of England will maintain its key rate on Thursday and for the remainder of 2025. The Bank of Canada cut its key lending rate as expected on Wednesday. Asian stocks traded mixed, after Tuesday’s tepid showing on Wall Street. Gold prices retreated from their record above $3,700 an ounce reached Tuesday, as the likelihood of lower US interest rates makes the precious metal more attractive to investors.
Shares in Nvidia fell 2.8 percent following a report that Beijing had barred major Chinese tech companies from buying the company’s world-leading AI chips.
– Key figures at around 1530 GMT –
New York – Dow: UP 0.6 percent at 46,049.07 points
New York – S&P 500: DOWN 0.1 percent at 6,597.42
New York – Nasdaq: DOWN 0.5 percent at 22,215.31
London – FTSE 100: UP 0.1 percent at 9,208.37 (close)
Paris – CAC 40: DOWN 0.4 percent at 7,786.98 (close)
Frankfurt – DAX: UP 0.1 percent at 23,359.18 (close)
Tokyo – Nikkei 225: DOWN 0.3 percent at 44,790.38 (close)
Shanghai – Composite: UP 0.4 percent at 3,876.34 (close)
Hong Kong – Hang Seng Index: UP 1.8 percent at 26,908.39 (close)
Euro/dollar: DOWN at $1.1850 from $1.1868 on Tuesday
Pound/dollar: UP at $1.3662 from $1.3657
Dollar/yen: DOWN at 146.34 yen from 146.49 yen
Euro/pound: DOWN at 86.73 pence from 86.87 pence
West Texas Intermediate: DOWN 0.6 percent at $64.11 per barrel
Brent North Sea Crude: DOWN 0.6 percent at $68.04 per barrel
burs-rl/jxb
© 2024 AFP
