US futures
Dow future 1.3% at 42k
S&P futures 1.7% at 5712
Nasdaq futures 2.34% at 19764
In Europe
FTSE 1% at 8340
Dax 1.6% at 19024
- Stocks rise as Fed opts for a 50 basis point cut
- Market prices in 75 bps worth of cuts this year
- Jobless claims were stronger than expected.
- Oil rallies after the rate cut & a larger stockpile draw
Stocks rally as the Fed’s easing cycle begins
U.S. stocks are pointing to a strong open on Thursday, with the NASDAQ pointing to a 2% jump after the Federal Reserve started its rate-cutting cycle with a bumper 50 basis point reduction.
The Fed opted for an outsized move and its first rate cut in four years, and the market hasn't been spooked; instead, it is bounding higher. The Fed indicated that the larger rate cut was an insurance policy against further labour market weakening rather than due to signs of an imminent downturn. Calming any recession worries, Fed chair Jerome Powell described the US economy as strong.
The markets see a 67% chance that the Fed will lower interest rates by 25 basis points at its November rate meeting. The market is also pricing in 75 basis points worth of cuts by the end of the year, compared to 50 basis points before the meeting.
The Fed’s dot pot points to two 25 basis point cuts, one in November and again in December.
On the data front, US jobless claims showed initial claims falling to 219k from 230k the previous week.
Corporate news
Target is set to rise 1.3% after the retailer named Jim Lee its CFO. Lee has more than 25 years of experience, including at PepsiCo.
Dell Technologies is set to open 3% higher after the PC maker declared a quarterly cash dividend.
Amazon is set to open almost 2% higher after the online retail giant set out plans to raise pay for fulfillment and transportation workers by one point $5.00 an hour.
Nasdaq 100 forecast – technical analysis.
The Nasdaq has broken out of its triangle pattern—the price heads towards 20k. A rise above 20k brings 20,750 into focus. On the downside, immediate support can be seen on the 4-hour chart at 19200, the trendline support and 100 SMA, as well as the 200 SMA at 19100. A fall below here could see a test of 18700, the rising trendline support.
FX markets – USD falls, GBP/USD rises
USD is falling after the Fed rate decision, which saw the central bank cut rates by 50 basis points and signaled a further 50 basis points worth of cuts this week.
EUR/USD is rising to 1.1150 on USD weakness despite a quiet eurozone economic calendar. ECB’s Nagel said that inflation is still higher than the ECB would like to see.
GBP/USD is rising, reaching a fresh 2024 high above 1.33 after the BoE left interest rates unchanged at 5% in an 8-1 vote. The central bank said it should be able to cut rates gradually over time. The pound rallied amid growing conviction that the BoE—Fed policies are diverging.
Oil falls, snapping a 3-day winning run.
Oil prices are rising after the bumper Federal Reserve interest rate cut, which is expected to lift economic activity and raise energy demand. A larger-than-expected draw on US inventories is also supporting the price.
EIA stockpiles fell by 1.6 million barrels to 417.5 million barrels, its lowest level in a year last week.
However gains are being limited by ongoing concerns surrounding the demand outlook in China. Oil refining slowed in China for a fifth straight month in August.
