Today’s market session sees a combination of critical economic data releases and heightened anticipation around the U.S. Federal Reserve’s upcoming interest rate decision. European markets opened lower, while Asian markets ended the day with mixed results. U.S. futures data reflects a cautious but slightly positive sentiment from the previous session.
In Europe, the Stoxx Europe 600 is down by 0.19%, the Euro Stoxx 50 has dropped by 0.10%, and the FTSE 100 declined by 0.21%. Italy’s FTSE MIB is holding steady with a 0.06% gain, while Spain’s IBEX 35 has seen a slight rise of 0.08%. In contrast, the DAX is marginally down by 0.02%, and France’s CAC 40 has dipped by 0.07%.
Asian markets closed with mixed results. The Hang Seng Index jumped 1.37%, showcasing strong performance, while Japan’s Nikkei 225 rose by 0.49%. In mainland China, the Shanghai A index gained 0.49%, but the Shenzhen A index slipped by 0.17%.
Futures markets display a continued downward trend in energy prices, with crude oil down 0.53% at $69.59. Gold is up by 0.12%, indicating a slight increase in safe-haven demand. U.S. equity futures are not showing any direction, with the Dow up by 0.08%, the S&P 500 increasing by 0.04%, and the Nasdaq 100 rising by 0.05%.
Currency markets highlight strength in the euro and the British pound. EUR/USD is up 0.15%, while GBP/USD has risen 0.27% following the release of August Consumer Price Index (CPI) data, showing a year-over-year increase of 3.6% in core CPI. USD/JPY, however, has weakened, down by 0.46%, indicating some strength in the yen as investors flock to safe-haven assets. Bitcoin remains relatively stable, dipping slightly by 0.09%.
Attention now shifts to the U.S. Federal Reserve, which is widely expected to cut interest rates for the first time since March 2020. The rate decision, due later today, has spurred intense speculation about the size of the rate cut. According to the CME Group’s FedWatch Tool, there is a 61% probability of a 50-basis point cut rather than the traditional 25-basis point reduction. This heightened expectation of a jumbo cut has gained momentum due to reports from major publications like the Financial Times and the Wall Street Journal, suggesting that the larger reduction remains on the table.
Former New York Fed President Bill Dudley has supported this view, stating that there is a “strong case” for a half-point cut. Dudley argues that borrowing costs are currently well above the neutral rate, the level that neither stimulates nor restricts economic growth. Investors are thus eagerly awaiting the Fed’s statement, as well as projections for future rate movements.
Later today, the Federal Open Market Committee (FOMC) will also release its economic projections, covering key metrics like interest rate projections across different time frames and GDP expectations. Additionally, the FOMC press conference and Fed Chair Jerome Powell’s comments will be closely watched for insights into the central bank’s forward guidance.
Finally, New Zealand’s GDP data is set to be released late in the day, with expectations of a quarterly contraction of 0.4% and a yearly decline of 0.5%, further highlighting the challenging global economic environment.
