Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Fed cuts, US GDP beats, big day ahead for Asian markets

Stock markets keep climbing that wall of (trade-war) worry, in what proved to be another record night for US stocks.

Source: Bloomberg

Risk-laden day ends in a risk-on rally

Stock markets keep climbing that wall of (trade-war) worry, in what proved to be another record night for US stocks. The S&P 500grinded higher into the close, while the Dollar and US yields fell, after the US Federal Reserve cut interest rates, and implied – albeit only in Chair Powell’s speech – that US rates may well remain low for some time. Sentiment was also boosted by stronger than expected US growth data. Despite the solid night’s trade, the ASX is expected to open flat today, amidst what will be a busy day today, with several significant economic events filling the calendar. In yesterday’s local session, Australian CPI was the big news.

A passing trade-war scare

Wall Street stock stumbled at the start of the US session, after news flowed through the wires that Chile had cancelled next month’s APEC meeting, at which the US and China have recently been feted to sign the (in)famous phase-one agreement with one another. Disruptions caused by ongoing civil unrest in the country were behind the Chilean government’s decision. The reports rattled market participants’ nerves briefly overnight, as fear spiked that it could represent a drag on the positive momentum in US-China trade relations. Those fears proved irrational and short-lived, after the US policymakers quickly hosed down any concerns that the summit’s cancellation would hinder trade-negotiations.

US GDP data beats, but devil in the details

Focus quickly returned to the big fundamental issues at hand. US GDP data was released, and – quite soundly – beat expectations. Headline growth came-in at 1.9% in the US economy last quarter, beating economist’s estimates of 1.6%. The strong figure eased some concerns that the US economy is slowing down precipitously. The data wasn’t entirely positive, however. Its fine print showed that exports and business investment remain a drag on US growth, as weaker global growth and the trade-war weigh on those parts of the US economy. The impacts of global uncertainty live-on in the US economy, even if the domestic economy is still robust.

Fed cuts, removes pledge to “act as appropriate”: All other news proved secondary to last night’s meeting of the US Federal Reserve, however. It cut interest rates by 25 basis, as expected. But trader attention was always going to be fixed on the guidance given by the Fed. And, at least initially, the central bank was considered much more hawkish in its messaging. The Fed removed from its policy statement the pledge to “act as appropriate” to support the US economy, signalling it sees an end to this rate-cutting cycle. The initial reaction was a slight fall in US stocks, a rally in US bond yields, and a pop higher in the
USD.

Are lower for longer rates here to stay in the US?

The tone, at least judging market price action, flipped on its head, however, during US Fed Chair Jerome Powell’s press conference. He threw a bucket of cold water on the prospected of any rate hikes occurring in the future, implying only “serious” inflation would force the Fed to do so. That turned the small dip in US equities, the climb in US Treasury yields and the pop in the
USD on its head. The prospect of further easing from the Fed, rightly or wrongly, increased very marginally, because of that commentary, and ultimately catalysed a rally in the S&P500 to fresh all-time highs.

Risks stay high as Asian markets prep for big day

It’s a high-impact day in Asian markets today, now. Of local significance, Business Approvals data is published this morning. But the really big news will come out of China and Japan. Chinese Manufacturing PMI data is released, and is forecast to show a slight improvement in manufacturing activity in the Middle Kingdom – however, at an estimated 49.9, will remain, slightly, in contractionary territory. The Bank of Japan also meet today, and though it isn’t expected to cut rates, traders will be searching for clues as to whether the central bank is preparing fresh monetary stimulus (conventional or otherwise) to combat persistent disinflation in Japan’s economy.

Chances of RBA cut next week dashed by at-expectation CPI data

Australian CPI data topped the calendar yesterday. It printed, practically, bang on forecasts. The headline inflation figure came-in at 1.7%, while the trimmed-mean figure came-in at 1.6%. Though well below the RBA’s 2-3% inflation target by any measure, the “at-expectation” number dashed (almost) any chance of a rate cut from the RBA at its meeting next week. The interest rate futures curve is implying little more than a 6% chance of a cut at Tuesday’s meeting. The Aussie Dollar edged higher on the news, before currency traders returned attention to the bigger macro issues at play in global markets.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

European Central Bank meeting

Learn about how the ECB meeting affects interest rates and price stability ahead of the next announcement.

  • How might the next meeting affect the markets?
  • What are the key rate decisions to watch?
  • Why is the Governing Council announcement important for traders?

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.