Fed holds rates as Powell dampens cut hopes while FTSE hits records

​The Federal Reserve's (Fed) decision to hold rates steady was expected, but Jerome Powell's pushback on September cut hopes caught markets off guard. The Fed chair described policy as "modestly restrictive" but insisted it was premature to discuss reductions, effectively cooling trader expectations for near-term easing.

​This hawkish tone weighed on US equities, with the Dow Jones falling 0.38% and the S&P 500 slipping 0.12%. The Nasdaq 100 managed a modest 0.15% gain, helped by tech strength. The divergence reflects ongoing uncertainty about the Fed's next moves and their global implications.

​FTSE 100 powers to fresh records

​In contrast, the FTSE 100 hit another record high, buoyed by a stellar earnings season. The index's 0.5% weekly gain puts it on track for its longest winning streak since 2018, driven by standout performances from heavyweight constituents.

​Rolls-Royce led the charge, surging 12% to fresh records after raising guidance across multiple divisions. The engineer's remarkable 94% year-to-date gain reflects its transformation from pandemic laggard to market darling, benefiting from defence spending, civil aerospace recovery, and artificial intelligence (AI)-driven data centre demand.

Shell also contributed to the FTSE's strength, rising 3.5% despite a 32% profit decline. The £3.5 billion buyback announcement overshadowed weaker trading margins, highlighting how shareholder returns can trump operational headwinds in today's market.

​Economic data delivers mixed signals

​US economic data painted a solid but slowing picture. Second-quarter gross domestic product (GDP) rose 3% annualised, beating forecasts, though underlying domestic demand showed signs of cooling. ADP's 104,000 private payroll additions in July exceeded expectations, setting up Friday's crucial jobs report as a potential market mover.

​The data supports the Fed's cautious stance, but also raises questions about whether Powell is behind the curve if economic momentum continues fading. For UK investors, the implications are significant given the pound's sensitivity to Fed policy shifts.

​Trump tariffs create sector divergence

​President Trump's latest tariff blitz added another layer of complexity, with 50% duties on copper pipe imports triggering a 2% decline in the S&P 500 materials sector. Mining giants like Freeport-McMoRan tumbled 9.5%, while UK-listed miners including Glencore and Anglo American also felt the pressure.

​The selective nature of these tariffs suggests a more targeted approach than some feared, but creates fresh uncertainty for commodity-exposed stocks on both sides of the Atlantic.

​Tech earnings provide late boost

​After-hours trading offered encouragement for tech investors, with Microsoft and Meta surging over 6% on strong quarterly results. This late rally could spillover into Thursday's session, potentially benefiting UK tech names and growth-oriented sectors.

​With Amazon and Apple reporting Thursday, and Friday's US jobs data looming, the stage is set for continued volatility as markets digest mixed signals from policymakers and corporate boardrooms alike.