Weekly house view | Fed: time to cut
The week in review
Stocks rose last week as markets looked ahead to a widely expected interest rate cut by the Federal Reserve this week. US core consumer price inflation surprised on the upside, but producer prices came in weaker than expected earlier in the week . The Fed is increasingly focused on the softening US labour market. Preliminary revisions to non-farm payrolls were negative. The Fed is expected to cut rates by 25bps on Wednesday, with a small chance of a larger cut. On the corporate front, Oracle said its order backlog is on track to hit half a trillion USD in the coming months, with news of a wave of cloud deals fueling an AI-driven surge in its share price. The S&P 500i rose 1.6% on the week and the EuroStoxx 600ii gained 1%. The 10-year US Treasury yield dipped to 4.06%. In the euro zone, the European Central Bank held rates steady and maintained a data-dependent approach. Fitch downgraded its credit rating for France from AA- with negative outlook to A+ with stable outlook, citing growing debt and political fragmentation. President Macron nominated Sébastien Lecornu, previously defence minister, as France’s new prime minister following the resignation of François Bayrou. France’s borrowing costs rose above those ofItaly for the first time since the late 1990s.
Quote of the week
“Let me say this: the disinflationary process is over,” ECB President Christine Lagarde said after holding rates.
Key data
US core CPI surprised on the upside at 0.3% month-on-month after rounding, while headline CPI rose 0.4%. The US economy likely created 911,000 fewer jobs in the 12 months through March than previously estimated, the Bureau of Labor Statistics said. China core CPI rose to 0.9% year-on-year in August, marking an 18-month high. Japan confirmed Q2 GDP growth of 2.2% on an annualised basis, after downwardly revised Q1 growth of 0.3%.