United States
Wall Street delivered a muted response to the Federal Reserve’s latest move, with the central bank cutting its policy rate by 25 basis points to a target range of 4–4.25 per cent. While the decision was widely expected, Chair Jerome Powell’s comments stressed a “meeting-by-meeting” approach, leaving investors digesting a cautious tone. Equities initially rallied but settled lower as traders judged the reduction to be more about risk management than stimulus.
The S&P 500 edged down 0.1 per cent, weighed by technology stocks, while the Nasdaq 100 slipped 0.2 per cent. The Dow Jones bucked the trend, rising 0.6 per cent on support from industrials. Small-caps showed resilience, with the Russell 2000 adding 0.2 per cent. Currency markets reflected steady demand for the greenback, the Bloomberg Dollar Spot Index climbing for a seventh consecutive Fed day – the longest such streak since 2001.
Bond yields pushed higher, with the 10-year Treasury ending at 4.06 per cent and the two-year up to 3.54 per cent, signalling some doubt over aggressive easing. Commodities also eased back, with West Texas crude down 0.9 per cent to $63.94 a barrel and spot gold 0.8 per cent softer at $3,661 an ounce.
Corporate headlines added to the mixed tone. China ordered tech firms to halt purchases of Nvidia’s RTX Pro 6000D chips, Apple flagged softer iPhone sales in China ahead of its new launch, and Reddit began early talks with Google on a content-sharing deal. United Airlines, General Motors, and Lyft also made the news with operational updates and partnerships, but none shifted the market narrative away from the Fed.
Europe
European equities trod water ahead of the Fed’s announcement. The Stoxx 600 closed little changed, down 0.03 per cent, as gains in technology and retail offset weakness in commodities and energy. SAP bounced 3.2 per cent from a one-year low, driving the tech sector 1.5 per cent higher, while Inditex and H&M boosted retailers after an upgrade lifted sentiment. Puma surged nearly 17 per cent on speculation Authentic Brands and CVC were eyeing a stake.
Banks were a drag, with UniCredit slumping 3.5 per cent despite raising profit targets, while BNP Paribas and Intesa also slipped. Commodity stocks fell after copper led industrial metals lower and Brent crude retreated, dragging Rio Tinto and Anglo American into negative territory. In healthcare, Novo Nordisk gained after an analyst upgrade, though rival Eli Lilly pared enthusiasm with strong trial results for a competing obesity pill.
Overall, the session reflected investors’ preference to wait on the Fed before making fresh commitments. Bond yields across the region eased slightly, with Germany’s 10-year at 2.68 per cent.
Australia
Local markets look set for a softer open, with futures pointing 15 points lower for the S&P/ASX 200 to 8,839. That comes after the benchmark shed 0.7 per cent on Wednesday to close at 8,818.50, led down by housing and consumer discretionary stocks.
Coal producers were in focus. New Hope tumbled 8.3 per cent, its sharpest fall since March, after Macquarie cut its rating to underperform. The sector has been under pressure following BHP’s announcement of 750 job cuts and Anglo American’s plan to shed 200 positions in Queensland. Whitehaven was a rare bright spot, jumping 5.2 per cent, while lithium miner Pilbara Minerals rose 4.1 per cent.
Investors today will be eyeing the August labour force report. NAB expects unemployment to tick up to 4.3 per cent from 4.24 per cent in July, with around 25,000 new jobs created. The data will be a key guide for the Reserve Bank of Australia, especially after the Fed’s shift.
Santos will remain in the spotlight after Abu Dhabi’s ADNOC walked away from its $36 billion takeover bid. Broker Jarden promptly downgraded the stock to underweight, cutting its price target to $7.05. Attention is also swirling around Macquarie after reports it held exploratory merger talks with Carlyle earlier this year, though discussions have since faded.
Commodities and currencies
Brent crude fell 0.8 per cent to $67.92 a barrel, snapping a three-day advance as traders assessed geopolitical risks in Ukraine against softer demand expectations. Iron ore slipped 0.3 per cent to $105.85 a tonne, weighed by caution ahead of Chinese economic data.
Gold eased to $3,659 an ounce, in line with the broader risk-off tone, while copper led industrial metals lower in Europe.
In currencies, the Australian dollar dropped 0.5 per cent to US66.52¢, reflecting the global bid for the US dollar after the Fed’s statement. Bitcoin also lost ground, down about 1 per cent to US$115,600.
Economic Calendar
US:
- Initial Jobless Claims 22:30
- Continuing Claims 22:30
- Philadelphia Fed Business Outlook Sep 22:30
- Leading Index Aug 00:00
- Net Long-term TIC Flows Jul 06:00
AU:
- Unemployment Change Aug 11:30
- Unemployment Rate Aug 11:30
- Participation Rate Aug 11:30
This article was written by James Woods, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
