Markets in confusion over US Federal Reserve, company and economic news
Market reviews
• The chance of a big 50 basis point Fed rate hike on Wednesday rose to 67% on Tuesday, up from 30% last week. The yen hit a 38-year low against the dollar in early July but has since strengthened, gaining more than 12% as the gap between two-year U.S. and Japanese rates has narrowed by about 130 basis points in 11 weeks.
• A German sentiment survey is expected to show a slight deterioration this month ahead of the Fed's meeting on Tuesday, while U.S. retail sales are forecast to fall in August from the previous month.
• Markets will likely look beyond the numbers to the size of the expected US interest rate cut this week, as well as the reasons for the cut and further forecasts, which will guide interpretation of economic data in the weeks and months ahead.
• The research arm of BlackRock, the world's largest asset manager, believes a robust economy will allow rates to be cut at levels lower than the 250 basis points that traders are pricing in over the next 12 months.
• Elsewhere in Asia, Australia's ASX 200 index hit a record high and Chinese appliance maker Midea rose 9.5 percent in its Hong Kong debut. Mainland China markets were closed for a holiday.
• Traders in Tokyo returned from a three-day holiday on Tuesday with little appetite for a repeat of the yen’s rally in a low-liquidity environment, when it reached a strong 140 per dollar on Monday. However, the dollar/yen pair and the 140 mark are in focus this week, with the Federal Reserve expected to begin a cycle of U.S. monetary easing and the Bank of Japan set a course for interest rate hikes. Further gains in the yen are possible if a dovish Fed or a hawkish BOJ pushes the yen above 140, opening the way to last year’s peak of 127.215 per dollar. That would also push the yen higher through strong corporate expectations for exchange rates in the current fiscal year, making them buyers and adding to already tight momentum. Japanese stocks were weak, with the Nikkei falling 1.7%.
• The Federal Reserve faces tough conditions: cutting rates in a strong economy, according to the WSJ Every rate-cutting cycle is different. Economies respond differently, and there is a delay in the response.
• U.S. interest rate futures raised the odds of a bigger move by the Fed to nearly 60%, with the chance of a 50 basis point Fed rate cut on Wednesday rising. Expectations of a Fed rate cut sent bonds higher and the Japanese yen stronger. The yen hit its highest since July 2023 on expectations of a narrowing interest rate differential between the U.S. and Japan.
• Shares of Trump's media company rose about 12% in a day after a failed assassination attempt on him Changpeng Zhao (CZ), the founder of Binance, will be released from prison on September 29 after a four-month sentence.
• iPhone 16 pre-orders fell short of Apple's expectations, with the company selling 37 million units in its first weekend, down 12% year-over-year. The iPhone 16 Pro is selling worse than the iPhone 15 Pro, while the base iPhone 16 is selling better than last year's model. AAPL shares fell 3% on the news.
• Nearly a quarter of Swiss industrial companies are unhappy with UBS's services, particularly in lending, since its takeover of Credit Suisse in 2023, a blow to the bank's efforts to show it is not abusing its market dominance, according to a survey.
• Election betting threatens confidence in voting and should be banned, U.S. agency says The Commodity and Futures Trading Commission is trying to stop New York startup Kalshi from resuming offering bets on the outcome of congressional elections this fall.
• Microsoft has signed a deal with Vodafone to bring artificial intelligence to Office, adding new features to Excel and Outlook They are designed to help workers create charts in Excel, prioritise emails and collaborate with each other.
• Grayscale XRP Trust: Is This the Breakout XRP Investors Have Been Waiting For? The launch of the Grayscale XRP Trust could signal significant demand for the altcoin. Given that historical altcoin trust launches have led to significant price gains, XRP could be poised for a breakout.
• Arabica coffee futures hit highest since 2011 on supply problems A cup of coffee is set to become even more expensive as ongoing supply disruptions push prices of premium Arabica beans to their highest in 13 years.
• Schwab expects earnings to rebound after a slump earlier in the year as fewer clients move money in search of higher returns.
• Carl Icahn Welcomes Dismissal of Lawsuit Against Icahn Enterprises A federal judge has dismissed a lawsuit that accused the billionaire of defrauding shareholders of his investment company to obtain large personal loans.
• Candy makers have breathed a sigh of relief after paying record sugar prices last year, with costs falling as domestic production reaches record levels.
• Tech company CACI is beefing up its defense business with a $1.28 billion deal with Azure Summit to expand its defense-focused business.
• Shares of Intel (INTC) rose 6% on Monday after Bloomberg reported that the chipmaker will receive up to $3.5 billion in funding to make chips for the Defense Department. That would be in addition to the billions the company received under the Chip and Science Act.
• Boeing (BA) has imposed a hiring freeze to cut costs.
• Microsoft (MSFT) shares rose 1% in premarket trading as the company increased its dividend by 10%. Although the dividend will remain less than 1% per annum, the company also announced a $60 billion share buyback, which is only 2% of its market cap.
• Intel (INTC) shares rose 8% in premarket trading after the company signed a multibillion-dollar, multiyear deal with Amazon.com Inc.'s AWS Web Services division to make some of its chips for artificial intelligence data centers.
• The NY Empire State Manufacturing Business Activity Index (USA) unexpectedly rose from -4.7 to +11.5.
Expected: -4.1.
Key events that could impact markets on Tuesday:
- Economy: German sentiment survey, US retail sales.
International Reviews
• Trump says Biden and Kamala Harris' "rhetoric" is responsible for another assassination attempt on him - Fox News
• Tokayev called Russia “invincible” and praised China and Brazil’s peace plan for Ukraine. During a meeting with German Chancellor Olaf Scholz, Kassym-Jomart Tokayev lamented that a good chance to achieve a truce was missed with the refusal to conclude the Istanbul Agreement. At the same time, he added that the opportunity to achieve peace still exists.
• The US itself is preventing Europe from giving up Russian gas, - Business Insider. Due to the reduction in American gas exports to Europe, the Old World cannot abandon supplies of Russian raw materials.
• US companies have begun to send their methane more often to Asia-Pacific countries, where the cost of this energy source has become higher. In general, this is a typical arbitrage and a typical situation for the LNG market, where the US is the leader, putting its own benefit above “partner” assistance.
• The International Monetary Fund is set to decide whether to ease billions of dollars in fines on loans
that are criticised as unfairly punishing borrowing countries before its annual meeting in Washington next month.