Bassanese Bites: Fabulous Fed – September 16 2024
Global markets
Global equities bounced back solidly last week as benign US economic data heightened expectations for a US rate cut this week.
The US Presidential debate was a non-event for markets. As I’ve argued in the past, markets don’t seem to mind which candidate wins – as each has pluses and negatives as far as financial markets are concerned. So the fact Harris appeared to do well and got a poll boost hardly caused a ripple on Wall Street.
Perhaps more important, US economic data continued to support the ‘soft landing’ scenario, with another reassuringly low weekly jobless claims report and benign consumer price inflation report. Headline consumer prices rose 0.2% in August – in line with expectations. While core prices (i.e. excluding food and energy) rose a touch stronger-than-expected 0.3%, most of this was in shelter costs – which we know should continue to trend down given the already apparent flatness in rents on new leases.
Also supporting markets last week was a widely-expected second rate cut from the European Central Bank.
Global week ahead
The obvious highlight this week will be the Fed meeting over Tuesday and Wednesday (US time). Absent clearer recession signs, markets are expecting only a 0.25% cut – the Fed is unlikely to do more, if only not to scare the horses.
