Big or small?
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Will the Fed start with a 50‑basis‑point cut this year?
Big or small, that is the question this week. Will the Fed go for a 50 basis point cut? If they plan to do it at some point this year, why not now? That is one of the arguments out there. And 5% by the end of the year, President Xi is still pushing for that as China's growth target. But softer data over the weekend suggests they are getting further away from that. So does that mean new policies are on the way? And as well as the Fed, lots of inflation numbers this week and labour market data for Australia. Well it's gonna be quite an important week, it seems. It's Monday, it's the sixteenth of September 2024. It's the morning call from Nab. Good morning. Well, the US dollar was down a quarter percent on Friday, but that's pretty much how it was across the whole week, down by a quarter percent.
Uh the Aussie dollar also down on that falling US dollar. So the Aussie dollar is down a quarter percent, down almost to sixty seven US cents now. The big move was the yen on Friday, it was up nort seven percent, and the Swiss franc up naught point three percent. So has someone turned the risk off switch back on? Well, not as far as equities are concerned. The Nasdaq SP and Dow all up on Friday between half a per cent and naught point seven percent. The Russell two thousand was up two point five percent on the day.
How are global equity markets reacting to the Fed‑cut speculation?
So can we get through the next few minutes without using the word rotation? I doubt it. Uh shares are up in Europe as well, up naught point nine percent for the DAX, for example, and bond yields were marginally lower. Ten year treasuries down a few basis points to three point six five percent, having started the month up over three percent. Three point nine percent. Aussie ten year yields fell three basis points on Friday to three point eight percent. Now on futures there are a few basis points higher than that this morning. And oil back down half percent off Brent and WTI on Friday, Brent around seventy one sixty a barrel. Gold is pushing higher up to two thousand five hundred and eighty an ounce, which is another new record high against those falling bond yields and that falling US dollar.
So here's NABS Ray Atrill. I mean it is interesting.
It is morning filled to some extent. So, you know, yeah, just to answer the rotation question, we've got the SP up, we've got the Nasdaq up, and we've got the Russell 2000 app. And I I would argue that um it's increased um expectations or a dialing up of speculation that the um the first cut from the Fed on uh Wednesday, US time, could be uh 50 basis points. So just looking at the different Between where the market uh ended up on Friday, as far as pricing is concerned, it's exactly 50-50 in terms of uh 25 or 50, whereas 24 hours earlier than that, there was a less than 40% chance. I think there was uh about a 37% chance. So we've certainly seen a little bit of a a dialing up there, and I think that's been sort of equity positive.
Um, you know, even though that you know there is a view out there that if the Fed does go fifty, it's going to frighten the horses a little bit in terms of, you know, what does the Fed know that we don't know about the economy?
What does the latest Chinese loan and housing data suggest about policy direction?
But that's not how equity markets behaved, at least on on Friday. But um but there is a bit of a contrast because if I look at the US dollar, okay, it was weaker, consistent with uh slight easing in uh across the US yield curve, but um but it's the Swiss franc and the yen, um, which are the two currencies that have uh driven the dollar down, which is far more consistent with risk off. So uh pays your money and takes your choice, I think, as far as Friday's Yeah.
markets are concerned. And you know it's interesting, Nick Tamirios in the Wall Street Journal, uh on Friday, he seemed to be having a bit of an each way bet as to what the Fed's going to do. So do they start big or do they start small? It was the question he asked. And it does get down to well if they're going to do it later, why not do it now? versus well the Fed likes to be cautious. But if they're going to do it, why not do it now?
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Chapters
8 chapters
1
Will the Fed start with a 50‑basis‑point cut this year?
0:01–1:10
2
How are global equity markets reacting to the Fed‑cut speculation?
1:10–3:04
3
What does the latest Chinese loan and housing data suggest about policy direction?
3:04–4:13
4
Is a bigger Fed move likely after the upcoming Politburo meeting in China?
4:13–6:31
5
Will the ECB consider an early rate cut before the December meeting?
6:31–8:41
6
How are New Zealand’s manufacturing and services PMI figures shaping the regional outlook?
8:41–10:48
7
Can Australia’s labour‑market numbers shift RBA expectations for a Q4 cut?
10:48–11:42
8
What are the key takeaways from today’s macro‑data roundup?
11:42–12:33