Powell resetting expectations?
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What did Jerome Powell say about future rate‑cut expectations?
Lots of moving parts today. As expected, Japanese shares tanked yesterday, whilst in China they shot higher. We know the reasons. We don't know whether the response though is overblown. We also don't know what the Fed is gonna do next, but it seems like, well maybe Jerome Powell has been talking down expectations. He's basically saying, remember the data, and we don't have long to wait for that. We get jolts tonight, and then of course non farm payrolls on Friday. European inflation is slowing. Enough for the ECB? Well, and the RBA, well NAB is now saying perhaps they're gonna uh bring down rates a few months earlier than we said they would. It's Tuesday, it's the first of October 2024. It's the morning call from NAB.
Good morning. Well the US dollar is up naught point four percent this morning, but the Aussie dollar also up today. It's only a little over naught point one percent higher, but against a rising US dollar, so that's not bad. It's up to sixty nine point one US cents now. The yen though has fallen one percent. The euro is down a quarter per cent. Ten year treasury yields are up again another four basis points today, almost at three point eight percent. We've got less movement in Europe, down one basis point in Germany, uh up three for uh ten year guilt in the UK though. Aussie ten year yields yesterday were three point nine seven per cent, up to four percent now on futures, and shares, well they were down in the United States until the last few hours of trip.
Trade, but all the indices finished in the green, only just admittedly for the day. You've got to go to the second decimal point percentage wise, but not point four percent higher for the Nasdaq and the S P. The Russell two thousand is up a quarter percent, all of that a complete turnaround from where they were in the middle of the afternoon in the US. But compare that to the NICE yesterday falling four point eight percent overnight in Europe, the Eurostocks fifty is down one point three percent, down two percent for The cat current, 1% lower for the FTSE one hundred. And oil is mixed today. WTI is up ever so slightly a 0.1% higher. Brent is down 0.3%, below 71.80 a bow, but no big moves anywhere there.
Uh Nabs Gavin Friend joins me from London today. So let's look at this yield story first of all.
How are US Treasury yields reacting to Powell’s comments and upcoming data?
I mean, you know, there's this expectation that rates are going to come down, you know, sooner rather than later, and yet yields seem to be creeping back up again. What's going on there?
Yes, good morning, Phil. We had some comments from Fed Chair Powell late in the day. Uh he was speaking at uh the a National Association of Business Economists Conference in Nashville. So in his prepared remarks there was no new message, you know, the reminder that the Fed thinks the labour market is solid. But that the Fed intends to use its tools To keep it there, so i. e. rate cuts. But he also re re repeated that the Fed isn't on a preset in a course. It will be guided by the data, meeting by meeting, all that sort of stuff. And that a move to neutral will be made over time. So nothing, you know, unexpected then. And a couple of things stood out in the QA that caught the market's attention. He said that it i it doesn't feel like this is a Fed that is in a hurry to cut quick
Yeah. And so yields already up on the day. Um you saw that extend. So ten year yields, sorry, two year yields moved up, um, an additional sort of five basis points on that. The two tenths curve flattened a bit, the dollar moved up a bit, stocks came off on the back of that. I heard one of the commentators out there saying that uh this was Powell trying to walk back a market m or market pricing that had got a bit. bit ahead of itself in terms of you know the cuts priced in for this year and next year. And it's true, you know, from 76 basis points uh for December, we've gone to about 69. And, you know, orders of that magnitude out through the curve in 2025. But I you know, I'm not I don't think this was the th this was the Fed setting out to walk back the market.
Um otherwise that would have been in his prepared remarks, I'm guessing.
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Chapters
8 chapters
1
What did Jerome Powell say about future rate‑cut expectations?
0:01–1:59
2
How are US Treasury yields reacting to Powell’s comments and upcoming data?
1:59–4:31
3
Is optimism about Chinese equities justified or a “push‑on‑a‑string” scenario?
4:31–7:00
4
What are the latest European inflation trends and how might they affect ECB policy?
7:00–9:14
5
Why is the UK’s “Goldilocks” labour‑market narrative under pressure?
9:14–10:59
6
How will Australian retail‑sales and building‑approval data shape RBA cut forecasts?
10:59–13:30
7
What could the upcoming RBNZ survey reveal about a 25 bp vs 50 bp rate cut?
13:30–15:27
8
What are the key takeaways for global markets from today’s mixed data releases?
15:27–17:35