General Market Analysis – 17/09/24

US Markets Mixed as Investors Eye Larger Rate Cut – Dow Up 0.55%

US markets saw a mixed performance just days before the crucial Federal Reserve rate decision, with markets increasingly pricing in the likelihood of a larger 0.5% rate cut. The Dow reached a record high, closing 0.55% higher at 41,622, while the S&P edged up 0.13%. In contrast, the tech-heavy Nasdaq slipped by 0.52%. US Treasury yields continued to fall, with the 2-year yield hitting its lowest point since September 2022 before settling 1.5 basis points lower at 3.561%. The 10-year yield also dropped by 3.1 basis points, closing at 3.618%. The US dollar took a further hit, with USD/JPY reaching its lowest level in a year, and the DXY closing down 0.33%.

Oil prices surged as markets continued to adjust to US production resuming following Hurricane Francine. Brent rose by 1.59% to $72.75, while WTI climbed 2.1% to $70.09. Gold reached a new record high, buoyed by the weaker dollar, peaking at $2,589.59 before settling 0.2% higher at $2,591.37.

Rate Cut Expectations Surge

Expectations for a Federal Reserve rate cut surged once again, with markets now pricing in a nearly 60% chance of a 50-basis point cut on Wednesday, up from around 28% at the start of trading on Friday. This significant shift in market sentiment comes despite the absence of new data or statements from Federal Reserve officials. This sudden move has sparked speculation, with some suggesting that information about the Fed’s decision may have been leaked. Traders now anticipate increased volatility surrounding this announcement, which is shaping up to be one of the most consequential in recent years.

Event Calendar Heats Up for Traders

The macroeconomic calendar picks up pace today, and traders are preparing for increased volatility as they await key rate decisions worldwide. While China remains on holiday during another quiet Asian session, European traders will be watching closely as the London session opens, with the release of Germany’s ZEW Economic Sentiment data, expected to print at 17.1. Tier 1 data releases kick off during the New York session, starting with Canada’s CPI figures, where the market is expecting a 0% change month-on-month for the headline figure. Simultaneously, US Retail Sales data is due, with forecasts predicting a 0.2% rise in core sales.

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