U.S. Indexes closed mixed when looking on a sector basis, as Consumer Discretionary surged thanks to Amazon’s 10% rally on a profit, revenue, and AWS beat. In tech, Apple was marginally higher but reversed earlier gains to close 0.5% lower as participants weighed the miss on some metrics (mainland China, iPhone, and Mac revenue) against the positive Q1 revenue outlook, which seemingly puts the impacts from the iPhone Air launch delay in the past. Utilities, Materials, and Staples underperformed and were in the red. Market-moving updates included reports from the Miami Herald (which synced up with the Wall Street Journal reports) that the US has decided to attack military sites in Venezuela that could come at any moment, as the sites are being used to smuggle drugs. A fleeting risk-off trade was seen, with US President Trump later refuting the prospects of a strike on Venezuela. Crude prices saw upside on the Miami Herald report, which held to some extent throughout the day but ~ USD 0.50/bbl off highs. For the U.S. Dollar and Treasuries, pertinent updates came via the Fed, where Fed’s Schmid, Logan, and Hammack argued against lowering rates in October and beyond, citing either/both concerns over high inflation or an economic outlook that argued otherwise. Treasuries settled mixed, with the long end seeing modest losses while the opposite was seen in the short end. The Dollar extended post-Fed gains amid a slight reduction in rate cut expectations at the Fed’s December meeting. The Japanese Yen outperformed with unchanged performance versus the Dollar as hotter-than-expected Tokyo CPI provided support. Fed Member Logan – voter 2026 – preferred to hold rates last week as the economic outlook did not justify a move and finds it difficult to support another cut in December. Stated the labour market is roughly balanced and cooling slowly, with low layoffs and unemployment claims, though she’s mindful of recent layoff announcements. She also touted that the breakeven rate has fallen to 30k. Logan emphasised that inflation risks remain, and the Fed had already mitigated employment risk with the September cut. On rates, Logan said that she is disappointed to see market repo rates rise above the Fed’s ceiling rates. She also reiterated calls to modernise the Fed Funds target rate. She suggested the Fed should shift the policy target from the Fed Funds rate to a repo-based rate. Meanwhile, Schmid – 2025 voter and dissenter – voted to keep rates unchanged due to continued economic momentum and concerns over high and potentially spreading inflation, which he noted is affecting both goods and services. Described policy as only modestly restrictive and argued it still needs to lean against demand and price pressures. He said the labour market is largely in balance and that any stress likely stems from structural changes, not something small cuts would fix. Schmid also warned that lowering rates too soon could undermine the Fed’s commitment to the 2% target. Regarding rising prices, he specifically noted that rising healthcare costs and insurance premiums are at the top of mind. Hammack – 2026 voter said she would not have cut rates in October, citing challenges to both sides of the mandate and stressing that policy is now around neutral and barely restrictive. She said the Fed cut in September because of the sharp drop in Payrolls, but since then, it is not obvious that the shift in the labour market is on the demand side. Hamamck argued that some restriction still needs to be maintained to bring inflation down, especially with little to no progress on core services ex-housing and additional pressures from tariffs, electricity, and insurance. Hamamck noted there are some emerging signs of labour softness, including layoffs, but said the Fed is missing more on the inflation side than on jobs. Emphasised the need to stay restrictive while remaining open-minded to new labour data ahead of December. On the balance sheet, she said there is a benefit to having the smallest possible balance sheet they can have, and that she agrees with Fed’s Logan that she wants to see Repo rates trading roughly in line with interest on reserve rates. Finally, Bostic – 2027 voter – ultimately supported last week’s rate cut but noted that mandates are in tension. He said the Fed is still in restrictive territory and needs to bring inflation down to 2%, though more progress is needed before feeling comfortable moving to neutral. Bostic acknowledged that less than half of upward price pressures are due to tariffs. He described the current environment as uncertain but not flying blind and said some labour market shifts are structural. Backed Powell’s message that a December cut is not a foregone conclusion and reiterated that policy remains data-dependent. On the balance sheet, he also said he would like a little extra buffer on the balance sheet, noting he is “team abundant”, versus Hammack, who is “team ample”. As was very much expected, the ECB opted to stand pat on the Deposit Rate at 2.0% at Thursday’s Meeting. The decision to do so was based on the lack of incremental shifts in data since the September meeting and confidence that indicators of underlying inflation are consistent with the ECB’s target. Additionally, the ECB retained its meeting-by-meeting and data-dependent approach. At the follow-up press conference, President Lagarde reaffirmed that policy is in a “good place” but it is not a fixed point and the GC will do whatever is necessary to stay in a good place. With regards to the decision itself, the President stated that it was a unanimous one. In terms of the economic assessment, Lagarde stated that some of the downside risks to growth have abated. However, the same cannot be said for inflation. Overall, despite some of the risks surrounding the Euro-Zone outlook (US trade policies, appreciation in the EUR, French politics), the ECB remains confident in the bloc’s growth outlook, whilst cautious of potential upside inflation risks. As such, the bar for a rate cut in the near-term remains a high one. Market pricing concurs with just 1bps of loosening seen for the December confab. The next inflection point will likely come via the next round of macro projections in December, which will include the debut 2028 forecast. Later, Reuters via sources, reported that ECB policymakers are preparing for a December showdown on inflation and rates; some think 2028 inflation projection would warrant rate cut debate, others favour giving little weight to any small undershooting three years ahead. Elsewhere, Oil closed higher by 0.68% while Gold ended Friday with a loss of 0.55%.
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