U.S. Indexes plummeted on Friday while havens rallied as US President Trump reignited trade concerns. In response to China’s rare earth export controls, Trump threatened massive tariffs on China, noting that other countermeasures are also under consideration. He also said there is seemingly no need for an in-person meeting with Chinese President Xi, given the escalations. The post on Truth hit global equities hard, with all Indices in the red and sectors also whacked, aside from Consumer Staples. The Dollar was sold on the news as it raises trade uncertainty, while the Japanese Yen and Swiss Franc outperformed. Antipodes were hit the hardest, given the close ties to China. Oil prices were sold in the risk-off trade, adding to the post-Gaza ceasefire downside. Gold prices initially rallied back above USD 4,000/oz, pared, and then rose again in later trade as the downside in equities continued. T-notes rallied across the curve on the haven demand, extending on the bid seen in the European morning (tracked global peers higher). Elsewhere, the University of Michigan data sparked little reaction and was largely in line with expectations. 1-year inflation expectations eased, with the 5-year unchanged. Note, this week’s CPI data has been pushed back to 24th October, while the Fed said Industrial Production will be delayed. Retail Sales are also likely to be delayed. Fed speak today saw Daly echo dovish remarks. Waller said the Fed needs to cut rates, but needs to do so cautiously, noting it will not be aggressive or fast, and will move in 25bp steps. Musalem noted that the goals are in tension but warned that there is limited room for further easing before policy becomes accommodative. The Prelim Oct. UoM Consumer Sentiment headline slipped to 55.0 from 55.1, above the 54.2 forecast. The beat was led by the current conditions index rising to 61.0 from 60.4, despite expectations for a drop to 60.0. The forward-looking expectations eased to 51.2 from 51.7, despite an unchanged consensus. The report notes that “Pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers’ minds. At this time, consumers do not expect meaningful improvement in these factors. Meanwhile, interviews reveal little evidence that the ongoing federal government shutdown has moved consumers’ views of the economy thus far.” Inflation expectations saw the one-year ahead ease to 4.6% from 4.7%, while long-run inflation expectations were steady at 3.7%. It notes that “Inflation expectations for both time horizons are about midway between the readings seen a year ago and the highs seen this year in April and May in the wake of the initial announcements of major tariff changes.” Governor Waller reiterated the view that tariffs are a one-time cost increase, which doesn’t result in persistent inflation. He acknowledges there could be a temporary effect, but he does not think it will be that big. Waller claims there is roughly a 40% pass-through of tariffs to goods. He is not seeing evidence of a wage-price spiral, which undercuts the risk of second-round inflation effects. On rates, Waller kept dovish, saying the Fed needs to cut, but be cautious at the same time. The Fed will not be aggressive or fast and will move in 25 basis points steps. The governor views the labour market as not that strong and is not tight in any way. Separately, Waller described his interview for Fed Chair as “great” but does not know if he is a finalist for the role. Reports had suggested the list is now down to five, Waller, Bowman, Rieder, Warsh and Hassett. Fed Member Musalem noted that Fed goals are in tension with inflation running high and the labour market showing weakness, noting a balanced approach only works if inflation expectations are anchored. He reiterated that short-term expectations are elevated, but long-term expectations are anchored. He expects inflation to fade by the second half of 2026 but warns the labour market could weaken; it looks like it is currently at full employment. Musalem supported the September rate cut as insurance against a weakening labour market, and he is open-minded about future rate cuts as further insurance, believing the Fed should tread with caution. He said policy is between modestly restrictive and neutral, reiterating that there is limited room for further easing before policy gets overly accommodative. He believes the Fed has a good understanding of the economy right now, despite the shutdown. Finally, Fed Member Daly said inflation has come in much less than had been feared, and the labour market is to a point where softening looks like it could be more worrisome if they don’t risk manage. Daly described policy as still modestly restrictive after the September rate cut. She notes that the Fed is also projecting more cuts, as part of the risk management. Elsewhere, Oil was hammered, closing lower by over 4% while Gold closed unchanged following a volatile trading session.
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For anyone following my Platinum Service it was made 1105 points on Friday and is now ahead by 1415 points for October after closing September with a gain of 3774 points after ending August with a gain of 3362 points after closing July with a gain of 3753 points after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
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