U.S. Indices closed sharply higher on Monday, with the S&P 500 reclaiming 6,700, posting broad-based gains, though the NASDAQ 100 outperformed as AI names clawed back some recent losses. Communications jumped 4%, led by Alphabet after more upbeat commentary on its latest AI updates, while tech and consumer discretionary gained about 2.5% (led by Broadcom, AVGO +11%) and 2.0%, respectively. Support also came from firmer expectations of a December rate cut after Governor Waller reaffirmed backing for a 25 basis points move, and Daly (a 2027 voter) also endorsed such a reduction. Markets priced a December cut at a 76% probability, up from 56% on Friday after dovish remarks from Williams. The Dollar eased slightly, but the Dollar Index stayed above 100, with the Australian Dollar outperforming while the Japanese Yen shed part of Friday’s gains. Focus turns to US PPI and Retail Sales on Tuesday ahead of the Thanksgiving holiday on Thursday. Oil prices were bid despite reports of further progress on Ukraine-Russia peace talks, though details remain scarce and traders appear sceptical of meaningful advances. Gold gained through the session, tracking equities higher, while Bitcoin recovered some of last week’s losses but failed to break above USD 90k, holding at session highs into APAC trade. Separately, US President Trump and China’s President Xi held a call in which Trump accepted Xi’s invitation to visit Beijing in April and extended a reciprocal invitation for later in the year. Waller, the Fed Governor reiterated his case for a rate cut at the December meeting, saying data since the last FOMC shows not much change, with weakness seen in the labour market while inflation is not a big problem. While inflation has ticked up slightly, he expects it to start falling, estimating ex-tariff inflation at 2.4–2.5%. Waller described the September jobs number as likely to be revised down and noted its concentrated nature is not a good sign. He emphasised a meeting-by-meeting approach going forward, with January posing challenges due to a flood of new data. Stated tariff effects on inflation are modest and one-off, and reiterated that if the data rebounds, the Fed can be more cautious. The San Francisco Fed President (Daly) said in a WSJ interview that she backs a December rate cut, because she sees a sudden deterioration in the job market as both more likely and harder to manage than an inflation flare-up. “On the labour market, I don’t feel as confident we can get ahead of it.” “It’s vulnerable enough now that the risk is it’ll have a nonlinear change.” Concerning an inflation breakout, she noted that it is a lower risk given how tariff-driven cost increases have been more muted than anticipated earlier this year. Daly still believes the Fed can bring inflation back to its 2% target without an increase in unemployment. While the economy has settled in a “low-hiring, low-firing” equilibrium for some time, the 2027 voter sees greater risks that the balance ultimately would break in a negative direction. She added, “I’m not willing to assume our hands are tied next year” in a way that either forecloses the option to cut rates further if the economy weakens more abruptly or to raise rates “if that’s what’s needed.” Regarding the divergence amongst the FOMC, she said it reflects genuine uncertainty, not dysfunction. On the December meeting, Daly said the decision requires a judgment call about where the risks of not moving are, and where the risks of moving are. As such, Daly puts the risks of moving [rates down] a little bit lower than others, and the risk of not moving a little bit higher than others. Elsewhere, Oil closed higher by 1.58% and Gold by 1.76%.
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