U.S. Equity Markets closed higher on Friday as Stocks were bid throughout the session with outperformance in the small caps Russell 2000 while all sectors closed green with Utilities, Communication and Materials leading, but Health Care, Real Estate and Financials lagged. T-Notes bull steepened as traders increased bets for a 50bp rate cut at this week’s Fed meeting with money markets (via refinitiv) pricing the decision at a near coin toss. The bets were piled on from Thursday in wake of the Wall Street Journal article citing a former Powell advisor who said 50bps is on the table while former NY Fed President Dudley overnight said he favours 50bps. The FT Fed preview also said 50bps was an option on Wednesday. Elsewhere, data was encouraging with import/export prices declining while this University of Michigan Consumer Sentiment beat, with upside seen in both current conditions and forward looking expectations. Inflation expectations saw the 1 year ease to the lowest since December 2020, although the 5 year ticked up to 3.1% from 3.0%. The Dollar was flat but the Japanese Yen and Swiss Franc were clear outperformers with US yields selling off on dovish rate expectations from the Fed, which also buoyed LatAm FX, such as the Brazilian Dollar Mexican Peso. Gold continued to push to fresh all-time highs while crude prices failed to hold onto their morning bid, settling in the red. Looking ahead, there is plenty of key risk events this week, namely the FOMC Rate Decision and updated SEPs, but also we see the Bank of England, Bank of Japan and Norges Bank rate decisions, US and UK Retail Sales, inflation reports from Japan, Canada and UK, Aussie jobs, New Zealand GDP, China activity data and PBoC LPR. As expected, last Thursday the ECB opted to cut the deposit rate by 25bps from 3.75% to 3.5% whilst also lowering the main refi and marginal lending rates by 60bps (as previously announced in March). In the policy statement, the ECB reiterated that it will continue to follow a meeting-by-meeting approach and remain in data dependent mode. Furthermore, policy rates will be kept sufficiently restrictive for as long as necessary and the ECB will not pre-commit to a specific policy path. In the accompanying macro projections, headline inflation forecasts for 2024-26 were left unchanged; 2026 remained below target at 1.9%. On a core basis, 2024 and 2025 forecasts were upgraded by 10bps on account of stubborn services inflation. From a growth perspective, 2024-2026 projections were lowered by 10bps each “owing to a weaker contribution from domestic demand over the next few quarters”. At the follow-up press conference, Lagarde noted that Thursday’s decision to cut the DFR by 25bps was “unanimous”. On the inflation path, the President noted that September inflation is likely to see a downtick on account of base effects before rising again in Q4. Despite attempts by journalists to extract information about easing intentions for the October meeting, Lagarde stated she would neither commit to a position or comment on how close the ECB is to R-star. Elsewhere, the President noted that the GC is going to be attentive to the risks of undershooting inflation. Overall, pricing has moved in a slightly more hawkish direction with around 7bps of easing seen in October vs. around 9bps pre-release with a total of 38bps of easing seen by year-end vs. 39bps pre-release. As such, it remains a case of seeing how inflation and growth dynamics play out in the coming weeks. Following this, Bloomberg sources noted that ECB officials have not ruled out a rate cut at the October meeting even if such a move is unlikely. The BBG sources added that given the downside risks to economic growth in the Euro-Zone, officials would rather keep open the option to lower borrowing costs at that meeting. Separately, Reuters sources noted that an October rate cut is unlikely for now and a move before December would take exceptional negative growth surprises. The sources added a move on October 17th could not be ruled out, but it was not likely because policymakers would not have much new information by then and would rather wait for a new round of projections in December. Elsewhere, Oil closed Friday 0.46% lower, while Gold surged to a new all-time high with a gain of 2.5%.
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For anyone following my Platinum Service it made 131 points on Friday and is now ahead by 1613 points for September having ended August with a loss of 301 points after closing July with a gain of 1918 points while June closed with a gain of 2074 points, having made 1843 points in May. The Platinum Service made 4010 points in April after ending March with a gain of 2113 points. February closed with a gain of 1606 points, after closing January with a gain of 3675 points. December saw a gain of 1890 points after finishing November with a gain of 1734 points. October ended with a gain of 3184 after closing September with a small gain of 228 points, after finishing August with a gain of 1485 points, following a small gain of 285 points gain in July, after closing June with a gain of 2683 points. May closed with a gain of 3205 points. April saw a gain of 3354 points while March closed with a gain of 6168 points. The Platinum Service made a record 9619 points last October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1900 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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