On Tuesday, US stock indices continued their ascent. The Dow Jones (US30) Index rose by 0.34%. The S&P 500 (US500) gained 0.23%. The technology-heavy Nasdaq (US100) closed up by 0.74%. All three indices set new historical highs amid expectations that the Fed would cut its rate by 25 basis points (bps) on Wednesday, a move the markets have almost entirely priced in.
Nvidia climbed 8% after announcing a $1 billion strategic investment in Nokia, which reinforces expectations for continued demand for chips and network infrastructure. UPS rose 8.1% thanks to an earnings report that beat analysts’ expectations. Microsoft jumped 2.3% after securing a landmark agreement with OpenAI, strengthening its commercial position in the AI sector.
Today, the US Federal Reserve (Fed) will hold its monetary policy meeting. The market is almost certainly expecting a 25 bps cut to the key interest rate. However, this decision is already priced in, so the main focus for investors will be on Powell’s press conference and the updates to the dot plot. A downward shift in the median outlook for the year-end rate level would increase the probability of additional cuts.
The Canadian dollar strengthened above 1.40 CAD per USD, remaining near its monthly highs. Markets have already priced in a 25 bps rate cut from both the Fed and the Bank of Canada (BoC) this week. Despite the overall easing, Canada maintains an advantage in real yield. Analysts believe that today’s BoC cut could be the final one in the current cycle, and the regulator’s rhetoric is likely to be neutral or slightly “hawkish” to keep inflationary expectations under control and support confidence amid an unemployment rate of 7.1%.
European stock markets traded with mixed dynamics yesterday. Germany’s DAX (DE40) fell by 0.12%, France’s CAC 40 (FR40) closed down 0.27%, Spain’s IBEX35 (ES35) gained 0.54%, and the UK’s FTSE 100 (UK100) closed 0.44% higher. The FTSE 100 set a new record high on Tuesday, supported by a rally in the banking, commodity, and defence sectors. HSBC led the gains, adding over 4% following strong quarterly results and a raised profitability outlook.
WTI crude oil declined for a third straight day amid sanctions and supply concerns. Last week, Washington imposed sanctions on major Russian oil companies (Rosneft and Lukoil) which led traders to closely monitor for potential supply disruptions. Indian refiners temporarily paused new orders for Russian oil. However, doubts persist in the market that the restrictions will be able to offset the oil surplus, as OPEC+ is considering another production increase at its upcoming meeting.
Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) dropped 0.58%, China’s FTSE China A50 (CHA50) rose by 0.75%, Hong Kong’s Hang Seng (HK50) fell by 0.33%, and Australia’s ASX 200 (AU200) posted a negative result of 0.48%.
The Australian dollar strengthened, reaching a three-week high, after fresh inflation data came in noticeably higher than prognoses and reduced expectations for an imminent policy easing by the Reserve Bank of Australia (RBA). Annual inflation accelerated to 3.5% in September, up from 3% in August and above the consensus projection of 3.1%, marking the highest level since July 2024. Against this backdrop, traders sharply cut bets on interest rate cuts. Markets are now pricing in a 90% probability that the RBA will keep the key interest rate at 3.6% on November 4th.
S&P 500 (US500) 6,890.89 +15.73 (+0.23%)
Dow Jones (US30) 47,706.37 +161.78 (+0.34%)
DAX (DE40) 24,278.63 −30.15 (−0.12%)
FTSE 100 (UK100) 9,696.74 +42.92 (+0.44%)
USD Index 98.72 -0.06% (-0.06%)