By Mike Dolan -What matters in U.S. and global markets today By Mike Dolan, Editor-At-Large, Finance and Markets As a year-end Federal Reserve interest rate cut comes back into play, the trickle of backlogged U.S. economic data turns into a torrent on Tuesday as markets get a better take on the U.S. consumer ahead of […]
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Morning Bid: Consumer readout tests Fed hopes
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By Mike Dolan
-What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Finance and Markets
As a year-end Federal Reserve interest rate cut comes back into play, the trickle of backlogged U.S. economic data turns into a torrent on Tuesday as markets get a better take on the U.S. consumer ahead of the Thanksgiving holiday.
Fed easing hopes have zoomed higher since New York Fed boss John Williams nodded late Friday to another cut next month. Futures markets now see a more than 70% chance of a move in December compared with a 1-in-4 chance just a week ago.
The shift in expectations dragged Treasury yields lower and sparked another hefty rally of more than 1% in Wall Street stock indexes on Monday. Stock futures have stepped back a touch overnight, however, as some major health checks on the U.S. consumer are due to hit later on Tuesday.
Long-delayed September retail sales and producer price data are released alongside a more up-to-date taken on consumer confidence this month. And with ‘Black Friday’ sales also on the radar, Best Buy reports earnings.
The Fed’s focus lately has been on the extent of softness in the labor market – with a mixed picture on that in the most recent payrolls update. But Williams’ intervention on Friday also indicated that he saw still elevated inflation as temporary and producer price readings on Tuesday will help color thinking on the Fed’s favored personal consumption expenditures inflation gauge for the same month.
The Fed Board’s resident dove and Fed Chair hopeful Christopher Waller backed another rate cut next month. So did San Francisco Fed chief Mary Daly.
All of which has helped repair market sentiment after last week’s jarring tech-related selloff.
But it was far from plain sailing in the increasingly volatile Big Tech and AI megacaps.
As Tokyo returned from Monday’s holiday, tech giant Softbank shares plunged 10%, even though Japan’s Nikkei index clung to positive territory. Shares of Alphabet jumped 3% premarket after The Information reported the firm was in talks with Meta Platforms to supply AI chips, a move that’s seen AI-chip behemoth Nvidia’s stock drop 3% ahead of Tuesday’s bell as the rivalry was eyed.
And with attention still on the scale of AI-related investment frenzy, Amazon said it plans to invest $15 billion in Northern Indiana data centers – on the same day it announced plans to invest up to $50 billion to expand AI and supercomputing capabilities for U.S. government customers.
Overseas there was better news on U.S.-China trade relations. President Donald Trump said on Monday that ties with China were “extremely strong” following a call with Chinese leader Xi Jinping, who told Trump that Taiwan’s “return to China” is a key part of Beijing’s vision for the world order.
China’s stocks rose 1% on Tuesday and the offshore yuan surged to its strongest level against the dollar in more than a year.
Elsewhere, Japan’s yen was firmer too, but long-dated government bonds there remained on edge ahead of an auction of 40-year debt on Wednesday that will test demand after the government unveiled its latest fiscal stimulus last week.
Overall, the dollar index was steady to a touch lower.
And in today’s column, I explore an interesting – and potentially concerning – entanglement of the gold and crypto worlds.
Today’s Market Minute
* When UK finance minister Rachel Reeves presents her secondannual budget on Wednesday, she is expected to announce anotherround of hefty tax increases, testing the confidence of thegoverning Labour Party and drawing scrutiny from an uneasy bondmarket. * “The Big Short” investor Michael Burry, a vocal skeptic ofthe current AI boom, took aim at Nvidia as he launched a paidSubstack newsletter focused on financial markets, days aftershutting down his hedge fund. * Unprecedented numbers of Americans are expected to hitstores this Black Friday, but they are likely to curtail theirspending as they find fewer bargains from tariff-hit retailers. * If the recent market wobble turns into something moreseismic, financial stability risks from plunging asset pricescould force the Federal Reserve to cut interest rates, writesROI markets columnist Jamie McGeever. * China may ride to the rescue of tightening diesel marketsin Asia by ramping up exports, writes ROI Asia commoditiescolumnist Clyde Russell.
Chart of the day
Even though ebbing slightly, U.S. consumers’ inflation outlook over one and five years remained elevated. Market-based inflation expectations, however, are better behaved and have subsided this month – with the 10-year inflation ‘breakeven’ rate from the inflation-protected securities market falling back to near 2.2% for the first time since April.
Today’s events to watch (all times EDT)
* U.S. September retail sales, Sept producer prices (0830) Sept home prices (0900) November consumer confidence (1000), Richmond Federal Reserve November business survey (1000), October pending home sales (1000), August business/retail inventories
* European Central Bank board member Piero Cipollone speaks
* U.S. corporate earnings: Best Buy, Workday, Autodesk, NetApp, HP, Analog Devices, Deere
* U.S. Treasury sells $70 billion of 5-year notes and $28 billion of 2-year floating rate notes
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Mike Dolan; Editing by Andrew Heavens)