Pre-Market Report – Monday 26 August: US to cut | SPI up 41, eyes all-time highs

Global markets rallied overnight on comments from Fed Chair Powell that the “time has come” to start cutting rates. This had been expected by markets for over a month now but did represent the first official shift in policy from the Fed since rates started rising in March 2022. New information, regarding timing and quantity of rate cuts remains an uncertainty (data dependent). Powell said "The upside risks to inflation have diminished. And the downside risks to employment have increased,". Bond traders did view the speech as slightly more dovish than expected. Odds of a 50bp cut in the next September meeting rose from 24% to 36% (still 100% chance of a cut in general) according to the FedWatch tool. The chances of policy rates being 75bp lower by November rose from 40% to 50%. A month ago it sat at 2%. Note that the bond market has been more optimistic about both the timing and quantity of rate cuts compared to the Fed. It does provide an indication of where sentiment currently lies. Bond yields and the USD also fell, indicating there was some element of surprise in Powell’s speech. The US10Y fell 6.3bp, the 2Y -10.5bp and the USD index lost 0.82%.

SPI up 41 -  BEN - ABB - ABY - PPT - Results

• Gold gains over 1% as Powell comments hint at September rate cut.
• Iron ore slips on falling near-term demand but heads for weekly gain.
• Oil climbs over 2% after Fed's Powell indicates US rate cuts.
• Aluminium, zinc extend gains on Powell comments, supply concerns.
• BHP's return to Argentina marks new hope for untapped copper mines.
• China pauses steel capacity swap programme, which will limit expansion.
• US buys nearly 2.5 million barrels of oil for Strategic Petroleum Reserve.
• Russian mining giant Nornickel's first-half profit slumps on weak prices.
• India's silver imports to double on demand for solar, investment.

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