Global Markets Daily Update – Fed Decision in Focus

                                                                       Source: Krish Capital Pty Ltd

Index Update

The Federal Reserve is expected to cut rates by 25 basis points, with markets focused on its outlook amid signs of a cooling labor market and subdued inflation. On Tuesday, U.S. equities slipped, with the Dow down 0.27%, the S&P 500 off 0.13%, and the Nasdaq easing 0.07%, as six of 11 S&P sectors fell, led by utilities, real estate, and technology. Megacap tech stocks dragged the market, with Nvidia (-1.6%), Broadcom (-1.1%), and Microsoft (-1.2%) posting declines. However, optimism around U.S.-China trade talks and a potential TikTok framework boosted sentiment, lifting Oracle shares.

Market Movers

On Tuesday, the top gainers were FGI Industries Ltd (+139.29%), followed by Flux Power Holdings, Inc (+52.17%). On the contrary NanoVibronix, Inc. (-28.5%), and GD Culture Group Limited (-28.16%) declined the most the same day.

Commodities Update

Oil prices retreated on Wednesday, with WTI around $64 and Brent near $68 per barrel, halting a three-day rally. Traders weighed mixed signals after reports suggested Russian output could be curbed by Ukrainian drone strikes, though pipeline operator Transneft dismissed the claims as disinformation. European officials reiterated their push to cut Russian fossil fuel reliance, while U.S. crude inventories dropped by 3.42 million barrels—more than double forecasts—signaling tighter supply.

Gold eased to about $3,670 per ounce after touching a record above $3,700, as investors booked profits ahead of the Federal Reserve’s policy decision. The Fed is expected to deliver its first 25 bps rate cut of the year, with markets pricing in three reductions amid softer labor data, though consumer spending remains resilient. Despite the pullback, gold is still up 41% year-to-date, supported by central bank demand, safe-haven inflows, and dollar weakness.

Macro Updates

U.S. Mortgage Applications Soar on Falling Rates

U.S. mortgage applications surged 29.7% in the week ending September 12, the sharpest rise since January, as mortgage rates fell to their lowest in nearly a year. Refinancing demand jumped 58–60% amid a sharp drop in Treasury yields, while purchase applications rose 3%. The average 30-year fixed mortgage rate declined for a third straight week to 6.39%, the lowest since October 2024, reflecting growing expectations of Fed rate cuts.

Fed Poised for First Rate Cut Since December

The Federal Reserve is expected to lower rates by 25bps in September 2025 to a 4.00%–4.25% range, citing a cooling labor market and stalled disinflation, with payrolls staying under 100K for four months and inflation rising to 2.9% in August. While a larger 50bps cut is unlikely despite President Trump’s calls for a “big cut,” markets anticipate at least two more reductions this year. The Fed will also unveil updated projections and its dot plot, as leadership changes continue with Stephen Miran confirmed to the Board and a court blocking Trump’s bid to remove Governor Lisa Cook.

Dollar Slides Ahead of Fed Decision

The dollar index hovered near 96.7, a 2½-month low and down 1% for the week, as traders awaited the Fed’s expected quarter-point rate cut. Markets are pricing in about 67 bps of easing by year-end, driven by signs of a cooling labor market despite inflation remaining above target. The dollar weakened broadly, hitting a four-year low against the euro, while U.S. retail sales rose for a third straight month, highlighting resilient consumer demand.

U.S. and China Reach Tentative Deal on TikTok

President Trump announced a deal to keep TikTok operating in the U.S., requiring ByteDance to transfer the app’s American assets to U.S. owners. While details remain limited, the agreement mirrors earlier proposals and comes just before a September 17 shutdown deadline, which the White House has now extended to December 16, giving ByteDance 90 more days to finalize the transfer.

Bonds Commentary

The 10-year U.S. Treasury yield steadied near 4.03%, close to five-month lows, as markets awaited the Fed’s expected quarter-point rate cut. Traders see about 67 bps of easing by year-end, supported by signs of a cooling labor market despite inflation staying above target. Attention will center on the Fed’s updated economic projections and dot plot, while August retail sales posted a third month of gains, underscoring resilient consumer spending.

Futures Update

U.S. stock futures were flat on Wednesday as traders awaited the Federal Reserve’s interest rate decision. While markets widely expect a rate cut, uncertainty remains over its size and future policy direction. In the U.K., inflation held steady ahead of the Bank of England’s rate decision, and General Mills (NYSE: GIS) is set to report earnings. Dow and S&P 500 futures were little changed, while Nasdaq 100 futures edged up 0.1%.

Following the previous session, most higher-performing stocks exhibited a lack of clear direction throughout Tuesday's trading day. The S&P 500 declined by 8.52 points, or 0.13%, closing at 6,626.99. Market participants are closely watching the Federal Reserve's latest economic projections and statements, which are expected to be the primary drivers of market movement today. From a technical perspective, the index maintained support at key levels and continued a steady upward trajectory, suggesting the potential for further gains in the near term. However, given that yesterday’s close was near its recent lows, there is a possibility that prices could decline further in today's session. Key support levels are around 6,495, while resistance is expected near 6,666.