Fundamental News Facts for 16th September, 2024

Fundamental News Facts for 16th September, 2024

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[Quick Facts]
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1. Trump Safe After Assassination Attempt.
2. U.S. Raises Tariffs on Chinese Electric Vehicles.
3. U.S. Consumer Confidence Hits Highest Since May.
4. U.S. Import Prices See Largest Drop in 8 Months.
5. Bets on a 50bp Rate Cut by Fed Rise as Treasury Yields Decline .
6. ECB Officials Cautious About Rate Cuts .
7. Bank of Japan (BoJ) is raising rates to normalise monetary policy.

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[News Details]
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1. Trump Safe After Assassination Attempt:

On Sunday, while playing golf in West Palm Beach, Florida, former President Donald Trump was unharmed despite gunshots being heard. The FBI described the incident as an assassination attempt. The shooter, hiding in the bushes, exchanged fire with Secret Service agents before fleeing in a black Nissan, leaving behind a rifle and two backpacks. The suspect, identified as 58-year-old Ryan Wesley Routh from Hawaii, was photographed by a witness.

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2. U.S. Raises Tariffs on Chinese Electric Vehicles:

The U.S. has significantly increased tariffs on Chinese electric vehicles to protect its local industry. In response, manufacturers like Polestar and Lotus are adjusting their strategies. Polestar has begun production of the Polestar 3 in South Carolina and plans to start producing the Polestar 4 in South Korea by mid-2025. Lotus has postponed the release of its new car in the U.S. and announced the ELETRE will enter the North American market with prices starting at $229,900.

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3. U.S. Consumer Confidence Hits Highest Since May:

The consumer confidence index, as reported by Joanne Hsu from the University of Michigan, has reached its highest level since May 2024, driven by improved purchasing conditions for durable goods. Despite slight weakening in labor market views, expectations for personal finances and the economy have improved. However, uncertainty surrounding the upcoming U.S. election keeps consumers cautious.

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4. U.S. Import Prices See Largest Drop in 8 Months:

In August, the U.S. import price index experienced its largest drop in eight months due to declining fuel and food prices, suggesting easing domestic inflation. The index fell 0.3% month-over-month, the largest drop since December 2023. The Federal Reserve is expected to start an easing cycle with a 25 basis point rate cut next week, although a 50 basis point cut seems less likely due to stable labor market conditions.

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5. Bets on a 50bp Rate Cut by Fed Rise as Treasury Yields Decline :

The probability of a 50 basis point rate cut by the Fed next week has increased, with U.S. Treasury yields expected to decline. Recent CPI and PPI data support expectations of mild performance in the PCE data, leading some investors to anticipate more aggressive monetary easing policies from the Fed.

September has historically been a challenging month for the stock market, and this year is no different. The S&P 500 dropped 4.25% in the first week, marking its worst performance since 1953. Investors are now focused on the Federal Reserve’s upcoming meeting on September 18, which is expected to influence market movements significantly. Analysts are divided on whether the Fed will implement a 25 basis points cut or a 50 basis points cut, with the former seen as a measure to support a soft landing and the latter potentially indicating more severe economic issues.

Potential Scenarios for the Fed’s Rate Cut: 

25 Basis Points Cut:
This scenario is gaining traction due to recent positive labor market data. The unemployment rate has slightly improved to 4.20%, down from August but still higher than May’s 3.90%. A 25 basis points cut would signal that the Fed is cautiously optimistic about controlling inflation and supporting the labor market. This gradual approach is seen as the most likely and positive outcome, aiming to avoid economic weakening without causing panic.

50 Basis Points Cut:
Although less likely, a 50 basis points cut would suggest that the Fed sees more significant economic challenges ahead. This larger cut could be interpreted as a curative measure, indicating that immediate action is needed to address underlying issues. Such a move might lead to market volatility and a negative reaction, similar to the early days of August when this scenario seemed more probable.

Market Implications and Future Outlook:
The Fed’s decision on September 18 will be closely watched, with the market already pricing in much of the optimism for a 25 basis points cut. Historically, gradual rate cuts have led to moderate market drawdowns, while more aggressive cuts have resulted in more significant declines. Regardless of the immediate outcome, the bond market anticipates a total of 250 basis points in cuts by the end of 2025, suggesting a more extended period of rate reductions.

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6. ECB Officials Cautious About Rate Cuts:

European Central Bank officials are cautious about rate cuts, indicating that the next cut will likely occur in December rather than October. They emphasize the need for strategic patience and flexibility in future policies, with services inflation being a key uncertainty. The outlook remains positive, with the 2% inflation target expected to be achieved by the end of next year.

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7. Bank of Japan (BoJ) is raising rates to normalise monetary policy:

While major Western central banks are reducing interest rates, the Bank of Japan (BoJ) is increasing them to normalize its monetary policy. The BoJ ended its negative interest rate policy in March and raised its policy rate again in July. It has also cut back on government bond purchases. Analysts predict that the BoJ will not raise rates again this month to avoid harming the economy. Despite this, Japan’s inflation rate stayed at 2.8% for the third month in a row in July, leading the BoJ to continue its monetary tightening to boost the yen.

China is expected to keep its 1-year and 5-year loan prime rates unchanged this week. In July, the central bank unexpectedly reduced two benchmark rates by 10 basis points and lowered the seven-day repo rate from 1.8% to 1.7%. The Chinese government is gradually implementing stimulus measures to prevent economic bubbles. A recent policy encouraging state-owned entities to buy commercial properties from developers aims to improve the troubled housing market.

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🔥Important News releases on This WEEK :

16/09 Mon All Day JPY & CNY Bank Holiday

16/09 Mon 6:30pm USD Empire State Manufacturing Index

17/09 Tue All Day CNY Bank Holiday

17/09 Tue 3:00pm EUR German ZEW Economic Sentiment

17/09 Tue 6:30pm CAD CPIs & Retail Sales

17/09 Tue Tentative NZD GDT Price Index

18/09 Wed 12:00pm GBP CPI y/y

18/09 Wed 6:30pm USD Building Permits

18/09 Wed 8:30pm USD Crude Oil Inventories

19/09 Thu 12:00am USD Federal Funds Rate & FOMC Statement

19/09 Thu 4:45am NZD GDP q/q

19/09 Thu 7:30am AUD Employment Change

19/09 Thu 5:00pm GBP Monetary Policy Summary & MPC Official Bank Rate Votes

19/09 Thu 6:30pm USD Unemployment Claims & Philly Fed Manufacturing Index

19/09 Thu 8:00pm USD Existing Home Sales

20/09 Fri 7:00am CNY 1-y & 5-y Loan Prime Rate

20/09 Fri Tentative JPY BOJ Policy Rate, Monetary Policy Statement & BOJ Press Conference

20/09 Fri 12:00pm GBP Retail Sales m/m

20/09 Fri 6:15pm CAD BOC Gov Macklem Speaks

20/09 Fri 6:30pm CAD Retails Sales & Core Retail Sales m/m

N.B. Time mentioned here is on Gmt +6 

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Sources :
– CNBC, Bloomberg, Reuters, Fastbull, Yahoo Finance, CNN, ForexFactory News, Myfxbook News etc

Prepared to you by “Akif Matin“

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