US equities opened higher today, with the Dow Jones and S&P 500 both reaching record highs once again. The market responded positively to the Fed’s 50bps rate cut, as lower interest rates are expected to stimulate corporate earnings and economic growth while encouraging investors to shift towards riskier assets like stocks. Fed Chair Jerome Powell reassured investors, stating that the US economy remains strong, with no recession risks on the immediate horizon.
Meanwhile, the dollar index showed little reaction to the rate cut, hovering just below 101 at the time of writing, while the 10-year yield climbed to 3.72%. The Fed’s 50bps rate reduction underscored its commitment to take decisive action, if necessary, particularly in the face of potential weakness in the labour market. However, there is some caution that weaker economic data could be misinterpreted as overly dovish, leading the market to price in more cuts than warranted. We anticipate this could weigh on the dollar as the election period approaches.
The base metals space also benefitted from the Fed’s decision, incentivising investors towards riskier assets. Still, market reaction was relatively muted, as we believe that most risks have been repriced to the tail- end of the curve. Copper rallied to test the $9,600/t level before coming back to $9,514/t – marking a high not seen since July. Aluminium remained elevated at $2,539.50/t. Lead jumped higher to $2,074.50/t, while zinc fluctuated around $2,900/t.
Precious metals appreciated today, with gold rebounding after last evening’s drop and nearing record highs again at $2,582/oz. Silver also rose, reaching $30.86/oz. Oil prices continued to climb, with WTI increasing to $71.80/bbl and Brent crude rising to $74.60/bbl.
All price data is from 19.09.2024 as of 17:30
