2024-09-18 06:02

Fed makes bumper 50 basis point cut US stock indexes jump then pare gains Dollar regains ground, Treasury yields rise NEW YORK, Sept 18 (Reuters) - Major stock indexes closed with modest losses and the dollar gained ground in choppy trading on Wednesday after the U.S. Federal Reserve opted for a supersized cut in its first move to borrowing costs in more than four years. The central bank cut the overnight rate by half a percentage point, more than the quarter-point that is customary for adjustments, citing greater confidence that inflation will keep receding to its 2% annual target. That rate, which guides how much interest banks pay each other and affects rates for consumers, is now 4.75%-5.00%, the lower end of the range markets had been expecting. The benchmark S&P 500 rose as much as 1% after the announcement before retreating to close down 0.29% at 5,618.26. "It's important to note that stocks are not rocketing ahead (at least not yet) after getting what they wanted. After seven straight up days, a lot of good news was priced in," said Steve Sosnick, chief market strategist at Interactive Brokers in Greenwich, Connecticut. The Dow Jones Industrial Average (.DJI) , opens new tab closed down 0.25%, at 41,503.10, and the Nasdaq Composite (.IXIC) , opens new tab shed 0.31%, to end at 17,573.30. Rates had been parked at their highest levels in more than two decades since July 2023. MSCI's index of world stocks (.MIWD00000PUS) , opens new tab rose to a record high during the session before turning south. It was last quoted down 0.29% at 826.29. The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, weakened after the announcement before rising 0.07% to 100.98. In the market for U.S. government debt, yields on rate-sensitive 2-year Treasuries , rose 3.8 basis points to 3.6297%, from 3.592% late on Tuesday. The yield on benchmark 10-year notes rose 6.6 basis points to 3.708%, from 3.642% late on Tuesday. A BIG BITE TO START Attention quickly turned to what the Fed would do next as it seeks to fulfil its two-part mandate to promote maximum employment and stable prices. Chair Jerome Powell said he saw no sign of a recession, citing solid growth, lower inflation and "a labor market that's still at very solid levels". He also said the Fed might have started cutting sooner, on the back of a surprisingly weak July jobs report, if it had seen that data earlier. Markets are now fully pricing in a cut of at least 25 basis points at the central bank's next meeting in November, with a roughly 40% chance for another 50 basis point cut. "There's a ton of room to go lower here, combined with what I would call wobbly labor data, wobbly not terrifying... They took a big bite to start," said Tom Herrick, chief market strategist at Cary Street Partners in Richmond, Virginia. Next up on a busy policy calendar is a Bank of England meeting on Thursday, which financial markets anticipate will keep interest rates on hold. The Bank of Japan is expected to do the same on Friday. On Wednesday afternoon following the Fed meeting, the Japanese yen strengthened 0.11% to 142.24 per dollar. Sterling strengthened 0.28% to $1.3193. Gold XAU= fell 0.62% to $2,553.67 an ounce, having touched record highs earlier this week. Oil prices fell, as the rate cut was seen as a response to unease about the U.S. labor market. Brent crude settled at $73.65 a barrel, losing 5 cents. Sign up here. https://www.reuters.com/markets/global-markets-wrapup-1-2024-09-18/

2024-09-18 05:57

NEW DELHI, Sept 18 (Reuters) - India is in discussions to tackle higher steel imports, Steel Minister H.D. Kumaraswamy said on Wednesday, without sharing further details. Rising imports are a key issue for steelmakers even as demand for the metal continues to surge, Kumaraswamy told reporters at an industry event. India, the world's second biggest crude steel producer, was a net importer of steel through the fiscal year ending March 2024, and remained a net importer from April to July. China was the top steel exporter to India from April to July, followed by Japan and South Korea. Higher imports have hit local steel prices, which have fallen to their lowest in more than three years, data from commodities consultancy BigMint showed. Earlier in the month, Steel Minister Kumaraswamy had said his ministry will try to convince the finance ministry to raise tariffs on steel imports, in a bid to protect domestic mills from a rise in cheaper imports from countries like China. In August, India initiated an anti-dumping investigation on certain steel products imported from Vietnam, in response to the urging of the country's leading steelmakers, such as JSW Steel (JSTL.NS) , opens new tab and ArcelorMittal Nippon Steel. Sign up here. https://www.reuters.com/world/india/india-talks-tackle-rising-steel-imports-steel-minister-says-2024-09-18/

2024-09-18 05:41

Sept 17 (Reuters) - Boeing (BA.N) , opens new tab and its largest union will restart contract talks on Wednesday in the presence of federal mediators, after failing to agree on key issues such as wages and pensions, the International Association of Machinists and Aerospace Workers said. The union, whose members went on strike last Friday, has been pushing for a 40% raise over four years in its first full contract negotiations with Boeing in 16 years, well above the planemaker's offer of 25%, which was resoundingly rejected. A prolonged strike could cost Boeing several billion dollars, further straining the planemaker's finances and threatening a downgrade of its credit rating, analysts said. "After a full day of mediation, we are frustrated, the company was not prepared and was unwilling to address the issues you've made clear are essential for ending this strike: Wages and Pension." the union representing more than 30,000 Boeing factory workers said , opens new tab on X following Tuesday's meeting. "The company doesn't seem to be taking mediation seriously. With a 96% strike vote, we thought Boeing would finally understand that IAM 751 Machinists are demanding more. We are fighting for what is right and just - for what we have earned over the past 16 years," it added. The strike, which enters its sixth day on Wednesday, is Boeing's first since 2008 and is the latest event in a tumultuous year for the planemaker that began with a January incident when a door panel detached from a new 737 MAX jet mid-air. Boeing and the U.S. Federal Mediation & Conciliation Service did not immediately respond to emails seeking comment outside normal business hours. The strike has halted production of Boeing's best-selling 737 MAX jets, along with its 777 and 767 widebody aircraft, delaying deliveries to airlines. Boeing said on Monday it was freezing hiring and weighing temporary furloughs to cut costs as its balance sheet is already burdened with $60 billion of debt and a prolonged strike could damage it further. The company has also stopped placing most orders for parts for all Boeing jet programs except the 787 Dreamliner, in a move that will hurt its suppliers. Shares are down about 40% this year. Sign up here. https://www.reuters.com/business/aerospace-defense/boeing-union-negotiators-set-resume-talks-wednesday-2024-09-18/

2024-09-18 05:08

Fed funds futures show 61% chance of 50-bps rate cut US dollar/yen pair highly sensitive to rate decision S&P 500's recent rally leaves stocks vulnerable to smaller cut Fed policy statement, projections due at 2 p.m. EDT (1800 GMT) NEW YORK, Sept 18 (Reuters) - Traders in global financial markets are facing extraordinary uncertainty as they await the U.S. Federal Reserve's expected rate cut on Wednesday, setting up markets for a burst of volatility. Major brokerages expect the Fed to lower interest rates by 25 basis points at the end of its two-day monetary policy meeting, even as financial markets price in a good chance of policymakers starting the easing cycle with a 50-bps reduction. Fed funds futures , which reflect the market's expectations for the future of monetary policy, have rallied to push the chance of a 50-basis-point rate cut to 61%, against 30% a week ago. The odds narrowed sharply after media reports revived the prospect of a more aggressive easing. These last-minute moves have left Fed funds futures projecting a record lack of clarity about a Federal Open Market Committee decision, according to a BofA Global Research report. "It's very rare that you have the market divided on a Fed action 24 hours before the event," George Bory, chief investment strategist for fixed income at Allspring, said. "Usually, at this point in time, the Fed has communicated, or has led the market to expect, a very specific action," Bory said, adding that given the decision is highly uncertain, positioning is unlikely to be deep. While Fed decisions often move markets, the relatively even divide between traders expecting 25 bps versus 50 bps makes it likely that no matter what the Fed delivers it is going to take many traders by surprise. The Fed move is likely to be the largest surprise, relative to market pricing two days ahead of a decision, in over 15 years, according to a Deutsche Bank analysis. "No one's quite sure ... people have landed on different estimates, guesstimates if you will, and right about half of those people are going to be wrong," said Matt Weller, head of market research at StoneX. "So they're going to have to adjust their positions ... One way or another, we could see pretty big moves in the market," Weller said. RIPPLE EFFECT Asset classes from stocks, currencies and fixed income could all log swings in the immediate aftermath of the decision, investors said. Stock options are pricing an about 1.1% swing, in either direction, for the S&P 500 (.SPX) , opens new tab on Wednesday, according to options analytics service ORATS. The recent rally in U.S. stocks — the S&P 500 has advanced for seven straight sessions, rising 4.2% — leaves stocks ill placed to deal with disappointment in the case of a smaller cut. The S&P 500 rose 0.03% on Tuesday, to finish just shy of the record closing high from July. "With U.S. equities near all-time highs and likely already reflecting a deep Fed easing cycle, the risk-reward skew for much further upside looks poor," said Tara Hariharan, managing director at global macro hedge fund NWI Management. Traders, who currently expect about 120 bps worth of cuts by year-end may also have to recalibrate their thinking if the Fed decision and Fed Chair Jerome Powell's accompanying commentary shakes their confidence in aggressive rate cuts. "The market will have to unwind some of this pricing given the U.S. economy continues to be resilient," she said, adding that she expects the front end of the yield curve to steepen. The Fed decision has the potential to roil foreign exchange markets as well with the dollar/yen pair seen as one of the most sensitive to the rate decision. The dollar rose nearly 1% against the yen to 141.95 on Tuesday. While a 25 bps rate cut would likely lead to a knee-jerk reaction higher for the U.S. dollar, potentially taking USD/JPY back above the key 142.00 level, a 50-bps rate cut could take the pair back toward the psychologically significant 140 level, StoneX's Weller said. Glen Capelo, managing director of fixed income at Mischler Financial Group, expects heightened interest rate volatility following the Fed’s decision due to the market overextending itself. Capelo said a 25-basis-point rate cut will most likely lead to a sell-off in Treasuries, although much will also depend on the Fed’s press conference. Michael Rosen, managing partner and chief investment officer of Angeles Investments, sees the bond market's read on the pace of monetary policy as too aggressive. "The market is pricing in 250 bps of cuts over the next year, a magnitude that only makes sense in the face of a recession. While a recession in the next 12 months is possible, it is not likely, and short-term yields will fall less than the market expects, while long-term rates may even rise from here," Rosen said. Sign up here. https://www.reuters.com/markets/rates-bonds/traders-brace-least-predictable-fed-meeting-years-2024-09-18/

2024-09-18 04:34

A look at the day ahead in European and global markets from Kevin Buckland With just hours until one of the most highly anticipated central bank decisions in recent memory, traders are still agonising over the odds of a super-sized Federal Reserve rate cut. An unexpected rise in U.S. retail sales on Tuesday initially knocked back bets for a 50-basis-point reduction to kick off the U.S. easing cycle, but it didn't last long. Futures-implied probabilities oscillated early in the Asian session, before steadying at about 65%. How markets are positioning in the final countdown to the Fed announcement, due at 1800 GMT on Wednesday, varies by asset class. The dollar was ceding ground, particularly against the yen. But U.S. short-term Treasury yields were ticking higher. Equities overall were weak - except in Japan, where the Nikkei rebounded from Tuesday's plunge as it continued to show a day-late reaction to swings in the yen. Early indications from European stock futures were for small losses. Expectations for the Fed's total easing this year have come down a bit but still lean towards a pair of 50 bps cuts and a single 25 bps reduction over the remaining three policy meetings of 2024 - a very dovish proposition considering the economy is flashing few signs of distress. The all-important U.S. consumer in particular seems to be in very robust health, with recent figures showing household net worth at a record high and debt at a 23-year low. From that perspective, a less market-friendly quarter point cut could be seen as more appropriate. The euro zone data docket is fairly light in the lead-up to the Fed decision, with region-wide inflation data for August the main event. British consumer and producer price indexes could have more of an impact. Lest we forget, the Bank of England has its own policy announcement to make on Thursday. Key developments that could influence markets on Wednesday: -UK CPI, PPI (both August) -Euro zone HICP (August) -Sweden unemployment rate (August) Sign up here. https://www.reuters.com/markets/europe/global-markets-view-europe-2024-09-18/

2024-09-18 00:54

MELBOURNE, Sept 18 (Reuters) - Australia's BlueScope Steel (BSL.AX) , opens new tab has signed a preliminary agreement with Israel-based Helios Project to trial its green iron, which is produced with clean energy rather than coal, from 2026, the companies said on Wednesday. Helios has developed a way to produce iron and other metals using sodium as a reducing agent. It requires less energy to produce than conventional methods and produces no direct carbon emissions. Only oxygen is emitted from the process, it said. “Decarbonizing the steel industry is an incredible challenge and we are thrilled to collaborate with companies like Helios that could support us on our journey,” said Andrew Garey, chief executive of BlueScope’s venture fund, BlueScopeX. The technology can be applied to green iron production from various iron ores, including lower grades such as those found in Australia, Helios said. Australia supplies around half of the world's seaborne iron ore. The steel industry accounts for some 10% of global emissions. Sign up here. https://www.reuters.com/markets/commodities/australias-bluescope-steel-signs-green-iron-agreement-with-helios-2024-09-18/