Last week, the US Federal Reserve met market expectations by cutting rates by 25bps. Whilst this is their third rate cut since July, Chairman Powell signaled a rate pause going forward, indicating it could take a “material change” in the outlook for the Fed to act again.
When Q3 earnings season begins this week in the US, a modest contraction in profit growth for the quarter is to be expected. The earnings season could also jumpstart more meaningful downgrades, as firms begin to provide clearer guidance of the coming year’s growth prospects.
Delaying Additional Tariffs Enough to Lift Short-Term Sentiment
By Jessica Tan
US-China reach a verbal agreement on the first phase of a deal during trade talks last week. While the ceasefire may not be a long-term solution, it may be good enough for markets in the short-term.
Unexpectedly weak ISM non-manufacturing and ISM manufacturing data makes a further Federal Reserve cut likely this year. However, despite increased downside risk, Citi’s base case remains for GDP growth to continue around 2% for the remainder of 2019 and into 2020.
The US Trade Representative (USTR) is expected to implement tariffs on US$7.5bn worth of EU products starting on October 18, following the World Trade Organization’s (WTO) ruling in favour of US.
Last week, the European Central Bank (ECB) delivered significant monetary expansion to stimulate the economy and meet its 2% inflation target. This week, all eyes will be on the Federal Reserve as they meet on 17-18 September.
