- Global markets rallied broadly this morning after the U.S. Federal Reserve kept interest rates on hold yesterday and Fed chairman Jerome Powell made it clear he would pursue monetary policy, and fight inflation, independently of President Trump’s desires for lower interest rates. Investors in Europe and Asia were also cheered by news of an incoming trade deal between the U.S. and the U.K. and ongoing talks with China.
China’s CSI 300 was up 0.56% this morning on news of trade talks between Washington and Beijing happening this weekend. All major Asian indexes followed suit with the exception of India’s Nifty 50, which declined 0.34% this morning as the armed conflict between that country and Pakistan remains unresolved.
The White House is expected to announce a trade deal with the U.K. this morning at 10 a.m. Eastern, and the FTSE 100 rose 0.4% on the news.
Even Bitcoin is back: It was above $99,000.
The S&P 500 rose 0.43% yesterday but remains down 4.26% YTD. S&P futures were priced up by 0.83% this morning, premarket.
The party was somewhat spoiled by Alphabet selling off 7% on Wednesday after Apple executive Eddy Cue testified in federal court that he believed search volume at Google was down due to people switching to ChatGPT.
Analysts broadly welcome the Fed’s reassertion of its independence and signals from Trump that he is open to compromise on tariffs: “The anticipated deal [with the U.K.] is among 17 agreements the Trump administration has pursued with major trading partners as it looks to row back its broader tariff strategy. While the news is expected to lift market sentiment, investors will focus on how far the administration is willing to walk back tariff measures and whether it opens the flood gates for further deals with other countries,” George Vessey of Convera told clients in a note seen by Fortune.
One recurring theme is that despite all the gloomy prognostications of damage to the economy from Trump’s tariff plans, recessionary signals have yet to appear in the “hard” data. (“Hard” data is based on actual economics, as opposed to the “soft” data, which comes from surveys of people’s sentiment.)
“While the FOMC puts some weight on the survey data, it will need to see weakness in the hard data to cut in light of the surveys’ poor recent track record,” Goldman Sachs’ Jan Hatzius and his team told clients. “Our analysis suggests that tariffs will eventually weaken the economy enough for the Fed to cut. But it usually takes longer for the hard data to deteriorate during slowdowns.”
Blackrock’s Jean Boivin still sees a downturn ahead: “If the current elevated tariffs on U.S.-China trade stay in place, we think the ensuing supply chain disruptions will likely result in a supply-driven contraction in the U.S. this year. That’s very different from a typical recession caused by weakening demand. It’s more akin to what we saw in the pandemic: supply disruptions quickly leading to a contraction, but activity can also pick up again quickly if and when those disruptions dissipate,” he wrote in a note.
Who’s buying? It’s retail investors buying the dip again, according to Kamal Tamboli and his team at JPMorgan Chase. “Retail traders net bought +$7.6B of cash equities, +0.7z above the last 12M average,” he told clients in a research note.
Here is a snapshot of the action this morning prior to the opening bell in New York:
- The S&P 500 rose 0.43% yesterday but remains down 4.26% YTD.
- Bitcoin was above $99K
- Stoxx Europe 600 was up 0.6% before lunch.
- The U.K.’s FTSE 100 rose 0.4% in early trading.
- China’s CSI 300 was up 0.56% this morning.
- Asian indexes in Japan, South Korea and Hong Kong all closed up.