Market Update

The latest Federal Reserve minutes revealed a tone of cautious optimism. The central bank expressed confidence in the economy’s resilience, with no signs of an impending downturn. Unemployment expectations remained stable, and most members of the Federal Open Market Committee (FOMC) believe inflation is gradually moving toward the 2% target, supported by slower GDP growth and lower commodity prices. While payroll growth has moderated and unemployment ticked up slightly, labor market conditions are still generally stable. Although there were differing opinions on the extent of future rate cuts, a majority of the committee supported a 50-basis-point reduction in the federal funds rate, bringing it to a range of 4.75% to 5%. The Fed emphasized a gradual approach to easing, ensuring flexibility based on incoming data rather than committing to a fixed path.
On Thursday, US inflation data dominated the headlines, delivering mixed results. September’s headline inflation rose by 0.2%, while core inflation (excluding food and energy) increased by 0.3%, slightly above expectations. Shelter costs contributed 0.2% to the rise, and food prices climbed 0.4%, driving much of the monthly increase. With inflation still a key focus for markets, investors adjusted their expectations for future rate cuts by the Federal Reserve.
NVIDIA’s strong stock performance this week helped lift markets, offsetting a decline in Alphabet Inc. (Google’s parent company) following reports that the US Department of Justice (DOJ) may seek to break it up for allegedly causing “pernicious harms” to consumers. This follows an August ruling in which Google was found guilty of suppressing competition in online search. Google has called these potential actions “radical” and defends its dominance with products like Chrome and Android, which control nearly 90% of online searches. If the DOJ moves forward, breaking Google’s hold could promote competition and set a precedent for regulating other tech giants like Meta, Amazon, and Apple.
Friday’s focus shifted to major US banks, with JPMorgan and Wells Fargo reporting smaller-than-expected profit declines for the third quarter. JPMorgan also posted a modest revenue increase, driving shares of both banks higher.
Across the Atlantic, the UK’s monthly GDP estimate for August showed 0.2% growth, in line with expectations, after flat growth in July. However, UK stocks remained subdued following a statement from the Office for National Statistics, which noted that while all major sectors saw growth in August, the broader trend indicates slowing momentum compared to the first half of the year.
Chinese stocks fell during a holiday-shortened week as enthusiasm for Beijing’s stimulus measures waned. On Thursday, there was a positive reaction to the central bank’s announcement of a CNY 500 billion facility aimed at stimulating capital markets. However, over the weekend, attention shifted to China’s Finance Minister, who outlined plans to expand support for the struggling real estate sector but did not provide specific figures for monetary stimulus. This left investors speculating about the size of the anticipated financial support.
Adding to investor concerns, China’s inflation data released on Sunday showed consumer prices rising by just 0.4% in September, the slowest growth in three months. Meanwhile, producer prices dropped by 2.8%, marking the steepest decline in six months. Both figures missed expectations, amplifying fears of deflation.