Please note that Morning Minutes will not be issued tomorrow. It should return on Monday, December 17th.
Yesterday afternoon, the Fed sparked a major rally in equity markets after FOMC members walked back their September hawkishness and forecast potentially three interest rate cuts in 2024, up from the 2 cuts they anticipated in September and returned to their June forecast. In the press conference Fed Chair Powell indicated that the US central bank is either done or nearly done raising interest rates and even though members aren’t ready to close the door completely on raising rates again if needed, thinking may start to turn toward when to start cutting rates into 2024. Powell also suggested that a soft landing scenario appears to still be playing out.
US indices, which had been trading flat ahead of the meeting rallied into the close, finishing with gains of about 1.4%. This morning US index futures are up another 0.2%-0.4%. In Europe this morning, the Dax is up 0.6% and the FTSE is up 2.0%.
Central banks across the pond also are finishing the year on hold with the Swiss National Bank, the Bank of England and the European Central bank all announcing no change to their benchmark rates as was widely expected. While the Bank of England indicated it expects interest rates to remain high for an extended period of time, this neutral to dovish tone has sent bond prices climbing and treasury yields falling. The US 10-year treasury note yield has dropped back under 4.00% while the German 10-year Bund rate has dropped to just above 2.0%.
The US Dollar has gone into full retreat this morning, igniting rallies in currency and commodity markets. Precious metals are soaring with Gold up 2.6% and Silver up 6.0%. The Euro, Loonie, Pound and Aussie are all up 0.5%-0.8%. In commodity action, Copper is up 2.8%, Crude Oil is up 1.9% and Natural Gas is up 0.6%.
US retail sales (0.3% vs street -0.1%) came in better than expected this morning, as did weekly US initial jobless claims (202K vs street 220K).