Euro Holds Steady Above $1.11 as ECB Eyes Rate Cuts

The euro remains above $1.11 as markets fully price in a European Central Bank rate cut following signs of easing inflation across major European economies, including Germany's lowest rate since 2021. US yields bounced slightly after Federal Reserve Chair Powell expressed hesitancy in cutting rates, though upcoming data could shift market expectations. In Asia, holiday trading was subdued, with factory activity weakening and iron ore prices falling on soft Chinese demand.

Equities

The FTSE 100 fell 1% on Monday, marking slight losses for the month but recording its fifth consecutive quarter of gains. Midcaps on the FTSE 250 slipped 0.9%, with Aston Martin tumbling 24.5% after issuing a profit warning and cutting its production forecast, leading to a drop in the broader automobile subindex by 6.7%. Rightmove dropped 7.7% after REA Group ended its $8.29 billion takeover attempt following repeated rejections.

Meanwhile, the precious metals sector declined, with gold miners falling 2.9% as gold prices slipped. On a more positive note, the construction and materials sector was the best-performing group for the quarter.

In the US, the S&P 500 gained 0.4% to reach a record high close, rebounding after a brief decline following Federal Reserve Chair Jerome Powell’s remarks about future rate cuts. The Dow Jones added 0.04%, while the Nasdaq rose 0.4%. The S&P 500 recorded its best September since 2013, rising 2% for the month and 5.5% for the quarter.

CVS Health climbed 2.4% after reports that Glenview Capital Management would meet with executives to discuss potential improvements in the company’s operations. The S&P 500 also saw 30 new 52-week highs.

In total, US stock indexes posted gains for both the month and the quarter, with the Dow adding 8.2% for the quarter and the Nasdaq rising 2.6%.

Forex & Commodities

The US dollar rose on Monday after Federal Reserve Chair Jerome Powell struck a more hawkish tone, reducing market expectations of another 50-basis-point rate cut at the Fed’s next meeting. The dollar index was up 0.42%, with the euro down 0.34% to $1.1125 and the dollar rising 1.17% against the yen to 143.85. In contrast, the Australian and New Zealand dollars edged higher after China's central bank cut rates and injected liquidity, with the Aussie last up 0.09% at $0.6908.

Gold prices hovered below record levels, reaching $2,641.33 per ounce, as Powell's comments on more measured rate cuts tempered market expectations of aggressive easing. US gold futures were slightly higher at $2,663.10. Despite a rally earlier in the month, factors such as easing geopolitical tensions and reduced central bank demand may limit gold’s further gains.

Oil prices were steady but recorded a 17% decline for the third quarter, marking their biggest quarterly loss in a year. Brent crude settled at $71.77 a barrel for November delivery, while West Texas Intermediate (WTI) ended at $68.17. Concerns about weak Chinese demand and increasing global supply, alongside Saudi Arabia's planned output increase in December, have weighed on oil prices for the month.