Fed Rate Cut Bets Grow as US Job Market Weakens

Global markets paused their selloff on Thursday as investors await US jobs data for clearer signals on Federal Reserve rate cuts. US labour data showed a softening jobs market, pushing traders to increase bets on a potential 50 basis point rate cut by the Fed. European shares are set for a subdued open, while the yen strengthened amid hawkish comments from the Bank of Japan.

Equities

The FTSE 100 dropped 0.4% on Wednesday, reaching a three-week low, led by a sharp decline in personal goods and homebuilder stocks. Homebuilders, including Barratt Developments, were down 2.9%, with Barratt itself slipping 4.6% after stating it does not expect profit growth until 2026. The personal goods sector fell to its lowest level since 2010, with Burberry and Watches of Switzerland declining by 4.5% and 3.4%, respectively. On a positive note, Rolls-Royce continued to rise, adding 1.8%, while the automobiles and parts sector climbed 2.2%.

In the US, the S&P 500 and Nasdaq both closed slightly lower, with the S&P 500 dropping 0.16% and the Nasdaq down 0.3%. Nvidia shares fell 1.7% amid reports of a Department of Justice subpoena, though the company later denied these claims. Other technology giants also saw declines, including Apple, which was down 0.9%, Microsoft by 0.1%, Alphabet by 0.5%, and Amazon, which fell 1.7%. Tesla bucked the trend, rising 4.2%. Advanced Micro Devices saw a gain of nearly 3% after announcing it had hired a former Nvidia executive to lead its global AI markets division.

On the Dow Jones, which managed to inch 0.09% higher, Dollar Tree plunged 22% after it reduced its annual sales and profit forecasts, weighing on consumer staples. Zscaler dropped nearly 19% after forecasting lower-than-expected revenue and profits for fiscal 2025.

Forex & Commodities

The US dollar has weakened by 5% from its 2024 highs, nearing its lowest level in a year, as markets anticipate Federal Reserve rate cuts. The Fed is expected to start reducing rates in its September 17-18 meeting, following signals from Chairman Jerome Powell. Investors have begun betting on larger rate cuts, with futures markets predicting around 100 basis points in cuts by the end of the year. Meanwhile, the British pound has held steady amid speculation over rate moves from the Bank of England.

Gold prices have risen by 0.1% to $2,494.24 per ounce, reversing earlier losses after US job openings fell to a three-and-a-half-year low, increasing expectations of a significant Fed rate cut. A weaker dollar and lower yields are providing support for the precious metal, which tends to perform well in a low-interest-rate environment.

In the oil market, Brent crude futures edged up 0.48% to $73.05 per barrel after OPEC+ hinted it may delay a planned output increase. US crude inventories also showed a larger-than-expected drop, helping to bolster prices. However, concerns over weak demand from China continue to weigh on the market. Analysts suggest that oil prices may remain volatile, influenced by both economic data and supply decisions from major producers.