From Marc to Market:
Overview: The US agreed to not to block subsidiaries of Chinese companies that were sanctioned and not to enforce the port fee on Chinese ships that had ostensibly triggered the tightening of China's rare earth/magnet export restrictions. China agreed to suspend those for a year and dropped its levy on US made/operated ships port calls. Beijing will also buy US soy, and some reports say energy as well. Apparently, Nvidia's Blackwell chip was not a subject of talks. Even with America's technological prowess, the education and material infrastructure to build rare earth processing capability and magnet will take more than a year. The deal will likely be widely criticized by the hawks that seem to dominate the US foreign policy establishment. Meanwhile, the hawkish cut by the Federal Reserve yesterday has seen the market narrow the odds of a December cut (to ~73% now from a little more than 90% yesterday) has helped lift greenback and it is largely consolidating today. The chief exception is the Japanese yen, which has been sold to a new eight-month low following the Bank of Japan's decision to stand pat and leave its economic forecasts from July largely intact. The dollar reached nearly JPY154.
The jump in US yields following the FOMC decision helped boost benchmark 10-year rates today. Benchmark yields are up 2-4 bp in Europe. The 10-year Treasury yield is slightly softer at 4.06%. Equities are mostly lower today. In the Asia Pacific region, among the large bourses, only Japan and South Korea, which secured a trade deal with the US, which include nuclear-fueled submarines, rose. Europe's Stoxx 600 is lower for the third session, matching its longest slump in a couple of months. US index futures are softer. Gold is firm, but mostly within yesterday's range. It is probing $4000 in the European morning. December WTI is also trading quietly in a narrow range around $60.
USD: As widely expected, (96% of 81 economists in Bloomberg's survey and 98% discounted in the futures market), the Federal Reserve delivered the second quarter-point rate cut of the year. It also signaled it would stop the unwinding of its balance sheet (QT) at the end of November. The maturing mortgage-backed securities will be replaced with T-bills. There were two dissents....
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