How is the global picture panning out ahead of the Fed meet on September 18?
The view is very divided. Standard Chartered is not expecting a rate cut on September 18. Reports from Merrill Lynch and Citi, are expecting that there might be a cut at least 25 bps. And they are expecting 75-100 points through the year. The view is clearly divided.
A read of some reports reveals that the Dow Futures is discounting about 50 bps cut. So, it is not only the cut that we will be seeing on 18th September, but also, people will be looking at the quantum of rate cut. If it is 25 bps cut, there could be a knee-jerk reaction from the markets.
If you would see the history, on 29th September 1998, the Fed cut rates by 25 bps and the stock market was down by 3% the next day. The Fed again had to cut rates on 15th October 1998; the Fed cut rate by another 25 bps. Then markets sobered down.
This is what market is anticipating. Remember the data that came in yesterday - the pending home sales data. It has registered its biggest drop since 2001 and also the non-farm payroll, which has been the slowest in 4 years. All these numbers were anticipated by the market because of all the confusion that was going on. There were serious concerns on the home numbers, the non-farm payrolls.
The only fact that led the US markets to slip down was the only data on the Fed's Beige Book - there was no indication given on the possibility of a Fed rate cut.
This is the biggest thing that the people are looking at.
How is the global picture panning out ahead of the Fed meet on September 18?
