Macro update
Fed split puts spotlight on Powell:
Investors are preparing for one of the most divisive Federal Reserve (Fed) meetings in years, with deep internal disagreement over easing placing unusual importance on Powell’s guidance and the number of dissenting votes.
Markets heavily priced for a cut:
Futures now assign an 84% probability to a 25bp reduction, even as several officials push back against easing and analysts warn that the risk of no move remains underestimated.
Shutdown-driven data gaps complicate the call:
The 43-day government shutdown has delayed key labour metrics, leaving the Federal Open Market Committee (FOMC) without a fresh unemployment rate and increasing the significance of Tuesday’s JOLTS report.
Powell’s tone likely to steer markets:
With a cut largely assumed, equity reaction may be muted; instead, investors will focus on Powell’s messaging, his balance of inflation versus employment risks, and the degree of division within the committee.
Global backdrop stays cautious:
European and Asian markets began the week on a subdued note, with China’s stronger export data offering some support, while Japan’s Nikkei 225 eased as richly valued tech stocks came under pressure.
Central bank landscape in focus:
The SNB, BoC and RBA are expected to leave policy unchanged this week, while uncertainty around Powell’s potential successor adds another layer of risk to the outlook for longer-dated US yields.
FTSE 100 keels over
The FTSE 100 lost upside momentum on Friday of last week and dropped to a one-week low at 9,656.
Minor resistance may now be found around the 9,680 region and more significant resistance at the 9,744 early December peak.
A rise above the 9,744 high would likely engage the 9,788-to-9,792 resistance area. It comprises the late October-to-early November highs.
A slip through Monday’s 9,648 low would push the 7 November low at 9,638 to the fore, below which lies the 9,605 region where the 14 and 17 November lows were made.
Short-term outlook: bearish while below the 9,744 early December high
Medium-term outlook: neutral while above the 9,276 October low but below the 9,928 November peak
