U.S. indices fell sharply on Wednesday following the Fed first rate cut since 2008. All sectors ended in the red with Semiconductors & Semiconductor Equipment (-3.2%), Household & Personal Products (-2.24%), Food, Beverage & Tobacco (-2.06%) sectors declining the most. The Fed decided to cut rates by 0.25% citing that although there was broad based growth across sectors and good employment numbers, uncertainty about the outlook and sub 2% inflation growth warranted the decision. Fed Chairman Jerome Powell said the rate cut is not necessarily the start of an easing cycle. On the economic data front, ADP Employment Change was 156K in July (estimated +150K, +112K in June). The Chicago PMI dropped to 44.4 in July (estimated 51.0) from 49.7 in June. The S&P 500 (2,980.38) breaks below its 20d moving average (2,980.38 – positive slope) but stays above its 50d moving average (2,924.26 – positive slope).
European markets are expected to start on a negative note.
Foreign Exchange
The US dollar was bullish against all its major pairs on Wednesday with the exception of the GBP. On the economic data front, ADP Employment Change was 156K in July (estimated 150K) vs. 112K in the prior month. The Chicago PMI reached 44.4 in July (estimated 51) vs. 49.7 in the prior month. The Fed decided to cut rates by 0.25% citing that although there was broad based growth across sectors and good employment numbers, uncertainty about the outlook and sub 2% inflation growth warranted the decision.
The Euro was bearish against all of its major pairs with the exception of the JPY. EUR/USD broke below the 1.11 key threshold for the first time in more then 2 years. In Europe, euro zone GDP growth slowed to 0.2% in 2Q, as anticipated, vs +0.4% in 1Q. Separately, euro-zone CPI index growth was 1.1% in July in firs reading, as anticipated, vs +1.3% in June. Germany retail sales jumped by 3.5% in June (+0.5% expected) after a 1.7% slid a month earlier (revised from -0.6%). According to Nationwide, UK house prices increased by 0.3% in July (+0.2% anticipated) after a 0.1% rise in June.
The Australian dollar was bullish against all of its major pairs with the exception of the GBP.
Commodities
After the close of Wall Street, WTI Crude Future (SEP 19) was about flat to $57.95. The contract was above its 20D MA (@ $57.57) and above its 50D MA (@ $56.73). The US Department of Energy reported that, for the week ended 26 July, crude oil inventories fell 8496k barrels compared to the previous week.
Gold was down $19 to $1412. The precious metal was below its 20D MA (@ $1417) and above its 50D MA (@ $1376).
Copper Future (SEP 19) on Comex was down 1.7c to 266.2c/lb. The contract was below its 20D MA (@ 269.37c) and below its 50D MA (@ 268.42c). In Europe, the London Metal Exchange reported its copper inventories decreased 2000 tons to 290500 tons.