3rd Quarter GDP Is Hot, FOMC Expected To Cut Rates, The Phase 1 Trade Deal Becomes Less Certain

Global markets tread water while traders wait on the FOMC policy statement and some key data later this week.
Thomas Hughes
Federal Reserve

U.S. Futures Are Flat In Early Wednesday Trading

The U.S. futures are flat in early Wednesday trading as traders wait on the FOMC policy statement. The statement is due out this afternoon at 2:15 PM and is widely expected to bring a 25 bps rate cut. What it is not expected to do is bring certainty over the path of future rate policy and that uncertainty was heightened by today’s economic data. The ADP Employment Report came in at 125,000 and below expectations while the 1st estimate for the 3rd quarter GDP was hot. The labor data confirms slowing in the economy while the GDP shows economic activity remains healthy despite the slowing.

The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all hugging the flat-line in early premarket trading. In stock news, shares of GE are up more than 7.5% after it reported earnings. The troubled international mega-conglomerate reported better than expected top and bottom-line results. Apple, Facebook, and Starbucks are all slated to report after the close of today’s session.

In trade news, new concerns over the Phase 1 trade deal have surfaced. Insiders have leaked that the U.S. demand for China to purchase $50 billion in agricultural products has become a major sticking point. If not resolved soon it is unlikely a deal will be ready for signing at the Chile APEC meetings next month.

European Markets Are Mixed, Johnson Scores Win In Parliament

European markets are mixed at midday on Wednesday. Traders are waiting for the FOMC meeting later today and digesting the results of last night’s victory for UK PM Boris Johnson. Johnson re-introduced his bill to force a general election was passed. With UK polls showing conservatives in the lead this could result in a clear majority in Parliament. If so, Johnson’s Brexit deal is likely to be accepted allowing a smooth Brexit come January 31, 2020.

The DAX is the only index in the red, it is down about -0.25%. The FTSE 100 is up about 0.10% while the French CAC leads at 0.20%. In stock news, autos are leading with a gain of 1.1%. The move is driven by word Fiat-Chrysler and Peugeot are in talks to merge. Shares of tire maker Pirelli are down -5.0% after it lowered full-year guidance.

Asia Moves Lower, FOMC In Focus

Asian indices moved broadly lower in overnight trading as traders turn their focus to the FOMC meeting. The Australian ASX led the decline with a loss of -0.83% after CPI came in weaker than expected. Most others in the region fell about -0.50% despite a surge in Japanese retail spending. Retail spending in Japan jumped more than 9% in September but the move is largely driven by a new sales tax that took effect October 1.

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