The Fed is expected to deliver its first rate cut in nine months tomorrow, with a 25 basis point reduction looking like the most likely scenario. A bigger 50 bps cut could be on the table as well amid signs that US job growth is slowing, Bloomberg reports. Futures also price further reductions in October and December, and deeper into 2026, as softening consumption and weaker job growth offset concerns about tariff-driven inflation.

Treasuries have dipped to their lowest in months ahead of the meeting, CNBC reports, with the 10-year yield at 4.06%, the 2-year at 3.55%, and the 30-year at 4.68%.

Everyone’s focus will now shift on the pace of cuts moving forward. Retail sales data due today and jobless claims on Thursday will help shape expectations for the pace of easing, especially as inflation still remains above the Fed’s target. The Fed’s dovish tone, coupled with US President Donald Trump’s pressure on the Fed to cut rates and the last-minute appointment of Trump adviser Stephen Miran as Fed governor in time for this week’s meeting, all support the case for a steady string of cuts in the near term.

Data-driven, but largely political: Bloomberg economists frame the move as primarily political, despite the hard data making a case for it in line with the Fed’s mandate, saying, “the markets expect a rate cut, the White House wants it — and we think Powell is doing what he sees as needed to fend off further threats to the Fed’s independence.”

Strategists warn the cut may cool risk appetite. The S&P 500 is up 12% this year on Big Tech and AI momentum, but Morgan Stanley and JPMorgan see scope for profit-taking, Bloomberg reports separately. “Near-term risk is centered on the tension between lagging, weak labor data, and the Fed’s response that may not meet the markets’ ‘need for speed’,” said Morgan Stanley’s Michael Wilson.

Others remain upbeat: Deutsche Bank and Barclays have raised their year-end S&P targets on the back of tech momentum and strong corporate earnings, while Oppenheimer’s John Stoltzfus expects any dip after the cut to be shallow if US fundamentals hold.

The Fed decision also kicks off a 36-hour run of central bank moves covering two-fifths of global GDP:

  • The Bank of Canada is expected to cut its policy rate by 25 bps to 2.5% after economic contraction in 2Q and weak jobs figures;
  • The Bank of England will likely hold steady at 4% following its August cut, though officials are expected to slow quantitative tightening;
  • Norway faces a close call between holding or cutting again, with inflation staying above 3% and making the case for postponing a cut;
  • The Bank of Japan is set to leave rates unchanged but looks likely to maintain a tightening bias as inflation remains elevated.

Elsewhere, others are holding steady. Brazil is expected to keep interest rates at 15%, while South Africa looks likely to keep its benchmark rate at 7% as inflation ticks higher and forecasts put Bank Indonesia as holding steady at 5% amid political uncertainty. Israel’s inflation may fall below target for the first time in more than a year, potentially opening the door to cuts later this month.

MARKETS THIS MORNING-

Asian markets are firmly in the green this morning amid signs that US-China talks in Spain are going well, with Japan’s Nikkei and Topix both notching fresh highs. Wall Street futures are mostly flat on news of Miran’s appointment as Fed governor, following a day in the green for S&P 500 and Nasdaq.

EGX30

35,166

+0.2% (YTD: +18.2%)

USD (CBE)

Buy 48.11

Sell 48.25

USD (CIB)

Buy 48.12

Sell 48.22

Interest rates (CBE)

22.00% deposit

23.00% lending

Tadawul

10,427

-0.1% (YTD: -13.4%)

ADX

10,036

+0.2% (YTD: +6.6%)

DFM

6,041

+0.2% (YTD: +17.1%)

S&P 500

6,615

+0.5% (YTD: +12.5%)

FTSE 100

9,277

-0.1% (YTD: +13.5%)

Euro Stoxx 50

5,440

+0.9% (YTD: +11.1%)

Brent crude

USD 67.52

+0.1%

Natural gas (Nymex)

USD 3.01

-1.0%

Gold

USD 3,717

-0.1%

BTC

USD 115,438

+0.1% (YTD: +23.4%)

S&P Egypt Sovereign Bond Index

919.77

+0.1% (YTD: +18.3%)

S&P MENA Bond & Sukuk

150.36

0.0% (YTD: +7.4)

VIX (Volatility Index)

15.69

+6.3% (YTD: -9.6%)

THE CLOSING BELL-

The EGX30 rose 0.2% at yesterday’s close on turnover of EGP 4.9 bn (10% above the 90-day average). Local investors were the sole net sellers. The index is up 18.2% YTD.

In the green: Credit Agricole (+3.0%), Arabian Cement (+3.0%), and Telecom Egypt (+1.6%).

In the red: GB Corp (-5.6%), Raya Holding (-3.0%), and E-finance (-2.5%).

CORPORATE ACTION-

Bonyan wraps up EGP 250 mn capital increase: Real estate operator Bonyan has completed a capital increase of EGP 250 mn, bringing its paid-in capital to EGP 1.7 bn, according to a statement(pdf). The increase represents the primary portion of Bonyan’s IPO and will be used to support its long-term growth strategy and optimize its capital structure.

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