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.

TASI

10,427

-0.1% (YTD: -13.4%)

MSCI Tadawul 30

1,358

-0.3% (YTD: -10.0%)

NomuC

24,951

+0.2% (YTD: -20.7%)

USD : SAR (SAMA)

USD 3.75 Sell

USD 3.75 Buy

Interest rates

5.0% repo

4.5% reverse repo

EGX30

35,166

+0.2% (YTD: +18.2%)

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%)

Sukuk/bond market index

917.41

0.0% (YTD: +1.7%)

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: TADAWUL-

The TASI fell 0.1% yesterday on turnover of SAR 6.6 bn. The index is down 13.4% YTD.

In the green: Cenomi Retail (+10.0%), Saudi Ceramics (+6.7%) and Bahri (+6.4%).

In the red: Alakaria (-2.5%), MIS (-2.2%) and Alrajhi (-2.1%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.2% yesterday on turnover of SAR 26.9 mn. The index is down 20.7% YTD.

In the green: Naf (+20.1%), Future Care (+15.6%) and United Mining (+7.5%).

In the red: Wajd Life (-8.1%), AME (-6.5%) and Apico (-5.8%).

CORPORATE ACTIONS-

Al RajhiBank’s board approved the distribution of SAR 3 bn in dividends for 1H 2025 at SAR 0.75 apiece, it said in a Tadawul disclosure yesterday. The distribution date is slated for Thursday, 2 October.

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