The US Federal Reserve delivered its second rate cut this year, cutting rates by 25 bps overnight and bringing the target range down to 3.75-4%, according to a statement. The rate is now at a three-year low as policymakers navigate weak labor data, political pressures, and a government shutdown that has limited access to key economic indicators.

Concerns about job numbers largely drove the decision. Downside risks to US employment rose in recent months, the statement said, pointing to a slowdown in job gains. Meanwhile, the economy is growing at a moderate pace and inflation remains “somewhat elevated,” as per the Fed’s assessment.

Not everyone’s on board: Two policymakers voted against the decision, with one wanting a bigger 50 bps cut — in line with the Trump administration pressures — and the other supporting no cuts.

The decision comes as the central bank operates “in a fog,” with no access to fresh labor data due to the US government shutdown, Fed watchers told Reuters . The latest inflation data came in delayed last week, and the government has suspended collecting new data since the shutdown began earlier in October.

Don’t count on a cut in December: “A further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it,” Bloomberg quotes Powell as saying after the decision. Markets reacted to Powell tempering expectations, with the S&P 500 closed flat, paring the day’s gains. The prospect of a rate cut in December is now at two-to-one odds.

ALSO- The Fed said it would stop shrinking its portfolio of assets starting December. The process that started in 2022 —called quantitative easing — shed some USD 2.3 tn of treasuries and mortgage-backed securities. The Fed’s balance sheet is now below USD 6.6 tn, smallest since 2020.

MARKETS THIS MORNING-

Asian markets are little changed this morning, as all eyes are on the Trump-Xi summit hoping it will yield a breakthrough in trade talks. Wall Street futures are indicating a higher opening after a flurry of tech earnings.

TASI

11,752

+0.7% (YTD: -2.4%)

MSCI Tadawul 30

1,533

+0.9% (YTD: +1.6%)

NomuC

25,009

+0.3% (YTD: -20.6%)

USD : SAR (SAMA)

USD 3.75 Sell

USD 3.75 Buy

Interest rates

4.5% repo

4.0% reverse repo

EGX30

38,230

-0.2% (YTD: +28.5%)

ADX

10,162

0.0% (YTD: +7.9%)

DFM

6,089

+0.3% (YTD: +17.8%)

S&P 500

6,891

0.0% (YTD: +17.2%

FTSE 100

9,756

+0.6% (YTD: +19.4%)

Euro Stoxx 50

5,706

0.0% (YTD: +16.5%)

Brent crude

USD 64.92

+0.8%

Natural gas (Nymex)

USD 3.38

+0.9%

Gold

USD 3,957

-1.1%

BTC

USD 110,988

-1.7% (YTD: +18.7%)

Sukuk/bond market index

919.94

+0.1% (YTD: +2.0%)

S&P MENA Bond & Sukuk

152.73

+0.2% (YTD: +9.1%)

VIX (Volatility Index)

16.92

+3.1% (YTD: -1.8%)

THE CLOSING BELL: TADAWUL-

The TASI rose 0.7% yesterday on turnover of SAR 5.2 bn. The index is down 2.4% YTD.

In the green: Ades (+10.0%), Alarabia (+9.9%) and Arabian Drilling (+8.6%).

In the red: Solutions (-4.3%), Leejam Sports (-4.1%) and Alyamamah Steel (-3.7%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.3% yesterday on turnover of SAR 30.2 mn. The index is down 20.6% YTD.

In the green: Sign World (+7.8%), Sure (+5.8%) and Dar Almarkabah (+5.4%).

In the red: Naas Petrol (-8.4%), Bena (-7.9%) and Aictec (-5.6%).

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