The “time has come” for rate cuts in the US: Federal Reserve Chair Jerome Powell indicated his readiness to start cutting interest rates in September during his address at the Fed’s annual retreat in Jackson Hole on Friday — read the speech or (watch, runtime: 16:06). Powell emphasized that “the time has come for policy to adjust,” citing cooling inflation and slowing job growth.

Behind Powell’s comments was a more optimistic inflationary forecast: US inflation fellunder the 3% mark in July for the first time since March 2021, strengthening the case for the Fed to cut interest rates. The figure undercut economists’ expectations that inflation would hold steady at 3% and helped to support Powell’s argument at Jackson Hole that “inflation is on a sustainable path back to 2%.”

Rising concerns about the labor market are also pushing the Fed to take actions: “The upside risks to inflation have diminished, and the downside risks to employment have increased,” Powell explained. With the US unemployment rate rising to a near three-year high of 4.3% in July, which in turn raised recession fears and triggered a market meltdown at the start of August, the Fed is now weighing how confident it is the economy’s inflationary trajectory with a desire not to see “further cooling in labor market conditions.”

The odds: Markets now see a 35% chance of a larger-than-usual 50 bps cut in September, up from 28% before Powell’s remarks, according to the Financial Times.

Market reax: US Treasuries rallied and the USD fell as investors priced in larger rate cuts this year following Powell’s comments on Friday before the markets closed for the weekend. The two-year Treasury yield dropped 0.1 percentage points to 3.9%, while the S&P 500 closed up 1.2% on Friday, approaching July's all-time high.

What’s next? The Fed will meet on 17-18 September to review rates, six weeks before the US presidential election. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” Powell said.

TASI

12,194

+0.1% (YTD: +1.9%)

MSCI Tadawul 30

1,524

+0.1% (YTD: -1.7%)

NomuC

26,578

+2.4% (YTD: +8.4%)

USD : SAR (SAMA)

USD 3.75 Sell

USD 3.75 Buy

Interest rates

6.5% repo

5.5% reverse repo

EGX30

30,141

+0.8% (YTD: +21.1%)

ADX

9,374

0.0% (YTD: -2.1%)

DFM

4,293

-0.4% (YTD: +5.7%)

S&P 500

5,635

+1.2% (YTD: +18.1%)

FTSE 100

8,328

+0.5% (YTD: +7.7%)

Euro Stoxx 50

4,909

+0.5% (YTD: +8.6%)

Brent crude

USD 79.02

+2.3%

Natural gas (Nymex)

USD 2.02

-1.5%

Gold

USD 2,546

+1.2%

BTC

USD 64,050.10

+0.7% (YTD: +51.9%)

THE CLOSING BELL: TADAWUL-

The TASI rose 0.1% on Thursday on turnover of SAR 7.6 bn. The index is up 1.9% YTD.

In the green: Herfy Foods (+9.9%), Chubb (+9.0%) and Al Rajhi Takaful (+6.6%).

In the red: Buruj (-2.8%), Raydan (-2.7%) and Ataa (-2.3%).

THE CLOSING BELL: NOMU-

The NomuC rose 2.4% on Thursday on turnover of SAR 224.6 mn. The index is up 8.4% YTD.

In the green: Jahez (+12.8%), Knowledge Net (+10.0%) and Al Modawat (+8.9%).

In the red: iOud (-5.4%), AZM (-4.8%) and Meyar (-4.6%)

CORPORATE ACTIONS-

Edarat Communication and Information Technology is set to buy back up to 5k shares — representing 0.22% of outstanding shares — for its employee stock ownership program, it said in a filing to Tadawul. The purchase will be financed through the company’s own resources.

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