Fed tweaks script in quarter-point cut; Wall St stumbles

Stocks on Wall Street slipped and the kiwi dollar fell against the greenback after the US Federal Reserve sliced a quarter-point from the federal funds rate as the central bank leans against the threat of slowing jobs growth, while chair Jerome Powell warned another reduction isn't a done deal.

Meanwhile, US President Donald Trump is preparing for his meeting with China’s Xi Jinping on Thursday, where the duelling superpowers are expected to find a meeting of the minds with tariff relief from Washington dangled in exchange for a Beijing crackdown on the fentanyl trade.

Magnificent 7 megacap companies Alphabet, Meta Platforms and Microsoft are poised to reveal their latest quarterly earnings after the close of trading in the US, while chipmaker Nvidia continues to blaze a trail crossing the US$5 trillion market capitalisation mark just a day after Apple and Microsoft poked their noses above US$4 trillion.

And while Fonterra Cooperative Group’s farmer shareholders will vote on whether to approve the $4.22 billion sale of the dairy processor’s Mainland consumer business to France’s Lactalis today, the monthly ANZ business confidence survey and courier company Freightways’ annual meeting will offer an insight into the flickering sparks of New Zealand’s recovery.

Flying blind

The Federal Reserve’s open market committee voted to cut the federal funds rate 25 basis points to a range of 3.75%-to-4% in a widely anticipated decision. The committee had dissenting views on both sides, with governor Stephen Miran preferring a 50 point cut and Jeffrey Schmid backing a pause.

Fed chair Jerome Powell cooled optimism for another cut this year, saying another reduction isn't a foregone conclusion.

“The central bank characterised economic growth as moderate and noted inflation has moved up since earlier in the year and remains somewhat elevated,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “In the accompanying press conference, Fed chair Powell said the labour market appears to be gradually cooling and that the downside risks to employment appear to have risen.”

The S&P 500 index was marginally lower at 8am in Auckland as it reversed earlier gains, while the tech-heavy Nasdaq Composite pared its gain to 0.4%. Meanwhile, the kiwi dollar fell to 57.60 US cents at 8am in Auckland, from 57.88 cents at 7am from 57.85 cents yesterday.

Investors are bracing for a flurry of major earnings announcements after the bell on Wednesday in the US, with Meta Platforms, Microsoft and Google-parent Alphabet due to report.

Tesla was the first of the Magnificent 7 companies to report, with its decline in earnings on an increased research and development spend getting a tepid response, although it’s since clawed back those losses and is on track for its third straight gain.

Five trillion dollars

Meanwhile, Nvidia advanced 2.5% in late trading, having become the first company to pass the US$5 trillion market capitalisation mark. Apple and Microsoft breached the US$4 trillion mark on Tuesday.

Across the Atlantic, European markets were mixed heading into the Fed review, with the UK’s FTSE 100 up 0.6% with pharmaceutical firm GSK and retailer Next buoying the bourse with upbeat earnings outlooks.

Germany’s DAX 30 slipped 0.6% and France’s CAC 40 was down 0.2%.

The highlight of the Asia trading day will be US President Donald Trump’s meeting with China’s Xi Jinping, with the presidents of the world’s two biggest economies expected to reach a trade deal as the recent tensions between the nations subside.

Australian futures are pointing to a 0.2% decline for the S&P/ASX 200 index when trading opens across the Tasman.

Local data today include ANZ’s monthly business outlook survey, which will provide an update on New Zealand firms’ activity, while courier operator Freightways’ annual meeting will also be a barometer on the state of the economic recovery.

Fonterra Cooperative Group’s farmer shareholders will vote at a special meeting today on whether to approve the $4.22 billion sale of its Mainland consumer business to France’s Lactalis.

Reporting by Paul McBeth. Image from Joshua Hoehne on Unsplash.

This story has been updated to reflect the turn in stock markets and the currency.