Markets whipsawed as Fed delivers expected rate cut; Santos deal falls through

Stocks on Wall Street and currency markets were whipped around after the Federal Reserve delivered its highly-anticipated quarter-point rate cut, with chair Jerome Powell pointing to growing weakness in the US jobs market, where a clampdown on immigration is starting to bite.

Meanwhile, Statistics New Zealand is due to release June quarter gross domestic product figures today, which economists predict will show the local economy shrank as US President Donald Trump’s Liberation Day tariff regime stalled the recovery.

Australian gas giant Santos has lost its A$36.4 billion suitor after the Abu Dhabi National Oil Co-led consortium walked away from the deal after looking under the hood.

And New York’s latest initial public offering hit a snag, with ticketing firm StubHub reversing early gains in its first day of trading, and looks set to end on the red side of the ledger.

Buy the rumour, sell the fact

The Federal Reserve’s open market committee cut the federal funds rate by 25 basis points to a range of 4%-to-4.25%, meeting expectations, with chair Jerome Powell saying the balance of risks has shifted to the labour market, where the White House’s crackdown on immigration has been sapping jobs growth.

US President Donald Trump’s new appointment Stephen Miran was the sole dissenter on the quarter-point cut, voting for a bigger 50 basis point reduction.

A narrow majority of governors indicated another two cuts are likely before the end of the year.

Markets were whipped around by the decision, with the kiwi dollar climbing as high as 60.05 US cents in the build-up to the decision before shedding half a cent to trade at 59.59 US cents at 7am in Auckland from 59.79 cents yesterday.

“Although the FOMC was broadly in line with expectations, the market reacted to the dovish interpretation of the Fed signalling a further 50 basis points of easing for this year,” Bank of New Zealand senior interest rates strategist Stuart Ritson said in a note. “However, these moves proved short-lived and quickly reversed after Powell suggested there was no urgency to move quickly.”

The Bank of Canada met expectations in reducing its key rate a quarter-point to 2.5%, while the Bank of Indonesia surprised analysts with a 25 basis point cut to its benchmark seven-day reverse repo rate to 4.75%. The Bank of England is expected to leave its key rate at 4% when it reviews policy on Thursday in the UK.

Not those chips

Wall Street was mixed with the S&P 500 down 0.2% and the the tech-heavy Nasdaq Composite slid 0.5%, with Nvidia down 2.1% as Chinese regulators urged firms not to buy Nvidia’s RTX Pro 6000D chip.

The blue-chip Dow Jones Industrial Average advanced 0.4% in late trading, with American Express, Caterpillar and Visa leading the index higher.

Ticketing firm StubHub was down 5.5% in late trading as the firm’s debut reversed earlier gains in what’s been a hot initial public offering market for New York of late. The company raised US$800 million.

Markets in the antipodes are set to open to a soft day, with Australian futures pointing to a 0.3% decline for the S&P/ASX 200 index, while New Zealand’s S&P/NZX 50 index has four companies shedding rights to dividends today: The a2 Milk Co, Tourism Holdings, Port of Tauranga and Briscoe Group.

Across the Tasman, Santos lost its suitor with Abu Dhabi’s state-owned oil and gas operator ADNOC walked away from a A$36.4 billion offer after due diligence uncovered things it didn’t like.

Stats NZ is due to release June quarter GDP figures today, which economists expect will show the economy shrank 0.3% in the period as Trump’s overturning of the world trade order in April stalled the domestic recovery as firms put off investment and hiring decisions even further.

Reporting by Paul McBeth. Image from Robb Miller on Unsplash.