Key Takeaways
- The Federal Reserve enacted its first rate cut of the year, but the move disappointed traders who had anticipated a larger reduction, leading to a slide in Treasuries, though US equity futures still rose. Policymakers now project two more cuts in 2025.
- New Zealand's Q2 GDP dramatically shrank by 0.9%, significantly worse than the expected 0.3% drop, pushing unemployment to a five-year high of 5.2% and intensifying bets on more aggressive easing by the Reserve Bank of New Zealand (RBNZ).
- Japan's July Core Machine Orders unexpectedly fell 4.6% month-over-month, missing estimates, while year-over-year growth also slowed to 4.9%. Despite this, Japan’s Nikkei Futures saw a 0.4% rise in early trade.
- Oil prices steadied after the Fed's rate cut, with West Texas Intermediate (WTI) holding at $64.13 a barrel and Brent settling at $67.95, as markets assessed weaker US labor signals and unwound bets on a deeper policy move.
- ExxonMobil (XOM) froze €100 million in planned chemical recycling projects in Europe, citing draft EU rules that it claims unfairly penalize integrated plants. Meanwhile, Samsung (005930.KS) received a $250 million Texas Semiconductor Innovation Fund Grant.
Global financial markets are navigating a complex landscape marked by a cautious Federal Reserve, concerning economic data from New Zealand and Japan, and significant corporate developments. The Federal Reserve initiated its first interest rate cut of the year, a move that saw US equity futures rise. However, the limited scope of the cut disappointed some traders, causing Treasuries to slide. Fed Chair Jerome Powell emphasized a data-dependent approach, with current projections indicating two additional rate reductions in 2025.
Economic indicators painted a mixed picture across the globe. New Zealand's economy experienced a sharp contraction in the second quarter, with its Gross Domestic Product (GDP) shrinking by 0.9%, a figure considerably worse than the anticipated 0.3% decline. This downturn pushed the nation's unemployment rate to a five-year high of 5.2%, fueling market expectations for more aggressive easing from the Reserve Bank of New Zealand (RBNZ), with markets fully pricing in 25 basis point cuts in October and November, and a one-in-three chance of a 50 basis point move. In Asia, Japan's Core Machine Orders for July fell by 4.6% month-over-month, missing the estimated 1.5% drop, while year-over-year orders rose by 4.9%, also below expectations. Despite this, Japan's Nikkei Futures saw an early trade increase of 0.4%.
Commodity markets saw oil prices stabilize following the Fed's rate cut. WTI crude held at $64.13 a barrel, and Brent crude settled at $67.95. This stability came as traders evaluated weaker US labor market signals and adjusted their expectations regarding further policy easing. The recent pullback in oil prices halted a three-day rally that had been driven by refinery strikes in Ukraine.
In corporate news, ExxonMobil (XOM) announced a freeze on €100 million of planned chemical recycling projects in Rotterdam and Antwerp. The energy giant cited draft EU rules that it claims unfairly penalize integrated plants compared to standalone recyclers, impacting projects that would have processed approximately 80,000 tons of plastic waste annually. Conversely, Samsung (005930.KS) received a substantial $250 million grant from the Texas Semiconductor Innovation Fund, bolstering its semiconductor operations.
Pharmaceutical giant Eli Lilly (LLY) reported positive results for its diabetes drug Mounjaro, which cut A1C by an average of 2.2% in children and adolescents with type 2 diabetes. The drug met all primary and secondary endpoints, demonstrating sustained glycemic and BMI improvements over 52 weeks, with a safety profile consistent with adult studies. Lilly (LLY) has since filed for regulatory approval.
Other notable developments include Disney's ABC suspending Jimmy Kimmel Live indefinitely after the host's remarks about the killing of Republican activist Charlie Kirk sparked backlash, leading Nexstar Media to also pull the show from its stations. The US House of Representatives cleared a procedural hurdle for a stopgap funding bill, paving the way for a floor vote to avert a government shutdown. Additionally, the USTR is poised to tweak its LNG penalty ahead of a China-ship rule deadline. Reports also emerged that US Treasury's Bessent made contradictory mortgage pledges, as reported by Bloomberg.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.