Major US stock indexes hit record highs as the Fed cut rates for the first time in nine months. The Russell 2000 gained 2.16%, the Nasdaq 2.21%, the S&P 500 1.22%, and the Dow 1.05%. A call between Presidents Trump and Xi also boosted sentiment, with progress reported on TikTok ownership and trade talks. The Fed reduced its policy rate by 25 bps, citing labor market weakness, with projections signaling another 50 bps of cuts this year. Retail sales rose 0.6% in August, but housing data disappointed, as starts fell 8.5% and builder sentiment stayed weak, though outlook improved on lower mortgage rates. Treasury yields climbed after Powell’s hawkish comments, hurting bond returns.
The STOXX Europe 600 rose 1.03% as expectations grew for US rate cuts, with Italy’s FTSE MIB up 2.30%, France’s CAC 40 up 1.96%, Germany’s DAX up 0.43%, and the UK’s FTSE 100 up 0.82%. The ECB held its deposit rate at 2%, raised growth and inflation forecasts, and signaled the rate-cut cycle may be ending, though analysts see a chance of another cut by March 2026. In Germany, exports fell 0.6% in July as US demand weakened, while industrial output rose 1.3%. UK GDP stalled in July after June’s growth, dragged by weak manufacturing. In France, President Macron appointed Sebastien Lecornu as prime minister after Bayrou’s government collapsed.
