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Macroeconomic & Geopolitical

APEC Provides the Trick, While the Fed Gives the Treat

1 November 2019 - 4 min read

The Fed cuts rates for the third time but turns less dovish, U.S. And European earnings are beating estimates and the APEC summit gets canceled.

Overview

FOMC: The Fed cut the funds rate by 25 bps to a range of 1.50%–1.75% in their October meeting, as expected. After the third-consecutive rate cut, the Fed’s statement was less dovish, suggesting that unless developments emerge that would require a material reassessment of their outlook, the central bank could refrain from additional cuts. Notably, the Fed removed the statement to “act as appropriate to sustain the expansion,” and added that it will monitor incoming information as it “assesses the appropriate path” of rates. While we seem to be in a holding pattern, Fed Chair Jerome Powell suggested that rate hikes are not on the horizon. The Fed’s economic outlook remained unchanged, as it expects moderate growth, a strong labor market, and inflation around their 2% target.

3Q19 Earnings: Approximately 68% of the S&P 500 has reported earnings with revenues up 4.2% Y/Y and earnings roughly flat at 0.1% Y/Y, according to Bloomberg. So far the biggest positive earnings surprises have come from Materials, Health Care, and Information Technology. About 58% of the companies that report in the current season for the Stoxx 600 have announced results, with sales down 0.5% Y/Y and earnings down 3.6% Y/Y. So far, sales are in line with estimates while earnings have surprised to the upside.

APEC Summit: The Summit originally planned to be held in Chile was cancelled due to local nonrelated protesting. Despite the cancellation, both the U.S. and China appear committed to finding a mutually agreeable venue for President Trump and Chairman Xi Jinping to meet and sign the so-called “Phase One” trade deal.

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