Confidence in the Federal Reserve’s commitment to lowering interest rates continued to erode yesterday after several of its members questioned whether the cuts were justified in light of recent economic data. In an interview on Thursday, Minneapolis Fed President Neel Kashkari voiced the opinion that interest rate cuts may not happen this year at all if inflation continues to move sideways. The statement echoes a growing sentiment that the US economy has not yet cooled off enough to justify any form of monetary easing.
The reaction in stocks was not pretty. All three major indices continued to tumble in what is shaping up to be a dismal start to the second quarter. The Dow Jones Industrial Average fell over 500 points, or 1.35% during yesterday’s session, the Nasdaq Comp following in lockstep with a 1.4% loss and the S&P 500 faring marginally better with a 1.23% drop. All the while Non-Farm Payrolls loom in the background, the official job figures set to be released mere hours from now. Current expectations are of 200k new jobs and a maintaining of the previous 3.9% unemployment rate. Although the figures often undergo significant revisions after publication, a too hot labour market will further dampen optimism of imminent rate cuts.
The recent rally in gold finally lost some momentum after reaching $2,300 an ounce in the mid-week, possibly due to public holiday market closures in China. The precious metal lost around 0.4% on Thursday and early morning trading in Asia looks even worse, down almost 1% at the time of writing. Interestingly, silver has also performed well this week, peaking its head above $27 for the first time since 2021.
No such faltering in the oil rally as of yet, with Brent crude prices breaking above $90 a barrel yesterday for the first time since October last year; WTI up to $86. Political tensions continue to be the main fuel behind the move, in both Ukraine and the Middle East.
