Powell’s speech, US futures, Chinese data – what’s moving markets

Investing.com — Wall Street is seen slipping lower Friday, on course for weekly losses, after Fed chief Jerome Powell signaled a more patient approach to future interest rate cuts. Chinese released mixed economic data, while the UK economy contracted in September. 

1. Powell signals measured approach to rate cuts

The Federal Reserve doesn’t need to rush to cut interest rates further, according to Fed chair Jerome Powell, especially given the uncertainty surrounding the return of President-elect Donald Trump to the White House.

“I think it’s too early to reach judgments here” and “we don’t really know what policies will be put in place,” Powell said at a Dallas Fed event on Thursday.

The Republican Party won control of both houses of Congress in the Nov. 5 elections, as well as the White House, and the new Trump administration has vowed to impose stiff tariffs on imports and a sweeping crackdown on immigration, both of which have the potential to reignite inflation.

The US central bank lowered the benchmark overnight interest rate earlier this month by 25 basis points to the 4.50%-4.75% range, the second reduction in a row.

After Powell’s remarks, rate-futures contracts priced in about a 60% chance of another quarter-point policy rate cut next month, falling from about 80% at the start of the week.     

2. Futures lower as rally stalls

US stock futures retreated Friday, adding to the previous session’s losses as the hefty post-election rally showed signs of fizzling out.

By 03:45 ET (08:45 GMT), the Dow futures contract was down 220 points, or 0.5%, S&P 500 futures dropped 36 points, or 0.6%, and Nasdaq 100 futures fell by 175 points, or 0.9%.

The three main indices closed lower on Thursday, with the blue chip Dow Jones Industrial Average falling over 200 points, in the wake of Powell’s more hawkish stance.

Wall Street is on course for a negative week, with the DJIA 0.5% lower, the broad-based S&P 500 down 0.8% and the tech heavy Nasdaq Composite off by 0.9%.

Friday’s economic data slate includes retail sales, import prices and industrial production, while Applied Materials (NASDAQ:AMAT) will also be in the spotlight after posting weak revenue guidance, as will Domino’s Pizza (NYSE:DPZ) after Berkshire Hathaway (NYSE:BRKa) announced a new stake in the pizza chain.

3. Mixed Chinese economic picture 

Economic data released earlier Friday painted a mixed picture of the Chinese economy, the second largest in the world.

Industrial production rose 5.3% year-on-year in October, weaker than expectations of 5.5% and slowed from the 5.4% seen in the prior month. 

The weak industrial production print came as Chinese manufacturing activity remained languid through October, amid persistent headwinds from sluggish local demand and spending. 

However, retail sales offered some optimism, rising 4.8% on an annual basis in October, much more than expectations of 3.8% growth and accelerating from the 3.2% seen in the prior month. 

The strong print was driven largely by the Golden Week holiday at the beginning of the month. But it also reflected some improvement in private spending, especially after Beijing announced its most aggressive round of stimulus measures through the past month. 

The property sector remained an area of concern though, as China’s property investment fell at a faster pace from January to October, dropping 10.3% in the first 10 months of 2024 from a year earlier.

Additionally, new home prices fell the most year-on-year in October since 2015, sliding 5.9% in October, in their 16th consecutive month of declines.

4. UK economy contracted in September

The UK economy surprisingly contracted in September, in a blow to the new Labour government as it attempts to rekindle sustained growth in the sixth largest economy in the world.

Gross domestic product slipped by 0.1% in monthly terms during September, while for the third quarter as whole, the economy grew by 0.1%, slowing from 0.5% growth during the second quarter.

Chancellor Rachel Reeves announced her first budget late last month, and included big spending plans as well as substantial tax rises and borrowing.

“Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers,” Reeves said in response to the GDP figures.

The Bank of England cut interest rates earlier this month by 25 basis points, after trimming its annual growth forecast for 2024 to 1% from 1.25%.

5. Crude on course for weekly losses

Crude prices fell Friday, and were on track for hefty weekly losses on concerns that China, the world’s biggest crude importer, is continuing to struggle with an uneven economic recovery.

By 03:45 ET, the U.S. crude futures (WTI) dropped 1.1% to $67.97 a barrel, while the Brent contract fell 1.1% to $71.78 a barrel.

For the week, both contracts are set to drop around 3%.

Economic data released earlier in the session [see above] had painted an uncertain picture of the Chinese economy, while the numbers also indicated that China’s oil refiners in October processed 4.6% less crude than a year earlier, falling year-on-year for a seventh month.

Prices were rattled by a cut in OPEC’s demand outlook this week, while US oil inventories grew nearly 2.1 million barrels in the week to November 8, pushing up concerns over a supply glut, especially as production remained close to record highs of over 13 million barrels per day. 

The International Energy Agency, in its monthly report on Thursday, had warned that robust production will see oil supplies exceed demand in 2025, even if the Organization of Petroleum Exporting Countries, and allies, left ongoing supply cuts in place.