Delayed US data and Fed uncertainty pressure risk assets

The US government has reopened after President Donald Trump signed legislation ending the 43-day shutdown. Market participants’ focus now shifts to the deluge of official US economic data that is due to hit the wires. However, this is not expected to be smooth sailing.

National Economic Council Director Kevin Hassett confirmed on Fox News that while October's payroll figures will be released, unemployment data will be unavailable. The unemployment rate is based on the Household Survey, which was not conducted in October. Payroll numbers derived from the Establishment Survey should be more readily available from business records.

Regarding when official data will start rolling in, it is difficult to estimate at this point, though I am sure September’s prints will be released next week. Most of the data collection would have been carried out just before the government closed its doors at the beginning of October; therefore, this should be swift.

Fed division grows; markets now 50/50 for a December cut

December’s Fed meeting presents a tough challenge for policymakers, as both the central bank – and investors – have put their faith in US private-sector data for now. It is also no secret that the Fed remains divided and cautious, with hawkish voices increasing.

San Francisco Fed President Mary Daly recently made the airwaves, underscoring that she is entering December’s meeting with ‘an open mind’. Minneapolis Fed President Neel Kashkari is also on the fence, a sentiment recently shared by St. Louis Fed President Alberto Musalem and Cleveland Fed's Beth Hammack.

Despite some Fed officials still backing cuts – such as Fed Governors Stephen Miran, Michelle Bowman, and Christopher Waller – a meaningful hawkish repricing has occurred. According to money market expectations, it is essentially a coin toss for the December meeting, with 13 bps of easing implied.

Stocks and crypto take a hit

For Stocks, US benchmarks pulled back on Thursday. The tech-heavy Nasdaq 100 shed 2.0%, with both the S&P 500 Index and Dow Jones Industrial Average falling by 1.7% – placing said indexes on the doorstep of their 50-day SMAs. Tech and AI-related Stocks came under pressure amid growing uncertainty regarding the Fed rate-cut outlook. Nvidia (NVDA) was down 3.6% and Palantir Technologies Inc. (PLTR) gave up nearly 7.0%.

Commodities were relatively tame, though Gold and Silver gave back some of their recent upside, and Oil prices caught a bid amid mounting geopolitical risks. Cryptocurrencies extended downside amid the sell-off in risk assets yesterday, with BTC/USD now comfortably south of its 200-day SMA and recently tunnelling through the widely watched US$100,000 base.

Stateside, the USD ended the session on the ropes. Technically, I see little in the way of support on the USD index, with monthly resistance at 99.67 entering the fray and scope to run for at least daily support at 98.58.

Closer to home, the GBP ended lower in recent trading following softer-than-anticipated UK growth numbers. Between August and September, and in Q3, the economy barely registered growth. This, I am sure, was not a pleasing read for the UK Chancellor, Rachel Reeves, who will deliver what is expected to be a rather challenging Autumn Budget at the end of this month. Recent speculation suggests that Reeves is considering dropping plans to raise the headline income tax rate in the upcoming budget. I am just not sure what to expect from this government anymore!

Looking ahead

US data is still off the table for the time being, and today’s calendar offers slim pickings. However, things should be more interesting next week as we may get a glimpse of US economic data for September, and, of course, Nvidia reports earnings, providing a key test of lofty AI valuations.