FOMC minutes signal December pause as we await US jobs report

European markets are moving higher as concerns around a tech led collapse in equity market subside following yesterday’s blockbuster Nvidia earnings report. The lack of any notable economic releases in Europe means that the focus is almost entirely on events on the other side of the pond, with today’s price action expected to come in response to Nvidia earnings, FOMC minutes, and the September jobs report released later in the day. Notably, despite the recovery seen for certain elements of the European markets, the lack of any significant rebound in the financials does highlight the ongoing concerns within the sector. One-week performance for the likes of Lloyds (-8%), HSBC (-6%), Deutsche Bank (-9%), Santander (-6%), and UniCredit (-7%) highlights the ongoing perception of economic risk in the face of an impending UK budget and ongoing questions regarding a tech-led global market collapse.

Yesterday’s Nvidia earnings provided enough for the bulls to jump back onboard for another leg higher, with the stock rising 5% after hours. EPS of $1.30 stands well above the 81 cents posted for the same quarter last year. With markets having teetered on the brink of some pretty concerning levels, there is a hope that this report staves off claims of an impending crash owing to questionable valuations based on unlikely eventualities. However, the attention paid to those topics certainly raise questions that will continue to cast a shadow over the sector going forward. Energy constraints provide an obvious barrier to maintaining this pace of growth, with the expansion in datacentres meaning that the US needs to build out a huge amount of new power generation that currently isn’t in place. Meanwhile, tech companies continue to do deals with eachother, booking future promises as revenues. Michael Burry has claimed that what we are currently seeing is fraud rather than a flywheel, raising question marks over what happens if this net of business arrangements start to unravel.

Yesterday’s FOMC minutes hampered calls for a rate cut next month, with market pricing for a pause having moved up from 50% to 68% in response. There now appears to be a great deal of Fed members that perceive a pause as appropriate given the current economic conditions. The minutes notes that “many” favoured a pause, while “several” believed a cut was necessary. With the October data now essentially off the table, today’s US jobs report takes on an increasingly important role in shaping the views of the committee. While many believed the Fed will continue to cut rates as they focus on labour market weakness over inflation concerns, the fact that unemployment stands at 4.3% highlights the lack of a crisis despite weak payrolls data. Trump’s efforts to lower inflation by dropping tariffs on over 200 items could help ease the inflation picture, with sub-$60 oil also keeping a lid on prices. However, unless we see a particularly concerning jobs report today, it looks likely that the next rate cut comes in 2026.