Access both platforms from your single Saxo account.
London Quick Take – 10 Dec - Fed day comes, will a hawkish cut be enough for a Santa rally?
Note: This is marketing material. This article is not investment advice, capital is at risk.
Fed Day: The Federal Reserve is expected to cut interest rates today, but is it enough to keep equities moving up? Trade has been a bit cautious and slack this week, whilst bond yields have risen and we are seeing a continuation of this patter this morning with European indices in a narrow range after a mixed bag on Wall Street yesterday. Traders are nervous that the Fed is about to say ‘there’s your cut, we’re done for now’. The pressure is showing up in bonds for sure - and the UK 10yr gilt yield is back to pre-Budget levels at 4.562% and the 30yr to 5.25%...
Markets are betting on a shallower path of easing next year – chiming with the assumption that the Fed will today deliver a ‘hawkish’ cut’, as well bets that other global central banks are about to pivot back to hiking rates next year. The focus will be on the press conference with Jay Powell, where he is likely to indicate that the bar for future cuts is higher now. The statement is likely to reflect a change to language around the extent and timing of additional adjustments.
The Fed is treading a tricky path. Yesterday’s labour market data wasn’t at all bad, but it also didn’t do anything to dissuade markets from assuming a cut is a done deal. US job openings rose to a five‑month high of 7.67 million in October while layoffs climbed to 1.85 million, the highest since early 2023, and hiring fell by 218,000.
That difficulty is reflected in an unusually divided FOMC. Whilst the Fed is poised to deliver its third straight cut, there have been dissenting voices aplenty. The dot plot should offer some clues – the September summary of economic projections indicated perhaps a couple more cuts next year. We’ll look to see if the dots change at all. We could have a number of hawks, perhaps three to four, indicating no cuts next year.
It’s all reflected in an unusually dislocated period since the last meeting in terms of what the market thinks will happen. In October Powell stressed that another cut in December was not a foregone conclusion. Markets assumed no cut, but have since come full circle and view the chances of a cut today at 90%. Has the data really deteriorated enough?
So, the Fed is expected to cut by 25 basis points, to 3.50%-3.75%, but signal it’s probably done for now, inflation is a worry, and the bar for future cuts is higher.
Inflation remains too high – 2.8% on the last reading of the PCE, the Fed’s preferred gauge. Policy is somewhat restrictive for sure, but it needs to stay that way to bring inflation down. The market is assuming, rightly I think, that ship has sailed. We live in a higher inflation world now – it's not worth crashing the economy and markets for a few bps.
Wall Street ended mixed, with the S&P 500 flat, the Nasdaq slightly higher and the Dow down 0.4% as traders weighed fresh labour data ahead of the Federal Reserve decision. JPMorgan sagged and weighed on Financials and the broader market after guiding 2026 expenses at roughly $105bn.
Silver trades at a record high – not just supply crunches but also rising industrial demand. Gold was steady at $4,200 as it continues to track sideways along an increasingly tight range that suggests a breakout is imminent.
US treasury yields trade near the highs of the recent range since September ahead of the Fed, with the benchmark 2-year Treasury yield near 3.61%, while the 10-year benchmark yield at 4.2%.
Markets are betting on a shallower path of easing next year – chiming with the assumption that the Fed will today deliver a ‘hawkish’ cut’, as well bets that other global central banks are about to pivot back to hiking rates next year. The focus will be on the press conference with Jay Powell, where he is likely to indicate that the bar for future cuts is higher now. The statement is likely to reflect a change to language around the extent and timing of additional adjustments.
The Fed is treading a tricky path. Yesterday’s labour market data wasn’t at all bad, but it also didn’t do anything to dissuade markets from assuming a cut is a done deal. US job openings rose to a five‑month high of 7.67 million in October while layoffs climbed to 1.85 million, the highest since early 2023, and hiring fell by 218,000.
That difficulty is reflected in an unusually divided FOMC. Whilst the Fed is poised to deliver its third straight cut, there have been dissenting voices aplenty. The dot plot should offer some clues – the September summary of economic projections indicated perhaps a couple more cuts next year. We’ll look to see if the dots change at all. We could have a number of hawks, perhaps three to four, indicating no cuts next year.
It’s all reflected in an unusually dislocated period since the last meeting in terms of what the market thinks will happen. In October Powell stressed that another cut in December was not a foregone conclusion. Markets assumed no cut, but have since come full circle and view the chances of a cut today at 90%. Has the data really deteriorated enough?
So, the Fed is expected to cut by 25 basis points, to 3.50%-3.75%, but signal it’s probably done for now, inflation is a worry, and the bar for future cuts is higher.
Inflation remains too high – 2.8% on the last reading of the PCE, the Fed’s preferred gauge. Policy is somewhat restrictive for sure, but it needs to stay that way to bring inflation down. The market is assuming, rightly I think, that ship has sailed. We live in a higher inflation world now – it's not worth crashing the economy and markets for a few bps.
Wall Street ended mixed, with the S&P 500 flat, the Nasdaq slightly higher and the Dow down 0.4% as traders weighed fresh labour data ahead of the Federal Reserve decision. JPMorgan sagged and weighed on Financials and the broader market after guiding 2026 expenses at roughly $105bn.
Silver trades at a record high – not just supply crunches but also rising industrial demand. Gold was steady at $4,200 as it continues to track sideways along an increasingly tight range that suggests a breakout is imminent.
US treasury yields trade near the highs of the recent range since September ahead of the Fed, with the benchmark 2-year Treasury yield near 3.61%, while the 10-year benchmark yield at 4.2%.
Meanwhile ... Elon Musk’s SpaceX is said to be moving ahead with plans for an IPO in mid-to-late 2026 that would value the company at $1.5 trillion and raise more than $30 billion, making it the largest IPO ever.
France’s National Assembly approved next year’s welfare bill by 247–234, boosting the odds of a year‑end budget and easing calls for Prime Minister Sebastien Lecornu to resign.
On the FTSE 100, Berkeley Group rose 2% despite a 7.7% drop in profits in the first half as it cited the Budget uncertainty as acting as a headwind. The housebuilder stuck to full-year guidance of £450mn in profit. Polar Capital opened lower but then climbed a touch after its latest update showed booming AI demand lifted the trust – it delivered +66% in net asset value per share against a benchmark of +48.4%. Total net assets rose 60.5% to £6.1bn as at 31 October.
France’s National Assembly approved next year’s welfare bill by 247–234, boosting the odds of a year‑end budget and easing calls for Prime Minister Sebastien Lecornu to resign.
On the FTSE 100, Berkeley Group rose 2% despite a 7.7% drop in profits in the first half as it cited the Budget uncertainty as acting as a headwind. The housebuilder stuck to full-year guidance of £450mn in profit. Polar Capital opened lower but then climbed a touch after its latest update showed booming AI demand lifted the trust – it delivered +66% in net asset value per share against a benchmark of +48.4%. Total net assets rose 60.5% to £6.1bn as at 31 October.
Read my look at some ideas for 2026 here.