U.S. President Trump posted on social media during late trading hours on Tuesday, stating that his administration is considering "terminating commercial relations with China regarding cooking oil." This news caused the three major indices to decline, with the Nasdaq and S&P 500 ultimately closing lower.
**U.S. Markets**: At the close, the Dow Jones gained 202.88 points, up 0.44% to 46,270.46 points; the Nasdaq fell 172.91 points, down 0.76% to 22,521.7 points; the S&P 500 dropped 10.41 points, down 0.16% to 6,644.31 points. Broadcom (AVGO.US) declined 3.5%, Nvidia (NVDA.US) fell 4.4%, while Navitas Semiconductor (NVTS.US) surged 26%. The Nasdaq Golden Dragon China Index dropped 1.95%, with Alibaba (BABA.US) falling over 2%.
**European Markets**: Germany's DAX 30 fell 120.72 points, down 0.50% to 24,254.56 points; the UK's FTSE 100 rose 8.38 points, up 0.09% to 9,451.25 points; France's CAC 40 declined 14.64 points, down 0.18% to 7,919.62 points; the Euro Stoxx 50 dropped 12.74 points, down 0.23% to 5,555.45 points; Spain's IBEX 35 gained 45.21 points, up 0.29% to 15,583.51 points; Italy's FTSE MIB fell 83.59 points, down 0.20% to 42,084.00 points.
**Crude Oil**: November delivery light crude futures on the New York Mercantile Exchange fell 79 cents to close at $58.70 per barrel, down 1.33%; December delivery Brent crude futures dropped 93 cents to close at $62.39 per barrel, down 1.47%.
**Cryptocurrencies**: Bitcoin rose 0.22% to $113,128.7; Ethereum gained 0.8% to $4,117.89.
**U.S. Dollar Index**: The dollar index measuring the greenback against six major currencies fell 0.23% to close at 99.046 in late New York trading. At the close of New York foreign exchange markets, 1 euro traded for 1.1605 dollars, higher than the previous trading day's 1.1568 dollars; 1 pound traded for 1.3327 dollars, lower than the previous day's 1.3334 dollars. 1 dollar traded for 151.77 yen, down from 152.29 yen; 1 dollar traded for 0.8010 Swiss francs, down from 0.8041 francs; 1 dollar traded for 1.4036 Canadian dollars, down from 1.4037 dollars; 1 dollar traded for 9.5397 Swedish kronor, up from 9.5055 kronor.
**Precious Metals**: Spot gold touched a record high of $4,179.83 during trading and closed up 0.78% at $4,143.67. Bank of America's October global fund manager survey showed that most investors consider "long gold" to be the most crowded trade in the market. 43% of surveyed investors listed "long gold" as the most crowded trade, exceeding the 39% for "long Magnificent Seven." The survey also showed that 39% of investors reported current gold positions near 0%, 19% allocated around 2%, and 16% allocated around 4%. The weighted average gold allocation stood at just 2.4%.
**Macroeconomic News**:
Powell hints at supporting further rate cuts as U.S. job market cools. Fed Chairman Powell warned Tuesday that the U.S. labor market is showing further signs of distress, suggesting he may be prepared to support another rate cut later this month. Powell noted: "Downside risks to employment have increased." This represents the strongest hint yet that Fed officials believe they have sufficient evidence to support another 25 basis point reduction in U.S. borrowing costs. Powell added that even without new Bureau of Labor Statistics data (delayed due to government shutdown), privately produced labor market indicators and internal Fed research provide sufficient justification that the job market is cooling. "Existing evidence" shows "layoffs and hiring remain low" while "household views on job opportunities and business views on hiring difficulties continue to trend downward." These remarks suggest Powell is becoming more dovish on monetary policy.
Powell: Balance sheet reduction may end in coming months. Fed Chairman Powell said Tuesday that the Federal Reserve may be close to ending its long-standing effort to reduce its balance sheet, known as quantitative tightening. Considering the Fed's long-term goal of leaving sufficient liquidity in the financial system to maintain firm control over short-term rates and normal money market fluctuations, Powell said, "We may be approaching this point in the coming months, and we're closely monitoring a range of indicators to determine whether this goal has been achieved." Powell noted: "Some signs are beginning to show that liquidity conditions are gradually tightening, including generally tightening repo rates and more pronounced but temporary liquidity pressures on specific dates." Powell also stated, "Our experience since 2020 does suggest we can use the balance sheet more flexibly in the future."
Fed's Bowman expects two more rate cuts this year. Fed Governor Bowman said Tuesday that she still expects the Federal Reserve to continue cutting rates at its final two monetary policy meetings of 2025. "I still think there will be two more rate cuts before year-end," Bowman said. "As long as the labor market and other economic data develop in the direction I expect, we will continue on the path of lowering the federal funds rate." After voting against maintaining rates unchanged at the July meeting and advocating for earlier rate cuts, Bowman supported rate cuts in last month's decision. Waller also dissented alongside her in the July meeting, both nominated to the Fed Board by Trump during his first term. Both Bowman and Waller have previously stated that tariff measures restarted by the Trump administration would not lead to persistent inflation, while current risk balance leans more toward the labor market.
IMF says central banks need caution on monetary easing, calls for urgent fiscal adjustment. The IMF stated that central banks should remain vigilant about tariff-driven inflation risks and take a cautious stance on monetary easing to minimize further surges in high-risk asset valuations. The IMF added that central bank independence is "crucial" for stabilizing market expectations and allowing these institutions to fulfill their responsibilities, without mentioning specific institutions. The IMF also called for "urgent fiscal adjustment" to curb deficits and ensure bond market resilience. The IMF stated that increasingly tight connections between banks and more loosely regulated non-bank financial sectors will amplify shocks generated in areas like private credit or cryptocurrencies. The institution urged policymakers to adopt more comprehensive approaches to assess these hidden risks, particularly regarding risk transmission between banks and non-banks.
Fed's Collins warns of labor market weakness, suggests another 25bp cut may be appropriate. Fed's Collins called for further rate cuts this year, citing growing concerns about labor market weakness. Collins stated: "With inflation risks somewhat under control but employment facing greater downside risks, further modest policy normalization this year to support the labor market appears prudent." She added that even with further rate cuts, monetary policy would remain moderately restrictive, "which is appropriate to ensure inflation can resume its downward trend after tariff effects gradually transmit through the economy." Collins emphasized that both short-term and long-term inflation indicators are currently relatively stable. She said the greater concern lies with the labor market: "The labor market has cooled to a peculiar balanced state—not much hiring or layoffs, with unemployment rates remaining relatively low. But if it weakens further, it would create unwelcome softness, making the economy more vulnerable to adverse shocks and potentially triggering more adverse dynamics." She also suggested that perhaps another 25 basis point cut would be appropriate.
**Individual Stock News**:
LVMH (LVMUY.US) reports slight Q3 sales growth, demand recovery boosts industry confidence. French luxury giant LVMH reported Tuesday that third-quarter sales increased 1% year-over-year, benefiting from improved Asian demand and providing a boost to the global luxury industry mired in prolonged downturn. LVMH, viewed as an industry bellwether with operations spanning fashion, spirits, and retail, stated that Asian markets excluding Japan showed "significant improvement" in the nine months ending September. The group's third-quarter revenue increased 1% year-over-year to €18.28 billion. The key Fashion & Leather Goods division declined 2% during July-September, a significant improvement from the second quarter's 9% drop. Since the last earnings update on July 24, LVMH shares have gained 13%, with this rebound helping LVMH reclaim the title of France's highest market capitalization company, previously briefly overtaken by competitor Hermès.
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