US stocks gained and dollar fell in the aftermath of a dovish FOMC - Newsquawk Asia-Pac Market Open

• US stocks and treasuries ended the day with gains, while the Dollar was sold after a surprisingly dovish FOMC and Powell press conference. Briefly recapping, the Fed cut rates by 25bps to 3.5-3.75%, as expected, but in a dovish 9-3 vote split - Goolsbee and Schmid voted to leave rates unchanged, while Miran wanted a larger 50bps reduction. Heading into the meeting, as many as 4 hawkish dissenters were touted. In the following presser, Powell largely put more emphasis on the labour side of the mandate vs inflation, but he did acknowledge that rates are in a plausible range of neutral. Looking to January, he noted the Fed has not made a decision yet, they will wait and see how the data comes in, stressing there is a lot of data due to come.
• USD was lower before and after the Fed cut the FFR by 25bps to 3.50-3.75% as widely anticipated, while dollar weakness accelerated on the unanticipated dovish vote split, meaning fewer FOMC voters were arguing for unchanged rates, with only 2 favouring to leave rates unchanged, against many expecting 4. The Fed argued downside risks to employment had risen, with the Fed statement acknowledging the move higher in the Unemployment Rate in September. Powell echoed the dovish theme in his press conference, arguing the job growth overcount is around 60k per month, and he does not feel like the economy is hot.
• Looking ahead, highlights include Japanese BSI Large Manufacturing, Australian Employment Change & Unemployment Rate, Supply from Australia & Japan.

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LOOKING AHEAD

• Highlights include Japanese BSI Large Manufacturing, Australian Employment Change & Unemployment Rate, Supply from Australia & Japan.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks and treasuries ended the day with gains, while the Dollar was sold after a surprisingly dovish FOMC and Powell press conference. Briefly recapping, the Fed cut rates by 25bps to 3.5-3.75%, as expected, but in a dovish 9-3 vote split - Goolsbee and Schmid voted to leave rates unchanged, while Miran wanted a larger 50bps reduction. Heading into the meeting, as many as 4 hawkish dissenters were touted. In the following presser, Powell largely put more emphasis on the labour side of the mandate vs inflation, but he did acknowledge that rates are in a plausible range of neutral. Looking to January, he noted the Fed has not made a decision yet, they will wait and see how the data comes in, stressing there is a lot of data due to come.
• SPX +0.67% at 6,887, NDX +0.42% at 25,776, DJI +1.05% at 48,058, RUT +1.32% at 2,560.
• Click here for a detailed summary.

FOMC

• FOMC cut rates by 25bps to 3.50-3.75%, as expected, while the vote split was 9-3, as Miran voted for a 50bps cut, while Goolsbee and Schmid voted for unchanged. Fed is to assess incoming data, evolving outlook and balance of risks in considering the extent and timing of further adjustment (tweaked from “in considering additional adjustments”), and it will monitor implications of incoming information for the economic outlook. Fed said it is prepared to adjust the policy stance if risks emerge impeding the goal attainment and noted Fed assessments are to consider labour market conditions, inflation pressures, inflation expectations, financial and international developments. Furthermore, it said job gains slowed, and unemployment edged up through September, while inflation moved up since earlier in the year and remains somewhat elevated. In its updated SEP, the Fed Funds projections were essentially unchanged, signalling steady expectations for a gradual return toward the longer-run rate. However, the 2025 dot plot composition shows six members' projected rates at the end of 2025 at 3.75-4.00%, indicating that four non-voters would have voted to keep rates on hold at today's meeting if they had voting rights. Fed Funds Rate projections showed 2025 at 3.625% (exp. 3.625%, prev. 3.625%), 2026 at 3.375% (exp. 3.375%, prev. 3.375%), 2027 at 3.125% (exp. 3.125%, prev. 3.125%), 2028 at 3.125% (exp. 3.125%, prev. 3.125%), and Longer Run at 3.00% (exp. 3.125%, prev. 3.00%).
• Fed Chair Powell said in the post-meeting statement that the outlook for employment and inflation has not changed much from the October meeting, while he stated near-term risks to inflation are tilted to the upside, employment risks are tilted to the downside, and the balance of risks has shifted. Powell said adjustments to rates since September should help stabilise the labour market and keep pressure down on inflation, while the Fed is well positioned to determine adjustments to rates, and rates are now in a plausible range of neutral. Powell also commented that reserve management purchases may remain elevated for a few months to alleviate money market pressures, but are expected to decline thereafter.
• Fed Chair Powell said in the Q&A when asked about policy statement tweaks, stated that rates are now in a broad range of neutral, and tweaks mean the Fed will carefully evaluate incoming data, with the Fed well positioned to see how the economy evolves. Powell also noted there is a lot of data due before the next meeting and the Fed can wait and see how the economy evolves when asked about whether the 'risk management' phase of rate cuts is over. Powell also commented that inflation is a touch softer with evidence growing that services inflation has come down, and goods inflation is entirely due to tariffs, while it does not feel like a hot economy and noted that when both policy goals are at risks, policy should be at neutral, but added he has not made a decision on January policy, and will wait and see. Furthermore, he stated the Fed has reached 'ample reserves' faster than it thought it would and wants to have ample reserves on April 15th tax day, as well as noted that frontloading the next few months of purchases is to get through the tax season.

TARIFFS/TRADE

• USTR Greer said it makes sense to discuss trade issues separately with Mexico and Canada, while trilateral discussions in certain areas would make sense, and the USMCA could be exited, revised or renegotiated with all options remaining on the table. Greer stated that tariff revenues based on IEEPA laws can be recreated using other measures, as well as noted that the US-EU trade agreement included language on no discrimination against US digital companies and said he is incredibly disappointed to see zero moderation by the EU on digital issues. Furthermore, he said the US goal with China is more balanced, 'managed' trade, while he would like to have a better trade relationship with Brazil, but said it takes both sides to actually make concessions.
• US Manufacturers are reportedly pulling back "harder" on orders of parts and raw materials due to uncertainty on the US administration's tariff policy and SCOTUS ruling, according to WSJ citing a survey
• China held urgent discussions with major domestic tech firms on Wednesday about whether to permit purchases of Nvidia’s latest H200 processors.
• ByteDance and Alibaba (BABA) are reportedly keen to place "large" orders for NVIDIA (NVDA) H200 chips, according to Reuters sources, while it was noted that Chinese tech firms are concerned about H200 supply, with some very limited quantities being produced.
• Brussels raided Temu (PDD) in foreign subsidy investigation, according to FT; ‘Unannounced inspection’ comes as European Commission steps up efforts against Chinese online retailers.
• Mexico's Lower House approved tariff hikes on imports from China and other Asian countries.
• Swiss Government confirmed 15% US tariffs on Swiss products to apply retroactively from November 14th.

NOTABLE HEADLINES

• US President Trump said he is meeting with former Fed Governor Warsh and commented that rates should be the lowest in the world.
• NEC Director Hassett said the Fed has plenty of room to cut rates and probably will need to do some more, while he added that data could support a 50bps cut and they could definitely get to 50, or even more. Furthermore, he said a 25bps cut would be a small step in the right direction and that President Trump will make the Fed Chair choice in a week or two.
• The Trump administration is preparing a shake-up of anti-money-laundering rules, in an effort to overhaul a system for catching illicit transactions by drug traffickers, terrorists and other criminals that banks complain is costly and ineffective, according to WSJ.
• US President Trump’s administration approves excluding six more states from SNAP benefits.

DATA RECAP

• US Employment Costs (Q3) 0.8% vs. Exp. 0.9% (Prev. 0.9%)
• US Employment Wages QQ (Q3) 0.8% (Prev. 1.0%)
• US Employment Benefits QQ (Q3) 0.8% (Prev. 0.7%)

FX

• USD was lower before and after the Fed cut the FFR by 25bps to 3.50-3.75% as widely anticipated, while dollar weakness accelerated on the unanticipated dovish vote split, meaning fewer FOMC voters were arguing for unchanged rates, with only 2 favouring to leave rates unchanged, against many expecting 4. The Fed argued downside risks to employment had risen, with the Fed statement acknowledging the move higher in the Unemployment Rate in September. Powell echoed the dovish theme in his press conference, arguing the job growth overcount is around 60k per month, and he does not feel like the economy is hot.
• EUR benefitted from the dollar pressure in the aftermath of the FOMC, with the single currency advancing to just shy of 1.1700.
• GBP strengthened as all attention was on the dovish Fed, with GBP/USD gaining a firmer footing above the 1.3300 level.
• JPY strengthened amid the narrowing US-Japan yield differentials and briefly reverted to the 155.00 handle against the dollar.
• Bank of Canada held rates at 2.25% as expected, while it reiterated that the current rate is about the right level to keep inflation close to 2% as long as the economy and inflation evolve in line with projections.
• BoC Governor Macklem's Press Conference Opening Statement noted that inflationary pressures continue to be contained despite added costs related to the reconfiguration of trade, while GDP growth is likely to be weak in the fourth quarter before picking up in 2026. Macklem stated that a policy rate at the lower end of the neutral range was appropriate to provide some support for the economy as it works through this structural transition while keeping inflationary pressures contained. Macklem later commented that the improvement in the labour market is encouraging, but stated that businesses are cautious about hiring and investment plans, while he added that recent jobs data hasn't changed the Bank's economic outlook.

FIXED INCOME

• T-notes bull steepened in the aftermath of the FOMC meeting, where the Fed cut rates and was more dovish than expected. Going into the rate decision, Wall Street had largely been expecting a hawkish cut. However, it ultimately was more of a dovish cut. The vote split was more dovish than expected, with only two members voting to leave rates on hold (Schmid and Goolsbee), while Miran opted for another 50bps cut. Note, according to the 2025 dot plot, there were four non-voters who would have voted to keep rates on hold today. The dot plot medians were left unchanged throughout the forecast horizon, with the median pencilling in just one rate cut in 2026, unchanged from September. Meanwhile, inflation forecasts were lowered for 2026, while unemployment was maintained at 4.4%. The Fed did adjust guidance to signal a slowdown of the pace of rate cuts, by tweaking language to "in considering the extent and timing of additional adjustments" from "in considering additional adjustments".

COMMODITIES

• Oil prices were choppy and settled marginally higher following the US seizure of an oil tanker near Venezuela.
• US EIA Weekly Crude Stocks w/e -1.812M vs. Exp. -2.31M (Prev. 0.574M).
• Kazakhstan is to raise oil exports via alternatives to CPC routes and to raise oil exports via BTC by 58k tons, while it is to raise oil exports to China by 72k tons in December and will raise oil exports to the Atyrau-Samara pipeline in December by 232k tons from the initial plan.
• Chile's Codelco copper production fell 14.3% Y/Y in October to 111k tons and Escondida copper production rose 11.7% to 120.6k tons, while Collahuasi production fell 29.3% to 35k tons.

GEOPOLITICAL

RUSSIA-UKRAINE

• US President Trump spoke with the leaders of France, Germany and the UK about Ukraine on Wednesday, according to Axios.
• US President Trump said regarding the Ukraine call with European leaders, that they discussed in pretty strong words and would like the US to go to a meeting in Europe on the weekend, while they will make a determination based on what they come back with, and noted a meeting with Zelensky and the US is what is being requested.
• Ukraine President Zelensky announced talks between Ukraine and the US on the peace plan draft today, while Zelensky cited a report from Kyiv's foreign intelligence service stating that China is taking steps to intensify cooperation with Russia.
• European leaders are set to meet in Berlin on Monday to discuss the Ukraine peace plan.
• Discussions between the US and EU over tougher sanctions on Russia are ongoing, according to EU officials.
• Ukrainian navy drones in the Black Sea struck the "Dashan" vessel that is part of Russia's shadow fleet, while the attack led to the tanker being disabled.
• US Treasury is to allow negotiations on Lukoil's foreign assets until 17th January, according to the Treasury website.

OTHER

• US seized an oil tanker off the coast of Venezuela.

ASIA-PAC

NOTABLE HEADLINES

• China is to accelerate the approval of overseas drugs urgently needed, according to Xinhua citing China’s chief drug regulator.
• Japanese government reportedly offers 7% corporation tax credit for certain investments, according to Nikkei.

EU/UK

NOTABLE HEADLINES

• UK Chancellor Reeves said there are no plans to increase EV duty further, and will not do so until the shift to EVs is secured.
• ECB President Lagarde said we remain in a good place and may upgrade projections again in December, while she added that they must focus on inflation and take the economy into account.
• ECB's Kazaks said inflation is near target, but momentum has picked up recently, while he added that price expectations are broadly stable and well anchored.
• EU finance ministers seek cull of banking and markets laws, according to FT, which reported that "EU finance ministers will this week bow to pressure from banks by pushing for an ambitious review of which financial services laws could be scrapped.