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Powell cites tough economy and high market valuation
The Chair of the Federal Reserve (Fed) stated that the FOMC sees a minimal but present risk of stagflation in the US economy and will not pre-commit to further cuts without supporting data. When questioned about financial stability, he added that the Fed does not perceive systemic risks, though asset valuations are considered elevated.
Jerome Powell emphasised that the Fed will be cautious in its forthcoming decisions owing to a complex economic outlook.
PMI data in Europe were mixed, with most impetus coming from services PMIs, which largely indicated expansion.
US PMIs signalled expansion, albeit with a slight slowdown from previous readings.
Brent and WTI closed higher after a drone attack on a Russian gas-processing plant.
Powell mentions challenging economic situation and high valuation in markets
Federal Reserve Chair Jerome Powell noted that labour-market cooling was a key factor behind the recent interest-rate cut and that the FOMC anticipates a “challenging economic situation”. With the labour market showing increasing signs of weakness while inflation remains sticky, the Committee has adopted a cautious, data-dependent stance for forthcoming decisions.
A notable element in Powell’s remarks was his reference to stagflation—a backdrop of weak growth alongside persistent inflation. Reflecting this precautionary tone, future interest-rate reductions are not guaranteed and will depend on the evolution of incoming data.
Powell also observed that risk-asset prices are at elevated levels, while clarifying that the Fed does not currently identify threats to financial stability. Into the New York close, US equities eased: the S&P500 fell 0.55%, the Dow Jones 0.19%, and the Nasdaq100 0.73%.
PMI data in Europe reflect mixed economic performance
Euro-area PMIs pointed to resilience in services alongside ongoing weakness in manufacturing. The services PMI rose to 51.4 (from 50.5), signalling expansion, while the manufacturing PMI contracted at 49.5, below forecasts and the prior 50.7. By the close, the euro appreciated 0.04% against the US dollar.
In France, manufacturing PMI fell to 48.4, a low since April, while services printed 48.9, both indicating contraction. By contrast, Germany’s services PMI increased to 52.5 (from 49.3), while manufacturing missed at 48.5 (previous 49.8). Equity indices firmed: the CAC 40 +0.54% and the DAX +0.36%.
In the UK, services PMI printed 51.9 and manufacturing 46.2, both below consensus. The FTSE 100 dipped 0.04%, while sterling gained 0.04% against the dollar.
US PMI data continue to reflect expansion
S&P Global’s latest US PMI readings remained in expansionary territory. Manufacturing printed 52 (in line with expectations but down from 53). Services registered 53.9, slightly below 54.5 previously. Although both slowed, they remain above the 50 threshold, indicating continued—if moderating—momentum.
In response, the Dollar Index eased 0.09%, and major US equity benchmarks posted modest declines, reflecting both the PMI deceleration and the stagflation risk flagged by FOMC participants.
Oil on the rise after drone attacks on Russian energy facilities
Brent and WTI settled higher by 1.83% and 1.59%, respectively, after a drone attack on Russia’s Astrakhan gas-processing plant led to a temporary suspension of fuel production (Reuters). The facility is controlled by Gazprom. Despite periodic reports of potential Russia–Ukraine peace overtures, cross-border attacks remain frequent.
