General Market Analysis – 27/06/25

US Stocks Close Higher Again – Nasdaq up 1%

US stock markets pushed higher again in trading yesterday as investors focused on potential rate cuts from the Fed and positive news on trade deals. Updates that China and the US have agreed on a trade framework and that India and the US are close to an agreement helped to spur risk trades, and the US indices all pushed higher — the Dow up 0.94%, the Nasdaq up 0.97%, and the S&P adding 0.80% to close just shy of a record level. Treasury yields fell off, the 2-year down 6.7 basis points to 3.713%, and the 10-year 5.3 basis points lower to 4.238%. The dollar also continued to fall to fresh lows, the DXY down 0.25% to 97.30, while oil prices edged higher again — Brent up 0.13% to $67.77 and WTI up 0.52% to $65.26. Gold remained in its recent range, closing the day down just 0.11% at $3,328.06 an ounce.

Fed Rate Cuts in Focus for Markets

Fundamentals are pushing their way back into investor focus as geopolitical concerns have retreated in the last few sessions, but for how long remains to be seen. As always, the Fed is top of the tree for investors, and we have seen some good moves in rate cut expectations over the last few days. Michelle Bowman started the ball rolling by advising that there was the possibility of a July cut in her mind; however, most have largely discounted this, especially as she is a Trump appointee, although pricing is now up to a 20% chance of a move at the next meeting. US data has definitely been moving in the right direction for a cut; however, tariff concerns still remain strong for most Fed members, including, crucially, Jerome Powell. The big move in expectations comes for the September meeting, with a 25-basis-point cut now being priced in as a 75% chance, compared to a 56% chance a week ago and a 47% chance a month ago. Traders will be keeping a very close eye on these expectations, with today’s PCE number and tariff updates likely to add more volatility in the coming days and weeks.

Inflation Data in Focus for Traders Today

Traders will again look to focus on fundamentals in the sessions ahead, with some key inflation data due out across the trading sessions. The geopolitical storm seems to have died down in the last couple of days, but traders will remain wary after the volatility of recent weeks. The Asian session will see the initial focus on Japanese markets, with the Tokyo Core CPI data due out — expectations for a ‘sticky’ 3.3% year-on-year rise are priced in. European markets will focus on the Spanish Flash CPI data (exp. 2.0% y/y), but the main focus of the day will be the Fed’s favourite inflation indicator, due out soon after the New York open. The Core PCE Price Index number is expected to show just a 0.1% month-on-month increase, and if it prints in line with those expectations, the Fed rate cut probability should tick up further. The Canadian GDP data (exp. 0.0% m/m) is due out at the same time, and we have Revised University of Michigan numbers later in the day, but expect the US inflation number to dominate sentiment.

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