Rise and shine everyone.

Breaking news just now - the Bank of England cuts their bank rate by 25bp, down to 5%. This is the first cut since the hiking cycle started. The vote was 5-4, i.e., a very close call.

This comes on the heels of a dovish Fed Chair last night who opened the door to a cut in September. While the Fed Chair talked extensively about the balance of risks, he did express that there was a path to a September cut, if inflation moved lower. The labor market still remains strong, in their opinion and they can afford to hold for a while longer.

What struck me as interesting, is that when he laid out scenarios for a cut, he talked about growth being strong. It tells me they want to make sure to engineer that “soft landing” before growth may start to slow. This doesn’t necessarily mean that there will be a recession but, the Fed will try to be cautious.

One thing to remember is that the level of interest rates is high enough that they will continue to be restrictive for the economy even after the Fed starts cutting. We will need at least 4-6 cuts before interest rates are back down to more “palatable levels”.

As for US Equities, they certainly liked what they heard. Going in, the Nasdaq was already up and the meeting helped keep markets higher, followed by Meta’s upside surprise. Meta is up 8% in the pre-market.

US Equities are still trading higher this morning, despite a bit of a recovery in UST yields. Commodities are higher except Copper and Bitcoin. The US Dollar is higher as the GBP and JPY weaken.

Lots of earnings still… but Apple, Amazon and Intel will be the most watched this evening.

Chart of the Day

Coming into earnings season, we said that the bar was set very high. Thus far, beating those higher estimates has seen outsized rewards for companies. However, contrary to what we thought, missing estimates have also seen companies being punished a fair bit.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)