{"id":190058,"date":"2025-11-20T03:25:12","date_gmt":"2025-11-20T03:25:12","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/190058\/"},"modified":"2025-11-20T03:25:12","modified_gmt":"2025-11-20T03:25:12","slug":"wrong-way-news-is-driving-market-selloff-says-macquarie-as-fed-cut-hopes-fade","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/190058\/","title":{"rendered":"Wrong-way news is driving market selloff, says Macquarie, as Fed cut hopes fade"},"content":{"rendered":"

As markets head towards Black Friday, the mood among investors echoes the gloom from which the shopping holiday derives its namesake. Markets across Europe, the U.S. and Asia have all hit snags this week, and the VIX volatility index also soaring.<\/p>\n

The negative sentiment isn\u2019t particularly down to one fact or another, said Macquarie\u2019s Thierry Wizman in a note to clients this week. Rather, it\u2019s a \u201cdeadly confluence\u201d of bad news\u2014or rather, news that investors would rather not see.<\/p>\n

The first is America\u2019s base interest rate. Throughout 2025, investors had steadily convinced themselves that cuts would come later in the year, with a reduction in December all but priced in. However, the tone from Federal Open Market Committee (FOMC) members recently turned hawkish, particularly given a lack of federal data during the government shutdown.<\/p>\n

Per CME\u2019s FedWatch barometer<\/a>, the likelihood of a December cut has fallen from 94% a month ago to 47% at the time of writing, as the market sways toward concluding rates will be kept on hold at the current level. This will have ramifications of its own: Consumers won\u2019t get a final burst of relief in the run-up to the Christmas shopping period, and businesses won\u2019t get the cheaper borrowing costs to motivate them to start new investing. There\u2019s also the minor fact that a hold will likely infuriate the White House, potentially reigniting tensions over the Fed\u2019s independence.<\/p>\n

Also on the list of \u201cwrong-way news,\u201d Wizman wrote, are: \u201cSecond, there\u2019s been widening evidence of slowing growth in key economies\u2014the U.K., E.U., China, and Japan.\u00a0Third, there\u2019s been uncertainty ahead of key fiscal policy decisions and plans (e.g., Japan, U.K.), as well as some associated political turmoil abroad (e.g., France, U.K.).\u201d<\/p>\n

Concerns about the U.K. economy\u2019s trajectory are on the rise, with the nation posting only fractional growth in the third quarter<\/a> of the year. Likewise, questions are ramping up for Chancellor Rachel Reeves about her upcoming budget plan and how it will handle tackling rising deficits with policies that don\u2019t alienate businesses or consumers.<\/p>\n

France is facing similar questions about its government deficit, while in Japan, uncertainty stems from the upcoming fiscal announcement by Prime Minister Sanae Takaichi.\u00a0Takaichi is hearing calls for a larger budgetary package to support growth after the country\u2019s GDP contracted by 1.8%<\/a> in the most recent reported period.<\/p>\n

Thus far, uncertainty among allies hasn\u2019t given the U.S. dollar the boost it can usually expect. Wizman adds: \u201cThe USD has only been a small beneficiary of these adverse trends, and only in the past two days has it managed to start to be a \u2018safe haven\u2019 again, even besting the CHF [the Swiss franc] and JPY [Japanese yen], which are both weaker today.\u201d<\/p>\n

Bad news may keep coming<\/p>\n

It may take further bad news for the Fed to change its tune, Wizman adds: \u201cWhile these adverse narratives floating mainly outside the US for now, it\u2019s hard to conceive of a renewal in the weakness of the USD between now and year-end, unless a sharper drop in US stocks causes the Fed to about-face again and sound \u2018dovish\u2019.\u201d<\/p>\n

There are also plenty of data releases to come which could further alarm investors\u2014not least a much-anticipated jobs report coming tomorrow.<\/p>\n

This too, economists have warned, may feed into the bad news narrative at play. As RSM chief economist Joe Brusuelas wrote in a note shared with Fortune yesterday, his expectation is for a 50,000 increase in the September report. While positive on the surface, Brusuelas adds: \u201cThe internals of the report will illustrate diminished demand for labor in higher-paying industries as the economy struggles to produce the 50K necessary to keep American labor conditions stable.\u201d <\/p>\n

He also anticipates upward revisions to both the July and August jobs estimates, increasing employment to near 100,000 roles in the report\u2014which should be good news, right?<\/p>\n

Not so fast. He adds: \u201cShould the September estimate show solid upward revisions it would likely further dampen expectations of any prospective rate cut at the Fed December policy meeting.\u201d<\/p>\n

Here\u2019s a snapshot of the global markets prior to the opening bell in New York:<\/strong><\/p>\n