The Fed and 4 of the Mag 7 meet tonight

Oil up to $110 a barrel; US stocks down, but not by so much: the S&P 500 losing 0.5%, as the Nasdaq tech index fell by almost 1%. Today sees the main event of the week, the Fed meets to deliver its interest rate decision, which should take about 30 seconds, and there will be no change then.  What will be of more interest will be that this is most likely Powell’s last meeting as its chair, as the investigation has been dropped, smoothing the path for his successor, Mr Warsh, to take the reins. Mr Powell has the right to stay on the committee till 2028, should he wish to do so; we shall see.  What is notable this month is that the US stock rally has not been accompanied by a rise in US Treasuries; yields across the curve are, if anything, fractionally higher than where they started the month.

Mr Warsh is considered more dovish than Mr Powell, as he believes that growth in AI will have a deflationary effect on the economy. So far, the bond market has not increased the odds of a near-term rate cut due to the greater probability that he will take over next month. Tomorrow is the Bank of England and ECB turn to meet and decide no change to interest rates. For the UK, the narrowness of the vote will be of greatest interest.  I am sure all three chairs will talk about the perils to growth and inflation caused by the ongoing conflict.

The other focus tonight will be the reporting of Alphabet, Amazon, Meta Platforms, and Microsoft after the close of trading tonight. It does not take me to highlight how important these earnings reports are to investors and portfolios worldwide. There cannot be a global large-cap portfolio that does not own at least one of these.

The UAE announced yesterday that it is planning to leave OPEC; it is apparently one of the few members with meaningful spare capacity. I assume this leaves them free to produce and sell more oil without the constraints of cartel membership. They all but confirmed this by announcing that it would bring additional production to the global oil market “in a gradual and measured manner, aligned with demand and market conditions”. One would have imagined that on another day, the oil price would have dipped on the news.