Morning wrap (26.09.2025)

Wall Street indices closed lower yesterday, with the S&P 500 shedding 0.50% and the Nasdaq down 0.5%. The retreat was driven by strong US economic data and subsequent hawkish commentary from central bankers, which collectively diminished the probability of Fed rate cuts.

Strong US data included an upward revision to Q2 GDP growth, which ultimately printed at 3.8% (up from a preliminary 3.3%). This was complemented by low initial jobless claims and solid figures for durable goods orders.

Gold displayed considerable resilience against the dollar's strengthening and reduced rate-cut expectations, managing a 0.3% gain during the session.

EUR/USD slipped below the pivotal 1.17 level, likely marking its first weekly decline after three consecutive weeks of gains.

President Trump announced a 100% tariff on branded and patented medicines, causing a sharp sell-off in pharmaceutical companies and raising global health sector concerns. Trump also escalated tariffs on trucks and furniture.

Market uncertainty is exacerbated by the return of trade tensions, the looming risk of a US government shutdown (Congress has until September 30 to pass a budget), the start of earnings season, and ambiguity regarding the Fed's future path.

The White House has instructed government agencies to prepare for furloughs amid the high probability of a government work stoppage.

Conflicting Fed views: Stephen Miran advocates for faster rate cuts; Michelle Bowman supports further reductions due to a weakening labour market; while Austan Goolsbee warns against tariff-induced inflation and does not support a series of rapid cuts.

Crude oil gained during the session, driven by continued uncertainty over potential sanctions on Russia and domestic Russian fuel market restrictions. After initial dips, WTI crude rose above $65 per barrel, though a slight retreat is observed today.

Attention today turns to the release of key US labour market data set for 14:30 CET.