The Overnight Report: The Powell Pause

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World Overnight
SPI Overnight	8412.00	– 9.00	– 0.11%
S&P ASX 200	8447.00	+ 47.90	0.57%
S&P500	6039.31	– 28.39	– 0.47%
Nasdaq Comp	19632.32	– 101.26	– 0.51%
DJIA	44713.52	– 136.83	– 0.31%
S&P500 VIX	16.56	+ 0.15	0.91%
US 10-year yield	4.56	+ 0.00	0.09%
USD Index	107.85	+ 0.15	0.14%
FTSE100	8557.81	+ 23.94	0.28%
DAX30	21637.53	+ 206.95	0.97%

Good morning.

The Bank of Canada has cut its cash rate by -25bp and the ECB is expected to do the same later on today, but the Federal Reserve, as expected, made no such move.

Investors’ attention thus shifted to Fed Chair Jerome Powell’s press conference. We now pass on the microphone to CIBC Economics:

There were a lot of different strands in today’s press conference and a little less focus on the economy than normal.

But Powell’s message about the course of monetary policy was very clear — the Fed is on hold and has no reason to move unless inflation progress materially picks up or the labor market cools in a hurry.

And those don’t seem like major risks judging by Powell’s tone, or their noisy pace over recent history.

But the regular reference to “adjust” instead of lower policy rates perhaps is an indication that Powell and his team could be thinking that monetary policy might actually not be far from where they want it, and the neutral rate estimates that they wrote down aren’t what they truly believe.

Or at least, some doubt could be seeping in given the economy is still growing close to 3%, the job market looking solid and underlying inflation not very far above target (and essentially at target excluding shelter).

The revisions to the long-run dot could be a constant theme throughout 2025 and we expect there is still more room to run higher for that measure.

But on the main theme of 2025 –what President Trump could do to the economy– Powell did not seem overly worried.

Tariffs, fiscal policy, immigration and regulatory changes –the four buckets he mentioned– can have important implications for the US economy but the Chair seemed fairly confident in the strength and stability of the economy weather potential shocks, reminding journalists that where the economy sits today is very different than where it has in recent history.

On tariffs, it’s likely the Fed has reached a similar conclusion as the CBO, the Yale Budget Lab and other institutions in assessing that the US might face only a modest hit on growth but the inflationary implications could be material upfront.

He alluded to companies likely wanting to pass-on higher costs, and judging by the risk bias in the December 2024 projections, it’s clear the Fed sees more benefits of waiting to see what transpires from the administration.

As they say, “good things come to those who wait” and all of this seems like a reasonable strategy.

The only bone we have to pick with the chair is on inflation. We are a little less convinced that inflation is truly sticky in the US and are less worried about inflation expectations becoming unanchored in a tariff event. But we’ll wait and see too.

****

In Australia, the bond market is now indicating the RBA is getting ready to start its own loosening cycle, potentially as early as next week.

Ongoing uncertainty surrounding US tariffs cast a pall over energy markets. Metals rose amid threats of further supply disruptions.

USD and Treasury yields pushed higher, sending gold bullion down by as much as -0.6%.

On the calendar today:

-New Zealand ANZ Business Confidence

-New Zealand Trade Balance

-Australia 4Q Trade Price Indices

-Australia RBA Speaks

-China Public Holiday

-Eurozone 4Q GDP

-Eurozone Dec Unemployment Rate

-Eurozone ECB Rate Decision

-UK Jan Home Prices

-US 4Q GDP

-Credit Corp ((CCP)) earnings report

-Djerriwarrh Investments ((DJW)) ex-div 7.25c (100%)

-Deterra Royalties ((DRR)) Quarterly update

(and more)

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Corporate news in Australia:

-Struggling Star Entertainment ((SGR)) is selling Sydney assets to Foundation Theatres for $60m

-DroneShield ((DRO)) wins $11.8m APAC contracts for countering Chinese drones

-Mosaic Brands ((MOZ)) to close Millers and Noni B, cutting -900 jobs

-ASIC launched a formal investigation into Mineral Resources ((MIN)) and its founder Chris Ellison, issuing Section 19 notices that compel him and CFO Mark Wilson to face questioning

Spot Metals,Minerals & Energy Futures
Gold (oz)	2793.85	– 5.89	– 0.21%
Silver (oz)	31.54	+ 0.61	1.98%
Copper (lb)	4.28	+ 0.03	0.81%
Aluminium (lb)	1.18	+ 0.02	1.76%
Nickel (lb)	6.86	– 0.12	– 1.72%
Zinc (lb)	1.26	+ 0.01	0.59%
West Texas Crude	72.84	– 1.10	– 1.49%
Brent Crude	75.76	– 0.82	– 1.07%
Iron Ore (t)	101.33	+ 0.03	0.03%

By Chris Weston, Head of Research, Pepperstone

The Australian share market over the past thirty days

Index	29 Jan 2025	Week To Date	Month To Date (Jan)	Quarter To Date (Jan-Mar)	Year To Date (2025)
S&P ASX 200 (ex-div)	8447.00	0.45%	3.53%	3.53%	3.53%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ABG	Abacus Group	Upgrade to Outperform from Neutral	Macquarie
AGL	AGL Energy	Upgrade to Outperform from Neutral	Macquarie
ALD	Ampol	Downgrade to Neutral from Outperform	Macquarie
ARF	Arena REIT	Downgrade to Neutral from Outperform	Macquarie
ASX	ASX	Downgrade to Underweight from Equal-weight	Morgan Stanley
AX1	Accent Group	Downgrade to Neutral from Buy	Citi
CHC	Charter Hall	Downgrade to Neutral from Outperform	Macquarie
CIP	Centuria Industrial REIT	Upgrade to Outperform from Neutral	Macquarie
CNI	Centuria Capital	Downgrade to Neutral from Outperform	Macquarie
CQR	Charter Hall Retail REIT	Upgrade to Outperform from Neutral	Macquarie
DSE	Dropsuite	Downgrade to Hold from Buy	Ord Minnett
DXS	Dexus	Upgrade to Outperform from Neutral	Macquarie
GOZ	Growthpoint Properties Australia	Upgrade to Outperform from Neutral	Macquarie
LLC	Lendlease Group	Upgrade to Outperform from Neutral	Macquarie
MND	Monadelphous Group	Upgrade to Outperform from Neutral	Macquarie
RGN	Region Group	Downgrade to Underperform from Outperform	Macquarie
SCG	Scentre Group	Downgrade to Neutral from Outperform	Macquarie
SGP	Stockland	Downgrade to Underperform from Neutral	Macquarie
SIG	Sigma Healthcare	Downgrade to Hold from Accumulate	Ord Minnett

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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