Investors Weigh Fed Rate Cut, China Tariff Truce and Mixed Tech Results
Fed rate cut, China tariff truce and megacap earnings are setting the tone for the session. The Federal Reserve cut rates by 25 basis points and stopped quantitative tightening, yet Chair Jerome Powell warned another cut this year is not a foregone conclusion. That left short-term bets on policy more cautious while long-term questions about the dollar and global capital flows linger. Global trade moves with China, pressure on the Bank of Japan and mixed tech reports from Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Meta (NASDAQ:META) are reshaping sentiment across the U.S., Europe and Asia. This matters now because monetary signals, a fresh U.S.China understanding and high-profile earnings all converge in the coming trading hours.
Fed stance tightens market focus on timing and the dollar
The Federal Reserve delivered the expected quarter point cut and signalled a halt to quantitative tightening for the year. That move had been largely priced in. Markets reacted by pulling back on the odds of another cut by year end to roughly 70 percent. Chair Jerome Powell said a December cut is not a foregone conclusion which pushed Treasury yields and the dollar a bit firmer into Thursday trading.
That reaction highlights a key short-term influence on trading. Investors must now weigh lower policy rates against uncertainty on follow up easing. In the longer term the U.S. administration’s posture toward a weaker dollar complicates the picture. Treasury Secretary Scott Bessent publicly urged the Bank of Japan to keep tightening to avoid yen volatility. Such interventions show how political aims can intrude on market mechanics and influence currency moves across Asia and the wider world.
China deal removes a tariff cliff but raises other risks
President Donald Trump and President Xi Jinping agreed to trim tariffs on China in exchange for tighter controls on illicit fentanyl flows, resumed U.S. soybean purchases and continued rare earth exports. The deal removes an immediate 100 percent tariff cliff due next week and replaces it with a 10 percent levy on fentanyl-related goods. That short-term easing of trade pressure should support sentiment for exporters in the U.S. and for global supply chains.
However, China’s stocks and the yuan slipped as details emerged indicating markets had expected more. The summit did not secure an explicit path for advanced AI chip access, which left some investors disappointed. On a broader scale the administration’s economic agenda aims at a weaker dollar to boost reindustrialisation and narrow deficits. Measured over 15 years through 2024, the dollar’s real effective exchange rate climbed almost 50 percent, before retreating about 5 percent since then. That historical move frames why Washington is attentive to any sign of renewed dollar strength now.
Big tech earnings deliver mixed signals on spending and cash flow
Megacap reports have been a major driver of market mood. Alphabet (NASDAQ:GOOGL) outshone peers and its stock jumped after the quarter. The company’s capex of $23.95 billion was about 49 percent of its cash from operations in the September quarter which underscored a balance between rising investment and cash generation.
By contrast, Meta (NASDAQ:META) showed a heavier capex share and a one-time tax charge that clouded its print. Meta said capex will run at $91 to $93 billion for the year, and its quarterly capex represented 64.6 percent of cash generated from operations. The company also disclosed a roughly $16 billion tax charge which soured sentiment. Microsoft (NASDAQ:MSFT) had a mixed reaction after flagging higher spending and suffering an outage in its Azure cloud platform that was later resolved. Microsoft’s capex proportion reached 77.5 percent of cash from operations, which amplified investor concern about the cost of sustaining the AI investment cycle.
Those contrasts matter because they highlight varied funding models for AI and cloud expansion. Alphabet’s stronger cash flow profile gave investors confidence. Meta and Microsoft face tougher questions about the trade off between scale and profit margins. The market responded by trimming high multiple names after some results, while rewarding companies that showed clearer cash conversion.
European and FX developments to watch during the day
The European Central Bank is expected to hold rates steady at 2 percent with euro area GDP for the third quarter running slightly ahead of forecasts. That backdrop keeps the euro sensitive to data surprises and to central bank language during the press conference. Sterling slid to its lowest in more than two years versus the euro on speculation of another Bank of England rate cut this year and talk of possible income tax rises in the upcoming budget.
Political outcomes also matter. Dutch centrist D66 made large gains in recent voting which may exclude far-right influence from the next government. That domestic result reduces some policy risk in the euro area at least for now. Still, global investors will be watching FX moves closely given the U.S. administration’s obvious concern about dollar strength and the potential for public pressure on other central banks.
Corporate calendar and market mechanics for the trading session
Investors enter the session with a heavy corporate agenda. Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) report after the close and their results can swing sector sentiment. A broad list of other companies is also due which keeps volatility potential elevated around earnings releases. In addition, ongoing Western sanctions on Russia’s oil sector have pushed diesel refining margins higher, even though analysts expect only transient supply disruptions. Energy metrics and refinery spreads are another variable traders will watch.
Finally, geopolitical surprises have not disappeared from the docket. In a striking move the U.S. ordered a resumption of nuclear weapons testing after a 33 year hiatus. Such developments feed into risk pricing and can shift demand for perceived safe havens. For the session ahead traders will balance central bank signals, the fallout from trade moves with China and the tech earnings narrative while keeping an eye on FX flows and energy margin dynamics.
The trading day promises plenty of cross currents. Short term, rate path clarity and key earnings will set immediate tone. Over the medium term, U.S. trade policy, dollar policy signals and corporate capital spending plans will remain central to risk appetite in the U.S., Europe and Asia.
