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MARKETS

Stocks rallied Thursday as investors continued to shake off a rocky start to September, diving back into tech stocks with a vengeance. Leading the charge, Nvidia—the world’s largest wealth-creation machine—powered up this week, moving markets like the Fed had already delivered a rate cut. And let's not forget: that rate cut is still on the table for next week. Add in the ECB's rate reduction, and we’re looking at a feedback loop of market bliss.

Nvidia (NVDA) has been playing the dual roles of wrecking ball and rocket ship, sparking market-wide momentum. Nvidia—not the Fed—might be the headline story of both the month and quarter. It’s been moving markets for days, creating the upward surge typically seen after a jumbo Fed rate cut.

Speaking of rate cuts, the ECB did its part, trimming the deposit rate by 25 basis points to 3.50%. The spotlight was on this rate, now called the DFR, as ECB President Christine Lagarde reminded us it "steers monetary policy." There’s still plenty of debate among the ECB’s Council members about future policy, and while back-to-back cuts in October can’t be ruled out, it seems more likely they’ll wait until December. That slow pace of cuts could bolster the euro, especially as the Fed prepares for its rate-cut cycle.

For euro bulls, the key to a big breakout hinges on more robust E.U. data—or, just as importantly, weaker U.S. numbers. If both cards fall into place, that could be the spark to push EUR/USD through the 1.1150 resistance level. The strategy remains straightforward: short the dollar at any sign of U.S. economic softness. As markets continue to factor in the Fed’s next steps, the playbook is clear—bet on a weaker greenback when the data falters.

Meanwhile, the yen has been a rollercoaster in the risk-on, risk-off game. However, it’s now better aligned with the narrowing gap between U.S. rate cuts and Japanese rate hikes after higher U.S. jobless claims support the current market rate cut structure. And don’t sleep on the Bank of Japan: Junko Nakagawa signaled that more rate hikes are on the horizon, with a 1% neutral rate in sight for next year. Yen's strength could cloud the outlook for Japanese stocks, so keep an eye on that.

Asian stocks are looking strong as we wrap up the week, with Wall Street’s momentum spilling over. The S&P 500 and Nasdaq both rose for the fourth straight day, and the Nasdaq is on track for its biggest weekly gain of the year. The S&P 500, meanwhile, is within 1% of its July record high.

COMMODITY MARKETS

A risk-on tone swept through markets, boosting sentiment across commodities, with gold hitting a record high. Weak U.S. labour market data confirmed current 2024 rate cut expectations from the Fed, sending U.S. Treasury yields lower and nudging the dollar down, cementing the market’s absolute rate conviction. Adding fuel to gold’s rally was the unwinding of bearish bets, as investors quickly bought back sold positions from earlier in the month.

Crude oil also rallied for the second day, with supply risks driving prices higher. Hurricane Francine has shuttered about 670,000 barrels per day of production in the Gulf of Mexico, accounting for roughly 39% of the region’s capacity. This “hurricane bid” comes even as the International Energy Agency (IEA) warned that global oil demand is cooling, contrasting OPEC’s more optimistic outlook earlier this week. According to the IEA, demand growth is slowing, mainly as China’s economy cools.

Yet, here’s the kicker: global oil output is still expected to hit a record high this year, even with OPEC+ curbs in place. Production from outside the group will grow by 1.5 million barrels per day in 2024 and 2025. That supply flood explains why traders remain bearish despite the short-term disruption in U.S. inventories. Despite current supply risks, the oversupply narrative continues to hang over the market, keeping a lid on oil’s upside potential.

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