Global equity markets were largely quiet at the end of the summer holidays, with small fortnightly moves: UK and US stocks rose about 0.5% in sterling terms while Europe, Japan and emerging markets fell roughly 0.5%. Government bond yields were little changed overall, with US yields edging down and UK yields up, producing modest returns for Treasuries and small losses for gilts. Gold rallied about 3% to test $3,480. The Federal Reserve signalled support for a potential September rate cut, reinforcing market expectations for a 0.25% move. US Q2 growth data showed a 3.3% headline revision but a 1.9% underlying pace, and core inflation edged to 2.9% in July. The President dismissed Fed Governor Lisa Cook, who is contesting the firing and may take the dispute to the Supreme Court, amid broader efforts to reshape the Fed ahead of Powell's successor.
At its annual jamboree at Jackson Hole, Chair Powell signalled his apparent support for a rate cut later this month, stating that the softening labour market could offset the inflation risks from Trump's tariffs. The market had already been anticipating a 0.25% cut on 17 September but this cemented expectations and last week's crop of US data did little to change things.
Rather more controversially, Trump fired with immediate effect Lisa Cook, one of the Fed Governors, for alleged mortgage fraud. However, she is contesting his right to do so and this battle looks like heading to the Supreme Court. This action is part and parcel of Trump's more general move to pack the Federal Reserve with his appointees, culminating in Powell's successor whose term ends in May.
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