Dollar rises as Fed casts doubt on December rate cut

The US Dollar Index strengthened above 99.2 points on Wednesday — its highest level in about two weeks — after the Federal Reserve (Fed) delivered a widely expected 25-basis-point rate cut. The move took the federal funds rate to a target range of 3.75%–4%, marking the second consecutive reduction and bringing borrowing costs to their lowest level since 2022.

However, during his post-meeting press conference, Fed Chair Jerome Powell cautioned that another rate cut in December was “not a foregone conclusion.” US equities retreated from record highs as Powell’s comments prompted investors to reassess the outlook for monetary policy. The Dow Jones dropped about 150 points, the S&P 500 fell 0.30%, and the Nasdaq 100 closed flat. The pullback reflected concerns that policymakers may pause rate cuts to keep inflation in check amid robust economic growth.

Defensive and healthcare stocks led the losses, while firms releasing results generally performed well. Caterpillar, Verizon, CVS Health, and Fiserv all advanced on strong quarterly earnings. Nvidia climbed 3%, lifting its market capitalisation above $5 trillion, after President Donald Trump indicated he may permit exports of Blackwell chips to China. Microsoft, Alphabet and Meta were scheduled to report results after the market close.

European stocks were mixed though as corporate earnings painted an uneven economic picture. The STOXX 50 closed flat at 5 702, while the STOXX 600 slipped 0.10%. Banks led gains, with Santander up 4% on a record nine-month profit and Deutsche Bank rising 5% after a robust investment banking performance. Mercedes-Benz advanced 4.30%, supported by premium sales and GSK jumped 6.60% on strong HIV and oncology drug sales. Nokia fell 3%, following yesterday’s 20% surge amid Nvidia’s $1 billion equity purchase. Investors also eyed the Fed’s rate decision and updates on quantitative tightening ahead of the ECB meeting tomorrow.

Germany’s DAX lost 0.60%, dragged down by retailers, with Adidas tumbling 10.40% despite record quarterly revenue, citing US market weakness and tariff pressures. In contrast, the FTSE 100 rose 0.60% to a fresh record above 9 750, boosted by mining stocks and upbeat corporate news. Retailer Next climbed over 8% after revising its outlook upwards, continuing its pattern of consistent guidance improvements US market movements set the stage for gains in commodities, which closed in the green. WTI crude oil futures rose to around $65.09 per barrel, recovering after three consecutive sessions of losses as traders assessed the impact of US sanctions on Russian oil and the latest inventory data. The EIA reported a larger-than-expected drop of 6.9 million barrels in US crude stockpiles, alongside declines in gasoline and distillate inventories, though reserves at Cushing, Oklahoma, increased.

Markets also reacted to reports that a tanker carrying Russian crude to India had turned back to the Baltic Sea, signalling initial disruptions following Washington’s sanctions on Rosneft and Lukoil. Indian refiners have temporarily paused new purchases of Russian oil while awaiting official guidance. Nonetheless, some analysts remain sceptical that the sanctions will significantly tighten global supply, particularly as OPEC+ is reportedly considering another production increase at its upcoming meeting to help stabilise market conditions.

Metal commodities also gained ground, with gold trading at $3 963.05, up by 0.28%, while silver rose above $48 per ounce, rebounding from one-month lows as technical buying met fresh policy developments. Platinum increased by 0.54%.

Asian equities extended Wall Street’s record-setting momentum, led by gains in technology and industrial stocks. The Nikkei closed 2.17% higher, while the Shanghai Composite rose 0.70%, marking a ten-year high. The Shenzhen Component jumped 1.95% as investors looked ahead to the eagerly anticipated meeting between Chinese President Xi Jinping and President Trump. Bank of China shares climbed to a two-month high following a 5% increase in third-quarter profits. AI-related stocks also performed strongly, with Sungrow Power, Victory Giant, Zhongji Innolight, Foxconn Industrial, and Wuxi Lead Intelligent gaining between 1.50% and 15.40%.

Locally, much of the JSE’s record highs this year have been propelled by mining stocks, as the ongoing commodity rally has provided a notable lift to gold and platinum producers. On Wednesday, the JSE All Share Index added 0.50%, while the Top 40 and Resource 10 rose 0.61% and 2.81%, respectively. The metals and mining sector led the gains, climbing 3.19% as investors continued to benefit from robust commodity prices.