Nvidia declines as markets look towards likely Fed rate cut

• French stocks up despite downgrade while AstraZeneca decline drives FTSE weakness.
• Poor Chinese data fails to stifle Hang Seng sentiment.
• Nvidia declines as markets look towards likely Fed rate cut.

European equities pushed higher at the start of the week, led by financials, with the CAC 40 up 1.25% and outperforming peers despite Fitch cutting France’s sovereign credit rating from AA- to A+. Despite the strength of the financial sector, the FTSE 100 has lagged its mainland counterparts thanks to a decline across healthcare stocks after AstraZeneca (3.6%) paused a £200 million investment into their UK headquarters. This week sees policy decisions from the Fed, Bank of England, Bank of Canada, and Bank of Japan, with markets widely expecting the first 2025 rate cut from the Fed on Wednesday. With US markets hitting record highs last week, there is a clear desire to focus on the benefits of looser monetary policy rather than focus on any signs of economic fragility.

Asian equities traded mixed to start the week, with Japan’s Nikkei 225 climbing 0.9% while Chinese markets lagged. The Hang Seng added 0.22%, extending gains for a second session, even as the Shanghai Composite slipped 0.26%. Investor sentiment was supported by ongoing US-China trade negotiations in Madrid, which entered their second day and signalled stepped-up diplomatic engagement. Still, optimism was tempered by disappointing Chinese data. Industrial production slowed to 5.2% year-on-year in August, the weakest pace in a year. Meanwhile, retail sales growth hit an eight-month low, and unemployment rose to a six-month high. The figures underscored persistent softness in domestic demand, capping upside momentum in mainland equities and leaving Hong Kong stocks reliant on external capital that has been flowing towards AI-focused tech stocks.

Attention in the US remains fixed on trade and monetary policy, with US-China negotiations in Madrid likely to be strained by the Chinese ruling that Nvidia had violated anti-monopoly laws. The Chinese market regulator’s ruling has dragged the tech giant 2.2% lower in pre-market trade, putting downward pressure on the wider markets. Meanwhile, the focus of this week will undoubtedly be Federal Reserve’s policy meeting on Wednesday. Last week’s stronger-than-expected CPI print of 0.4% has all but erased the prospect of a 50bp cut, now priced at just 6%. However, the weakness of the jobs market appears to be carrying the will of the President for the time being, with the four-year high in jobless claims ensuring that a rate cut looks nailed on this time around. Political drama is adding another layer of uncertainty, with President Trump continuing his push to oust Fed Governor Lisa Cook. While the President took aim at Powell through claims of financial mismanagement, Cook has been accused of mortgage fraud which she has thus far decided to fight in court. The outcome of that legal battle could have sweeping implications for the Fed’s independence, just as policymakers prepare to set the tone for monetary policy into year-end.