Morning Bid: Fed back on centre stage, for now

A look at the day ahead in European and global markets from Rae Wee Investors have chosen, at least for now, to look past simmering U.S.-China trade tensions, taking comfort instead from Federal Reserve Chair Jerome Powell's remarks hinting at more rate cuts on the horizon. Global shares were once again upbeat on Wednesday, with European futures pointing to a sharply higher open, after a volatile session the previous day owing largely to trade whiplash. Markets may have Powell to thank for the reprieve, after his comments on Tuesday reinforced expectations of further easing this year, alongside a potential end to the Fed's balance sheet drawdown some time soon. That in turn left the dollar down and gold extending its record run once again, with futures now pointing to roughly 48 basis points worth of rate cuts by December. But if anything, the bouts of market volatility over the past few sessions are a reminder of how fragile investor sentiment remains. The U.S. and China continue to trade volleys in their ongoing tariff spat, the latest being Trump's warning that he might terminate some trade ties with Beijing, including in relation to cooking oil. The tariff shock from Friday – when Trump threatened additional levies of 100% on China's U.S.-bound exports – continues to ripple through markets, though each wave has been smaller as investors assume the two sides will keep shoving each other but not come to blows. U.S. Trade Representative Jamieson Greer on Tuesday said it depended on China whether the heightened tariffs kick in on November 1 or sooner, but acknowledged it might be hard for Beijing to find an off-ramp. Politics also loom large around the world. Japan's parliamentary scheduling committee could not agree on holding a vote to select the next prime minister on October 21, local media reported on Wednesday, prolonging the uncertainty over Sanae Takaichi's bid to become the nation's first female premier. And in France, eyes will be on what comes next for the government, after French Prime Minister Sebastien Lecornu promised to suspend a landmark pension reform until after the 2027 election. Over on Wall Street, earnings from Bank of America and Morgan Stanley are due later in the day. Expectations are running high after their peers reported a solid set of results on Tuesday. Top U.S. bankers predicted business would continue to boom as equity markets surged over the last quarter and the economy and consumer spending held up despite sweeping tariffs. Key developments that could influence markets on Wednesday: – French political developments – Bank of America, Morgan Stanley earnings – Fed's Miran, Bostic, Schmid speak – Release of Fed's Beige Book (Editing by Sam Holmes)

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