Trump Urges Fed for Larger Rate Cut; US and China Reach TikTok Framework Agreement

GLOBAL MOOD: Cautiously Risk-on
Drivers:  US-China trade dynamics, US Fed rate cut hopes

Markets are positioned cautiously ahead of the Federal Reserve’s policy meeting, with expectations of rate cuts supporting equities and the dollar showing weakness. Oil prices remain elevated due to geopolitical tensions in Ukraine and OPEC+ production adjustments. Soft US consumer and manufacturing data reinforce expectations of easing monetary policy, creating a risk-on environment for equities but keeping bond yields near multi-month lows.

TODAY’S WATCHLIST
 - US FOMC two-day meet begins
 - US August Retail Sales

THE BIG STORY
US President Donald Trump on Monday called on Federal Reserve Chairman Jerome Powell to implement a “bigger” cut to benchmark interest rates, highlighting the potential for a surge in the housing market ahead of the Federal Reserve’s meeting this week. In a social media post, Trump wrote: “'Too Late' MUST CUT INTEREST RATES, NOW, AND BIGGER THAN HE HAD IN MIND. HOUSING WILL SOAR!!!”

In parallel, the US and China reached a commercial agreement placing the short-video app TikTok under US ownership, with final approval expected during a Friday call between President Trump and Chinese President Xi Jinping. Treasury Secretary Scott Bessent, following talks with Chinese negotiators in Madrid, refrained from disclosing specifics, including whether TikTok’s algorithm would be part of the deal. Chinese negotiator Li Chenggang confirmed a framework agreement after “candid, in-depth” discussions, noting the US showed willingness to reduce investment barriers.

Trump extended TikTok’s divestment deadline to 17 September. The talks coincided with Beijing opening an antitrust investigation into Nvidia, which Bessent described as “poor timing” but stressed that discussions were “respectful, wide-ranging, and in-depth.” Trump concluded that the “big Trade Meeting” went “VERY WELL!” and reiterated that US-China relations remain “very strong.

Data Spotlight
HSBC expects a significant oil surplus of 1.7 million barrels per day in Q4 2025 and 2.4 million barrels per day in 2026, driven by the return of OPEC+ barrels over the next 12 months. At its recent meeting, OPEC+ decided to increase production by 137,000 barrels per day in October, starting to unwind the previous voluntary cuts of 1.65 million bpd ahead of schedule.

In the US, the New York Empire State Manufacturing Index fell to -8.7 in September, the lowest reading in three months, following 11.9 in August. The decline reflects a modest contraction in manufacturing activity, with new orders (-19.6) and shipments (-17.3) falling sharply. Inventories edged lower for the second consecutive month (-4.9), while employment remained steady (-1.2). Input price increases remained elevated at 46.1, although selling price increases were moderate at 21.6.

Takeaway: The combination of a rising oil surplus and slowing manufacturing activity highlights potential downward pressure on energy prices and broader economic growth concerns, reinforcing expectations for accommodative monetary policy in the near term.

WHAT HAPPENED OVERNIGHT

• S&P 500 and Nasdaq hit record highs ahead of Fed meeting
  
  • US stocks closed higher on Monday with S&P 500 and Nasdaq recorded intraday all-time highs.
  • Tesla shares rose 3.6% after Elon Musk disclosed a $1 billion stock purchase.
  • Alphabet hit a record high, surpassing $3 trillion in market capitalization.
  • Nvidia slipped 0.04% as China’s market regulator continues its AI chip anti-monopoly investigation.

• US treasury yield near April lows ahead of Fed decision
  • The benchmark US treasury 10-year yield fell below 4.05%, hovering near April lows.
  • Markets have fully priced in a 25-basis point rate cut by the Federal Reserve on Wednesday.
  • Investors are focused on the Fed’s updated macroeconomic projections, especially the interest rate outlook.

• US dollar Slips ahead of Fed meeting as Trump calls for faster rate cuts
  • The US dollar weakened across major currencies, with the dollar index falling 0.4% to 97.273, a nearly one-week low.
  • Investors await the Federal Reserve’s interest rate decision later this week.
  • President Trump renewed calls for a “bigger” rate cut, citing concerns over the housing market.

• Crude oil prices rise on Ukrainian drone attacks
  • Brent crude oil futures rose 0.67% to $67.44 a barrel, while US WTI crude increased 0.97% to $63.30 a barrel.
  • Ukrainian drone attacks on Russian refineries raised concerns over potential supply disruptions.
  • US President Trump urged NATO nations to halt purchases of Russian oil, adding to geopolitical tensions.

Day’s Ledger

Economic Data

• Canada August Inflation Rate
• Euro July Industrial Production
• Italy August Inflation Rate
• Japan August Balance of Trade
• US August Retail Sales
• UK August Inflation Rate

 Corporate Actions

• Arihant Foundations to consider fund raising
• Bajaj Holdings to consider dividend
• Healthy Life to consider rights shares
• Panth Infinity to consider fund raising
• Suraj Industries to consider fund raising

 Policy Events

• RBA Jones Speech

Tickers to Watch 

• ADANI ENTERPRISES wins ₹40.81 billion order from National Highways Logistics 
• ASAHI INDIA opens QIP; floor price set at ₹844.79 per share
• CANARA HSBC LIFE INSURANCE gets SEBI nod to file updated red herring prospectus
• EICHER MOTORS launches upgraded Royal Enfield Meteor 350, starting at ₹195,762
• GLENMARK PHARMACEUTICALS transfers consumer care business to subsidiary Glenmark Consumer Care
• JSW KOLKATA signs 30-year concession pact with Syama Prasad Mookerjee 
• LEMON TREE signs licensing deal for new hotel in Gaya, Bihar
• LIC OF INDIA gets ₹1.85 billion tax demand order from Jamshedpur GST commissioner
• NCC secures ₹20.91 billion order from Bihar Water Resources Dept
• WIPRO partners with CrowdStrike to launch AI-powered managed security product CyberShield MDR
• ZYDUS LIFE arm launches generics of phenylpropanolamine hydrochloride and furosemide tablets

Must Read:

• WPI inflation turns positive after 2 months, at 0.52% in August
• Aim to become leader in mid-size SUV segment, says Maruti Suzuki
• SEBI signals more relaxations to ease onboarding of foreign investors
• Ambani's Reliance raises nearly ₹210 billion in asset-backed securities
• Adani, Ambani race to lead mega energy transition: Bernstein Research
• Corporate credit growth to revive in H2 FY26, says Crisil Ratings
• Crisil pegs FY26 bank credit growth at 12%, flags MSME loan stress
• Insurance Amendment Bill likely in Winter session, says FM Sitharaman
• India's exports up 6.7% in Aug despite US tariffs; trade gap narrows
• Bank of England Should End Gilt Sales, Former Rate-Setter Says

See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

Tariffs have a long, messy American lineage, from Hamilton’s infant-industry protection to Smoot-Hawley’s retaliation spiral. 

Former RBI Deputy Governor Michael Debabrata Patra, in his latest BasisPoint column, uses that history to frame today’s shock: headline duties on India will hurt, but panic is not policy.

The smarter response is measured: diversify orders beyond the US and protect job-heavy exporters where margins are thin. As he puts it, à la Muhammad Ali, India must float like a butterfly and sting like a bee.