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Q3 GDP expanded at a 4.3% annualized rate, outpacing the consensus forecast of 3.3% and rising from 3.8% in Q2, while the GDP price index jumped to 3.7% from 2.1%. Initial jobless claims showed a four-week moving average of 11.5k, down from 17.5k the prior week, indicating labor market recovery. Equities rallied, with the S&P 500 hitting a record high amid enthusiasm for US economic performance, despite a forward P/E near 2020 highs. Bond yields edged up 5bps, with 2-year and 10-year Treasuries reflecting tempered rate cut expectations. The US dollar fell against all major peers, pressured by policy divergences with central banks poised to hike rates in 2026. Commodities advanced, as gold and silver climbed to fresh records on safe-haven demand from Russia-Ukraine tensions, while oil extended gains amid supply disruption risks from Venezuela and Russia. (cont...)
Initial jobless claims for the latest week are expected to confirm labor market trends, potentially influencing Fed easing pace. No major Fed speeches are scheduled, leaving markets focused on data-driven rate cut signals. With Christmas closures, trading volumes may thin, amplifying any geopolitical reactions from Middle East tensions.
US inflation remains elevated, with the GDP price index at 3.7% underscoring persistent pressures despite robust growth. Global trade tensions, including US-India tariff disputes, add uncertainty to export-driven sectors. India's economy projects 7-7.5% growth in 2026, bolstered by reforms and stable external positions, contrasting US acceleration.
In the current rate cutting cycle, yesterday's strong GDP data suggests a slower pace of reductions, with markets pricing fewer cuts for 2025 amid resilient activity. Fed officials emphasize data dependence, favoring caution to avoid overheating as inflation cools gradually. Hawkish data leans tilt policy toward neutrality, potentially pausing further easing if growth surprises persist.