In the coming days, you're going to be fed up with the Fed, and so am I. It will be difficult to escape the weight of the monetary policy decision that the US central bank is due to announce on Wednesday. Traders are 96.2% certain that US key rates will fall by 25 basis points, from a range of 4.25-4.50% to a range of 4.00-4.25%. The price of money in the United States is currently the highest among the major Western economies because the Fed has been unable to launch a cycle of rate cuts due to worrying inflation. Or because of its incompetence, according to Donald Trump. Without getting into that debate, a rate cut would reinforce the preferred scenario of investors, who believe that equity markets can continue to rise if the central bank introduces enough flexibility into the system to ensure that the US economy continues to grow without letting inflation get out of hand. This balancing act is far from easy, which explains why the Fed chairman will have to walk a tightrope on Wednesday when he announces the decision. But we will have time to talk about that again before then.

Several other major central banks are due to announce their decisions this week. As they have generally already done the job of cutting rates, thanks to lower inflation than in the United States, several are expected to maintain the status quo. Only the Bank of Canada is expected to continue cutting rates, bringing its benchmark down from 2.75% to 2.50%. Here is ING economist James Knightley's clear explanation of this prediction: "The Canadian economy is highly exposed to President Donald Trump's US tariffs, and output contracted sharply in the second quarter, while employment fell for a second consecutive month in August, pushing the unemployment rate up to 7.1%. Inflation is broadly in line with the target, giving the BoC room to move rates closer to the lower end of the perceived neutral range."

Apart from this very central bank-focused news, it is difficult to escape the downgrade of France's credit rating by Fitch. The press has jumped on the bandwagon with sensationalist headlines such as ‘Loss of AA rating: could France go bankrupt?’. Fitch believes that France's financial strength continues to deteriorate, leading to its downgrade by one notch on the agency's scale, from AA- to A+. This is somewhat the result of French politics over the last few decades, reinforced by the recent mess. Roughly speaking, if you continue to dig yourself deeper into debt but give the impression that you will be able to do something about it one day, even if everyone knows that this is not true, you have a good chance of maintaining your credit rating. On the other hand, if the disorganisation and loss of control start to become too visible, then punishment comes. With this downgrade, the French Republic's credit rating becomes less solid, which mainly means that it risks borrowing at a higher cost. This is not great news when you are on a borrowing drip. Fitch also points out that France's room for manoeuvre is not huge, given that it already has the highest rate of compulsory levies in the European Union (45.6% of GDP) and very high social spending (32% of GDP). ‘A+’ is still a very good rating, but it is the trajectory, rather than the level, that is causing concern. At the same time, S&P raised Spain's rating to A+ and Fitch raised Portugal's to A-. The efforts of southern European countries are paying off. The cost of French debt did not change much after Fitch's announcement: part of the downgrade was already factored into the risk premium. But caution is still warranted, because this kind of poison takes time to take effect and complicates the entire French economic equation.

News you shouldn't miss to get the week off to a good start:

  • The United States and China have resumed negotiations on their future trade relationship. To get off on the right foot, Beijing has launched an official investigation into chips imported from the United States. I have a feeling we are going to see a return to the theme of ‘China will have to stimulate its economy’, which the stock markets are fond of.
  • China, where the latest statistics are weak: investment, consumption and industrial production were below expectations in August, while the property sector continues to struggle.
  • A summit of Arab and Muslim countries to support Qatar after Israel's attack.
  • Donald Trump has urged NATO countries to stop buying Russian oil. The White House is at a loss in the face of Vladimir Putin and is looking for ways to put pressure on Russia again.
  • On the macro agenda, central banks are taking control. The US Federal Reserve will be the most closely watched, with a quarter-point rate cut expected on Wednesday. It will be followed by the Bank of Canada and the Bank of Brazil (also on Wednesday), the Bank of England (Thursday) and the Bank of Japan (Friday). However, the BoE's position will be closely scrutinised because Chancellor of the Exchequer Rachel Reeves may have to find £4 billion to balance her budget if the central bank stops selling Gilts.
  • On the corporate side, the agenda is light: FedEx stands out.

In Asia-Pacific, performance is mixed. Australia and Taiwan are starting the week down slightly. India is flat. China, despite today's poor statistics, is up moderately, both in Hong Kong and on the mainland. Japan is more buoyant, with the Nikkei 225 up 0.9%, having fallen only once in the last nine sessions. European leading indicators are bullish.

Today's economic highlights:

On today's agenda: industrial production and retail sales in Switzerland; the trade balance in Spain; in the United States, the Empire Manufacturing index. See the full calendar here.

  • GBP / USD: US$1.36
  • Gold: US$3,643.72
  • Crude Oil (BRENT): US$67.35
  • United States 10 years: 4.07%
  • BITCOIN: US$116,702

In corporate news:

  • J Sainsbury PLC has ended discussions with JD.com regarding the sale of Argos.
  • Centrica and X-Energy have agreed to develop the UK's first advanced modular reactors, targeting 6 gigawatts of new nuclear capacity.
  • Thor Energy Plc has requested a trading halt pending an announcement regarding a project disposal.
  • UK house prices have fallen for the first time since January 2024, with the slowest annual rent increase in four years.
  • Rheinmetall has acquired NVL, the military arm of Lürssen Group, enhancing its naval vessel production capabilities.
  • Skanska AB has signed a SEK 1.2 billion contract with the University of Virginia for a biotechnology facility.
  • The Italian government has announced new economic plans to stimulate growth and address fiscal challenges.
  • The German automotive industry faces challenges with falling sales and profits but sees opportunities with new electric vehicles.
  • American Tower is reportedly considering a bid for TDF infrastructure.

See more news from UK listed companies here

Analyst Recommendations:

  • Bakkavor Group Plc: Investec downgrades to hold from buy and raises the target price from GBX 195 to GBX 236.
  • Rio Tinto Plc: BNP Paribas Exane maintains its outperform recommendation and raises the target price from USD 77 to USD 81.
  • Anglo American Plc: BNP Paribas Exane maintains its outperform recommendation and raises the target price from GBX 2750 to GBX 2920.
  • Associated British Foods Plc: RBC Capital maintains its sector perform recommendation and reduces the target price from GBX 2150 to GBX 2050.
  • Burberry Group Plc: Barclays maintains its equalweight recommendation and reduces the target price from GBP 13.60 to GBP 13.40.
  • Informa Plc: Goldman Sachs maintains its buy recommendation and raises the target price from GBX 1130 to GBX 1140.
  • J Sainsbury Plc: JP Morgan maintains its overweight recommendation and raises the target price from GBP 3.30 to GBP 3.63.
  • Auto Trader Group Plc: JP Morgan maintains its underweight recommendation and raises the target price from GBP 7.45 to GBP 7.65.