US GDP Growth Revised Higher to 3.3% in Q2; Fed Rate Cut Debate Intensifies

GLOBAL MOOD: Risk-Off
Drivers: Fed Rate Cuts, AI Investment, Inflation Concerns, Geopolitical Tensions

Risk-off sentiment prevails as markets weigh rising US tariffs, potential Fed rate cuts, and geopolitical tensions. Investors remain cautious, favouring safe-haven assets amid economic and policy uncertainties.

TODAY’S WATCHLIST
 - India GDP Data 
 - India Fiscal Data 
 - US Core PCE Price Index 

THE BIG STORY
The US economy expanded faster than initially estimated in the second quarter, largely driven by business investment in intellectual property, including artificial intelligence, alongside stronger consumer spending and equipment investment. The Commerce Department’s revised report showed GDP rising at a 3.3% annualized rate, up from the previously reported 3.0%, surpassing economists’ expectations of a 3.1% gain. Despite this upbeat growth, tariffs on imports continue to pose challenges for trade and overall economic sentiment.

In monetary policy developments, Federal Reserve Governor Christopher Waller expressed support for a 25-basis-point rate cut at the September 16-17 FOMC meeting and indicated that additional reductions may follow to move policy rates closer to neutral, citing signs of weakening labour conditions.

Meanwhile, Fed Governor Lisa Cook filed a lawsuit against President Donald Trump, arguing his move to remove her on August 25 violated federal law, setting the stage for a potential legal battle over the central bank’s independence.

Data Spotlight
New applications for unemployment benefits in the US fell slightly last week, signalling a modest slowdown in layoffs, but weak hiring trends suggest the unemployment rate could rise to 4.3% in August. Initial claims decreased by 5,000 to a seasonally adjusted 229,000 for the week ended August 23, slightly below economists’ expectations of 230,000. Meanwhile, continuing claims, which reflect ongoing benefit recipients and serve as a proxy for hiring, declined by 7,000 to 1.954 million for the week ending August 16. Employment gains over the past three months averaged just 35,000 jobs per month, down sharply from 123,000 during the same period in 2024, highlighting the tepid pace of labour market expansion.

Takeaway: US labour market remains sluggish, with weak hiring potentially pushing unemployment higher despite a small drop in jobless claims. 

WHAT HAPPENED OVERNIGHT

• S&P 500 and Dow Close at Record Highs Despite Nvidia Miss
  
  • Nvidia shares down 0.8% post-earnings as Sino-US trade uncertainties weigh on Nvidia’s China outlook.
  • AI spending remains strong, driving gains in other tech stocks.

• US Treasury yields mixed as traders weigh Fed rate cuts
  
  • The 10-year US Treasury yield down 2.7 bps at 4.211%, while Two-year note yield rose 1.6 bps at 3.639%.
  • Short-term yields pressured by bets on multiple Fed rate cuts this year.
  • Long-term yields supported by inflation concerns and White House influence on the Fed.

• US dollar slides on Fed rate cut bets and Trump’s pressure
  
  • US dollar Index down 0.34% at 97.830 against major currencies.
  • Dollar weakened on bets for a potential Fed rate cut next month.
  • Pressure from Trump’s moves to influence Fed policy and attempt.

• Crude oil prices rebound after Russia strikes Ukraine
  
  • Brent crude oil futures up 0.8%, at $68.62, while WTI crude futures rose 0.7%, at $64.60 a barrel. 
  • Prices recovered from early losses after Trump expressed concern over Russia’s overnight missile and drone attacks on Ukraine.
  • Investors also monitoring geopolitical risks and potential supply disruptions,
    
    

DAY’S LEDGER

Economic Data

• India April-June GDP Data 
• India July Fiscal Data 
• India Foreign Exchange Reserves
• US Core PCE Price Index 
• ECB July Consumer Inflation Expectations 

Corporate Actions

• Chandrima Mercantiles to consider bonus share issue
• Excel Realty to consider fund raising 
• Fruition Venture to consider share issue 
• HUDCO to consider fund raising 
• RBL Bank to consider fund raising 
• NHPC to consider fund raising 

Policy Events

• ECB Guindos Speech

TICKERS TO WATCH

• AFCONS INFRA chairman Shapoorji Pallonji Mistry steps down from board
• BSE to roll out pre-open session for index and stock futures from December
• CG POWER subsidiary opens semiconductor assembly and testing facility in Gujarat
• COAL INDIA arms expected to file IPO draft papers in November, says CMD
• INFOSYS and Mastercard join hands to give financial firms access to Move platform
• NALCO to invest ₹30K cr in smelter and coal power plant, says CMD
• SAI LIFE SCIENCES completes second phase of Production Block 11 at Bidar unit

MUST READ:

• India's crude oil imports from Russia to dip briefly, then rebound
• Centre planning support measures for exporters amid tariff shock
• US tariffs may cut India growth by 0.5%: Ex-commerce secretary G K Pillai
• GST reform to offset growth drag from 50% US reciprocal tariff
• India should rethink Russian oil imports as US tariffs hit: Raghuram Rajan
• US Economy expands at revised 3.3% rate on Stronger Investment
• Fed’s Williams says every policy meeting is ‘Live’ for rates
• Eurozone’s economic outlook worsens amid U.S. tariffs, domestic pressures

See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

IBC Amendment Bill Strengthens the Insolvency Edifice

Eight years after its launch, the Insolvency and Bankruptcy Code faces its toughest credibility test.

Sachin Malhotra writes, long delays, misuse of loopholes, and inconsistent rulings have raised questions. The 2025 Amendment Bill seeks to restore order; tightening processes, streamlining admissions, and reinforcing the architecture of debt resolution in India.