Global Easing Expands as ECB Cuts RatesGlobalEasingExpandsasECBCutsRates

The European Central Bank announced its third rate cut of the year on Thursday, expanding a global pivot toward looser monetary policy, as investors assess the impact of cheaper borrowing on corporate earnings and the broader economy. Data revealing softer inflation and business activity in the eurozone set the stage for the ECB to reduce interest rates by another quarter of a point, even after officials had played down the likelihood of back-to-back cuts. In the US, the latest economic indicators call for “more caution on the pace of rate cuts than was needed at the September meeting,” Federal Reserve Governor Christopher Waller said Monday, adding that the economy appeared to be in a “sweet spot.” Interest rate futures showed that investors envision quarter-point cuts at the Fed’s final two meetings of the year in November and December.

Investors also have their eyes on corporate earnings this week. Wall Street banks reported upbeat results for the third quarter, with the prospect of lower borrowing costs offering support to dealmaking activity and corporate debt issuance. Across the S&P 500, earnings are on track to increase 4.1% year-over-year, according to FactSet data. That would mark the fifth consecutive quarter of earnings growth. In its fourth-quarter outlook, PGIM Quantitative Solutions looks at the path ahead for global markets, including how earnings and the US election could influence stock returns.