Global Markets Shake Off Rate-Hike Jitters

Global markets size up President Trump's response to the Fed's rate hike. Plus, Congress backs new measures to punish Moscow for its invasion of Ukraine. Appeasement is not a strategy. And this bill is about imposing costs and making sure that America's strategic interests are protected. And Canada's prime minister takes a swipe at Washington as he welcomes the EU's offer of an alliance for the future. It's Thursday, September 17th. I'm Luke Vargas for The Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today. Global markets are having their say following yesterday's Fed rate hike. Despite slumping following that quarter point rise, U.S. markets are still in the lead. U.S. markets are on pace to open higher today. And from Asia to Europe, foreign investors have also found something to get excited about, too. But with oil prices backing off this morning on optimism about taming disruptions in the Middle East, how much of that response actually has to do with the Fed's move? Who better to ask than Journal finance editor Alex Frangos. Alex, I'm curious what's caught your eye in the global market response to yesterday's hike. Has anything? Because after all, there was no real surprise here in the end. Well, I think there was a surprise and people, we didn't know exactly how hawkish Kevin Walsh was going to be, how determined he would be, in other words, to say that he was going to fight inflation and raise rates not just yesterday but in the future. And the message was, yeah, we're going to do that, we're going to raise rates. What we have in global markets this morning, the day after, is stock futures are going up, global stocks are up, bond yields, both U.S. bonds and bonds of other governments are going down. And what that could be is people reacting to the Fed decision by saying, hey, he's got a handle on this. We were worried. Back in June, when he kind of said, I'm going to be a hands off Fed chief and kind of let the market do what it wants. And this time he's growing into the role as a much more traditional communicator. Another thing, Alex, that I guess investors couldn't have forecast is how exactly President Trump would take this rate hike. And on that front, we've seen a bit of mixed messaging, I think we could say. Yeah, there's definitely mixed messaging from the White House. Trump saying the U.S. should have one percent rates. And he said he talked to Warsh beforehand, which is not usual. And he said, you know, we've been talking about this for a long time. We've had a lot of conversations between the Fed chief and the president, at least in the recent decades. But on the other hand, he let him do what he wants. He said, you know, you're on a board and the board wanted to raise rates. So what are you going to do? That also gives investors some sense of relief after worries about is Warsh just going to be a puppet of Trump and do whatever he says and cut rates when everyone else thinks they should raise rates. And Trump, as much as he, you know, kind of bristle, he didn't do the Jerome Powell thing and say he's going to fire him and all that kind of thing. So, you know, I think that's a good thing. I think that's a good thing. up against Republicans in these contests. Not least because President Trump has come out and said these AI safety fears are a hoax. We don't need more AI guardrails. I mean, we're going to talk about the Trump effect on both parties, but just starting with Republicans here on this one issue of AI, candidates are in a tricky spot. They need to choose whether they adopt the president's language on AI and data centers. Yeah, I mean, one great example we have right now is playing out in Texas. We've seen in the Texas governor's race, Governor Greg Abbott, who has been a huge champion for AI and wanted Texas to be the center of AI development, the center of data centers being built in this country, has sort of backed off in recent weeks and did a pause on data centers being approved in the state. And part of that has been because the Democratic candidate, Gina Hinojosa, has really pushed this point, has pushed the backlash to data centers, has gone to rural parts of the state and talked to folks who are seeing it. And I think that's one of the things that's going to impact their water supply, who are seeing it in terms of their electric bills, seeing it just in the day-to-day in their communities, and has really capitalized on that. But more broad, when we look at the Republican Party right now, it has been interesting, that dynamic. In the primaries, you wanted to be close to Donald Trump. You wanted the MAGA base, the reliable Republican base, to come out and vote for you in your primary. But as we head to the general election, you start to see, particularly in swing states, people that are candidates who are less likely now to tie themselves to Trump. Just last week, we had the Republican convention in Dallas, Texas, and there was a divide amongst who came and who wanted to be seen with President Trump, who wanted to be part of that event, and who decided it was better to stay in their districts. Meanwhile, Democrats have their own Trump effect to deal with, a familiar one that the party's dealt with before. Do you just run against Trump or try to run on the basis of something else? Yes. I mean, fight. Fighting Trump remains a potent argument for Democrats to make, but it is not enough to just frame yourself as a fighter against Donald Trump. People want something to vote for, not just something to vote against. And part of what they want to vote for, we've seen in race after race, is some type of plan, whether it is an economic message, whether it's very focused and tailored on health care or housing and talking to voters in different parts of the country. They want people who are really actively trying to chart that path and chart a path that looks past Donald Trump, because he will not be the leader of the Republican Party forever. Ken, it sounds there like certain Democrats have some big ideas that they're trying to run on, but I'm not detecting really that there's a singular issue really rallying the base. And given that the presidential campaign cycle pretty much begins the moment the midterms are over, I'm getting the impression we could be in for a very wide open battle there, not just a battle of personalities. But I'm getting the impression that we could be in for a very wide open battle there, not just a battle of ideas. That will be the big story of 2027. It's very possible that Democrats will have control in the House. I think that's the expectation potentially in the Senate. And then simultaneously, you're going to have all of these presidential candidates on the Democratic side, you know, making their way around the country and talking about a path forward. Gavin Newsom was in South Carolina recently. Pete Buttigieg has been traveling in the country. Senator Mark Kelly has been. In some of these early states, and they are going to be laying out an agenda that really does not hinge simply as on a reaction to Trump, but more about what does the country look like after Trump is gone and how do you take the country in a different direction? And so that, I think, will really be the story of 2027. I've been speaking to Journal of Politics reporters Ken Thomas and Sabrina Rodriguez. Ken, Sabrina, thank you both so much. Thanks. Thanks for having us. And that's it for What's News for this Thursday morning. Today's show. It was produced by Daniel Bach and Hattie Moyer. Our supervising producer was Sandra Kilhoff. And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.