U.S. Lifts Chip Export Restrictions, Synopsys Stock Surges 6%

On Thursday evening, the U.S. Commerce Department announced the lifting of export restrictions on three major global chip design software suppliers: Synopsys, Cadence Design Systems, and Siemens. This decision has led to a significant surge in the stock prices of these companies, with Synopsys experiencing a near 6% increase at one point. The move comes as the global semiconductor industry faces supply chain disruptions and increasing demand for advanced chip technologies.

The lifting of these restrictions is expected to enhance the competitiveness of these software suppliers in the global market. It will also provide a much-needed boost to the semiconductor industry, which has been grappling with supply chain issues and increasing demand for advanced chip technologies. This move is seen as a positive development for the U.S. economy, as it will help to strengthen the country's position as a leader in the semiconductor industry.

Meanwhile, the latest non-farm payroll data released by the U.S. Department of Labor showed that the U.S. economy added 147,000 jobs in June, significantly higher than the expected 110,000. The unemployment rate also fell to 4.1%, lower than the expected 4.3%. This strong employment data has led to a shift in market expectations for the Federal Reserve's monetary policy. Prior to the release of the non-farm payroll data, there was a significant probability that the Federal Reserve would cut interest rates in July. However, the strong employment data has led to a reversal in market expectations. According to the CME's FedWatch Tool, the probability of the Federal Reserve maintaining interest rates unchanged in July has increased to 93.3%, while the probability of a 25 basis point rate cut has fallen to 6.7%. This shift in market expectations has led to a strengthening of the U.S. dollar and a sell-off in gold prices.

The strong employment data has also led to a reduction in market expectations for a rate cut in September. Currently, the market expects a 24% probability of the Federal Reserve maintaining interest rates unchanged in September, a 71% probability of a cumulative 25 basis point rate cut, and a 5% probability of a cumulative 50 basis point rate cut. This shift in market expectations is a reflection of the strength of the U.S. economy and the resilience of the labor market.

Institutions have noted that the employment data is a key factor for the Federal Reserve in adjusting its policy. This report provides Federal Reserve Chairman Jerome Powell with the space to continue his current stance, making a July rate cut almost non-existent. The Federal Reserve is expected to remain inactive during the summer.

U.S. Treasury Secretary Janet Yellen has publicly questioned the judgment of Federal Reserve policymakers on interest rates, reiterating that the trajectory of two-year Treasury yields indicates that the benchmark interest rate is too high. Yellen also hinted at the possibility of Powell leaving the Federal Reserve system entirely by May 2024, although Powell's term as a governor extends until 2028. If Powell steps down as chairman but chooses to remain on the board, he would only need to replace Governor Lael Brainard's seat in January 2026.