Dow Jones futures gains due to increased Fed rate cut bets, easing US-China trade concerns

• Dow Jones futures improve on the increased likelihood of further Fed rate cuts by year-end.

• US stock futures receive support due to moderating Trump’s remarks on China.

• The CME FedWatch Tool indicates pricing in nearly a 96% chance of a 25-basis-point Fed rate cut in October.

Dow Jones futures climb 1.12% to trade above 46,200 during European hours on Monday, ahead of the opening of the United States (US) regular session. The S&P 500 futures gain 1.52% to rise toward 6,700, while Nasdaq 100 futures surge 2.07% to trade around 24,900 at the time of writing.

US index futures rise due to the increased likelihood of US Federal Reserve (Fed) further rate cuts by year-end. The CME FedWatch Tool suggests that markets are now pricing in nearly a 96% chance of a 25-basis-point Fed rate cut in October and an 87% possibility of another reduction in December.

Consumer confidence in the United States (US) deteriorated slightly in early October, supporting the Fed rate cut bets. The preliminary University of Michigan's Consumer Sentiment Index edged lower to 55.0 for October, from 55.1 in September. This print came in better than the market expectation of 54.2. Meanwhile, the Current Conditions Index improved to 61.0 from 60.4, while the Expectations Index retreated to 51.2 from 51.7.

Market sentiment also improves amid easing US-China trade tensions. US President Donald Trump posted on Truth Social on Sunday, noting that China’s economy “will be fine” and that the US wants to “help China, not hurt it.” On Sunday, Trump said that there’s no need to meet China’s President Xi Jinping at the upcoming South Korea summit and threatened to impose 100% tariffs on Chinese imports.

In the previous regular session, Wall Street recorded its worst day since April, with the Dow Jones dropping 1.9%, the S&P 500 declining 2.71%, and the Nasdaq tumbled 3.56%, marking. Losses were led by tech and chip stocks, including Nvidia, AMD, and Tesla.