Summary for the 18th of September -Repo problem prior to Fed's meeting


According to a research paper published by the federal reserve’s board of governors, the uncertainty that is created by the trade conflict can lower the GDP growth by 1% in the period from end of 2018 to early 2020. Economic indicators have been showing lower investments and exports and weaker growth in employment, mainly in the manufacturing sector. The data for industrial production in 
August has showed a stronger increase in production than expected, the production has been 0.6% from July to August. Comparing to August 2018, this year’s production is 0.4% lower. Consumer spending and the activity in the service sector, though, are still strong.

The interest rates in the US money markets has increased by 10% in a short amount of time, four times than the Fed’s rate. This pushes the Fed’s benchmark lending rate to rise above its targeted range, thus forcing the Fed to make an emergency injection of liquidity through market interventions. Through repo auction, the Feds has injected 75billion dollars into the financial markets by exchanging cash for treasury notes/bonds and other financial instruments with the banks. A combination of large tax payment by corporations and settlements by banks and investors that had bought notes/bonds last week is probably the reason the liquidity has dried up, leading to an increase in interest rates in the money markets.

Indices for 18th of September)
Dow: +0.1 % (17th of September))
S&P 500: +0.3% (17th of September))
Nasdaq: +0.4% (17th of September)
Nikkei: -0.1%  (18th of September)
Chinese indices: +0.6% (18th of September)
STOXX Europe 600 Index: +0.02% (18th of September)

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