Archives of “July 2019” month

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Fed’s Powell: Comments on sever weather risks

  
  Analysis

Enters the slippery political risks from climate change

Pres. Trump has called  climate change a China hoax in the past, but that is not stopping Fed’s Powell to talk to it.
  • Increase severe weather poses some increased risk to expose institutions
  • he believes severe weather is due to climate change
  • Fed requires banks to have planned for severe weather risk
The Fed Chair did not dismiss the impact on the economy of climate change.

Collateralized loan obligations (CLO) concentrated in market-based vehicles, not banks

  • Does not see corporate debt rising to the level of systematic risk
  • Most CLO debt concentrated in market-based vehicles, not banks
  • Most CLO debt is not runnabe, though some mutual funds could see accelerated withdrawals
On the dollar as a reserve currency, Powell says:
  • being reserve currency has benefits and costs
  • one cost is a lack of fiscal discipline
  • Does not see near-term risk to dollar as reserve currency
  • Don’t assume USD status as reserve currency permanent
  • US needs to address longer-term fiscal issues

Nikkei 225 closes higher by 0.51% at 21,643.53

  
Analysis, Global Indices

Asian equities gain as Fed chair Powell reaffirms July rate cut expectations

Nikkei 11-07

Equities in the region are mainly taking its cue from Wall Street, trading higher on the back of sentiment that the Fed will be looking to cut rates later this month.

Powell’s testimony all but sealed the deal in that regard and that is feeding into equity gains ahead of European trading as well. US futures are up by 0.2% currently and that should offer similar sentiment to European stocks as well as we begin the session.

CNN report 5 Iranian boats tried to seize a British oil tanker in Persian Gulf

  
Analysis, Politics
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Five armed Iranian Islamic Revolutionary Guard Corps boats in the Persian Gulf tried to seize a British oil tanker

  • CNN citing two unnamed US officials “with direct knowledge of the incident”
  • tanker was transiting out of the Gulf, was crossing into the Strait of Hormuz area
  • A US aircraft was overhead and recorded video of the incident.
OK, more:
  • The British Heritage, owned by BP Shipping and registered to the Isle of Man, was due to dock in the Iraqi city of Basra at the weekend but made an unexpected U-turn.
Link (this to a UK Telegraph report, not the CNN one)
Five armed Iranian Islamic Revolutionary Guard Corps boats in the Persian Gulf tried to seize a British oil tanker 

Dovish testimony from Powell, 3 rate cuts on the way, starting with 25bps in July

  
  Analysis
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That’s the expectation from Bank of America / Merrill Lynch for the FOMC after Fed Chair Powell’s testimony on Wednesday

Powell “delivered a dovish testimony“
  • “hinting strongly at an upcoming cut“
BoA ML:
  • expect a 25bp cut in July (31st)
  • and cuts thereafter at each of the following two meetings (September17-18 and October 29-30)
  • cumulative 75bp of easing
More from the note:
  • The Fed seems to be willing to dismiss the better data from the US and instead is focusing on the weaker global data.
  •  Indeed, when Powell was asked if the strong jobs report changed his views on cuts, he stated “no”. 
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