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Weekly Update – September 20, 2019

  • U.S. stocks retreated during a volatile week; markets in Asia and Europe were mixed. Sentiment slipped as investors weighed the impacts of a U.S. interest-rate cut, an oil-supply disruption, a liquidity shortage in the overnight funding markets and dashed hopes of a deal as a Chinese trade delegation curtailed its visit to the United States.
  • Investors sought “safe haven” assets, bidding up prices of gold and bonds. As a result, the 10-year U.S. Treasury yield fell to 1.718%. Crude oil prices swung sharply after a missile attack on Saudi Arabian oilfields, but eased after the Saudis said production soon would return to normal. The U.S. dollar, as measured by the DXY index, was flat for the week.
  • The Federal Reserve injected $278 billion into overnight repurchase operations, its first intervention since the money markets seized up in 2008. Repo rates spiked from 2% to almost 10% as corporate tax payments overlapped settlements of U.S. Treasury debt auctions, leading to cash shortages. The Fed said it would offer daily overnight repo operations of at least $75 billion until October 10.
  • U.S. household net worth grew 1.64% in 2Q19, a slower pace than the 4.99% rate in 1Q19. Despite volatility during the period, much of the gains came from stocks. Over the same period, household debt accelerated to an annual rate of 4.26% and the saving rate fell to 8.03%.
  • August new home sales rose to 5.49 million, beating July’s 5.42 million. The August pace was up 1.3% month-over-month and 2.6% year-over-year. Housing starts and permits hit 12-year highs of 1.36 million and 1.42 million, respectively.
  • The Philadelphia Fed manufacturing survey dipped to 12.0 in September, down from August’s 16.8. New orders declined but shipments improved.
  • China’s industrial production plumbed a 17-year low in August, rising 4.4% YoY following 4.8% in July. August retail sales increased 7.5% versus 7.6% in July.
  • At its September meeting the Federal Open Market Committee cut the Fed funds target rate 25 basis points to 1.75–2.00%. In addition, the FOMC said in October it would consider allowing the Fed balance sheet to grow again.

CPWM Weekly Market Monitor (2019.09.20)

 

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