Federal Reserve Bank and November financial forecasts
A look at the day ahead in US and global markets from Mike Dolan Investors who want to put a dark October behind them may first need to negotiate the Federal Reserve’s policy decision on Wednesday, plans to sell Treasury debt and the beginnings of a series of labor market updates. As global markets begin a new month in better sentiment than they have over most of the past months, the external drama has centered on the Japanese yen – which fell near a three-decade low last year at 151.94 on Tuesday after the Bank of Japan issued a decision to devalue only… Japanese yen. A slight adjustment to the yield control policy.
Masato Kanda, Japan’s chief currency diplomat, protested the move on Wednesday, saying authorities were “on guard” to respond to the currency’s “unilateral” sharp decline – intensifying rhetoric about intervening in yen buying. But that only lifted the currency slightly as it hovered around 151.27 first thing. The problem may be that the Bank of Japan may have eased its target interest rate for 10-year bond purchases by 1% – but it is still committed to capping yields there and did so again on Wednesday in another emergency operation that brought yields back to 0.95%.
The weaker yen and higher yield caps were a cheer for Japan’s Nikkei stock index (.N225), which rose more than 2% earlier – boosted by news of a doubling of Toyota’s earnings that lifted the auto giant’s shares (7203.T) by almost 5%. So is there drama? Is the yen important for US markets? And at least on the margin
The US Treasury expects a decrease in the need for borrowing
The worry is that prolonged yen intervention and dollar sales by Japan may also reduce demand for US Treasuries at a sensitive time – while higher yields there drag Japanese bond investors home. Although the US Treasury expects lower borrowing needs in the fourth quarter than it previously indicated, tension in the bond market remains ahead of detailed future refinancing plans scheduled for release later on Wednesday. The key will be the $1.6 trillion in bill sales this year that will have to be converted into long-term debt securities until 2024.
With the Fed widely expected to hold interest rates steady again on Wednesday, Treasury’s plans may end up attracting more interest in the bond market. Ten-year bond yields rose to 4.89% overnight before the two events. Fed officials will cautiously watch data released Tuesday showing employment cost inflation rose during the fourth quarter along with an acceleration in home price increases in September.
But US consumer confidence declined, oil prices fell again, and the external demand picture began to weaken. Despite all the concern about the impact of the Middle East conflict on energy prices, US crude oil prices fell to their lowest levels since August on Tuesday – to just over $80 a barrel, marking year-on-year declines of about 7% that are the deepest. Since August too. With euro zone GDP figures showing the bloc’s economy contracted in the third quarter – in stark contrast to the boom in the United States – China’s economy once again showed signs of faltering.
The profits of American companies are led by insurance companies
A special survey showed on Wednesday that Chinese factory activity unexpectedly contracted in October, adding to the pessimistic official purchasing managers’ index for the manufacturing sector on Tuesday. And the monarchy is collapsing in the meantime. China Evergrande (3333.HK) has proposed a new debt restructuring plan for overseas bondholders, offering to swap debt for 30% stakes in each of the developer’s two Hong Kong-listed subsidiaries.
This gloom was only partially offset by hopes of easing political tensions as the White House confirmed that President Joe Biden and his Chinese counterpart Xi Jinping now aim to have a “constructive conversation” on the sidelines of the Asia-Pacific Economic Cooperation Forum in San Francisco. Francisco this month. Beyond Tokyo, stocks elsewhere were more mixed and Wall Street futures fell slightly after the S&P 500 posted its first straight daily gain in three weeks. The new month saw the Vix Volatility Gauge (.VIX) fall significantly below 18.
Another heavy day of US corporate earnings led by major insurance companies and the likes of PayPal and Kraft Heinz. On Tuesday, shares of heavy machinery maker Caterpillar fell nearly 7%, as signs of slowing demand overshadowed quarterly earnings. But PINS.N shares rose nearly 20% after the photo-sharing platform beat estimates. The Federal Reserve System may consist of several layers. Governed by a presidentially appointed Board of Governors or Federal Reserve Board (FRB), privately owned commercial banks are supervised by twelve regional Federal Reserve Banks spread across the country
The Federal Reserve System is an instrument of the US government
Nationally chartered commercial banks may be required to own stock in the local Federal Reserve Bank and may elect some members of the Federal Reserve Board of Directors in their area. Money decisions are then made by the Federal Open Market Committee (FOM). There are twelve regional Fed presidents plus all seven members of the Board of Governors, but only five of them can vote once: the New York Fed president and four other presidents. They alternate one-year voting periods.
There are also various advisory boards that have a structure that distinguishes them from other central banks. They are exceptional in that the US Treasury, which is a separate body from the central bank, is the one that prints money. The federal government sets the salaries of the seven board governors and receives all annual profits of the system after paying dividends on capital investments to member banks and maintaining a surplus in the account. In 2015, the Federal Reserve achieved net profits of $100.2 billion in 2015 and transferred $97.7 billion to the US Treasury. In 2020, it achieved net profits of $88.6 billion and transferred $86.9 billion to the Treasury.[
Although the Federal Reserve System is an instrument of the US government, it considers itself an “independent central bank.” Because its monetary policy decisions are not necessarily approved by the US President or anyone else in the executive or legislative branches of government, the Federal Reserve System does not receive any Funding from Congress, and the terms of the members of the Board of Governors may extend over several presidential terms.] The Federal Reserve is currently headed by Jerome Powell, succeeding Janet Yellen. Alan Greenspan is one of the most famous presidents of the last century. It was established to build the new world orde