FOMC Decision Clouded By Repo Rate Spike
The Federal Open Market Committee concludes its two-day meeting today with an announcement as 2:00pm EST regarding its rate target decision. The chances of a rate hike have been declining ever since the oil price spike at the beginning of the week, but fed funds futures are still implying a rate cut today. However, the Fed’s decision will be suffering from a hangover in money markets that occurred yesterday when overnight rates suddenly rocketed to an astronomical 10% in an acute liquidity shortage caused by the Treasury sucking up all available liquidity into the Treasury market, compounded by a corporate tax deadline that redirected even more funds into the Treasury. So the answer as to why overnight interest rates suddenly spiked to 10% yesterday is that the government did it by borrowing too much in too short of a time frame, maybe. The Fed responded by injecting about $53 billion in short term funding into the banking system to keep the fever down, but it is uncertain how long this solution will last. The Fed plans to inject another $75 billion into money markets today, not connected to the FOMC rate decision.
Saudi Arabia Says It Has Evidence Iran Bombed Abqaiq
Now that the Saudis have assured the oil markets that full capacity at its enormous Abqaiq crude oil processing facility will be restored by the end of the month, attention is being turned to who the culprit is. Even though Yemeni Houthis have already claimed responsibility, Saudi Arabia says it was really Iran who was behind the attack, and now they say they have concrete evidence. The kingdom said that it would provide this evidence today at 2:30pm, half an hour after the FOMC has had its say about rates. Iran has continually denied any involvement in the attack. “They want to impose maximum … pressure on Iran through slander,” Iran’s President Hassan Rouhani said according to state media. “We don’t want conflict in the region … Who started the conflict?” he said, menacingly.
UK Supreme Court Deliberates on Prorogation of Parliament
British stocks (NYSEARCA:EWU) continue their slow and steady trek up a wall of worry as the British Supreme Court deliberates over the legality of Prime Minister Boris Johnson’s prorogation of parliament last week. That basically means he called an end to the parliamentary session in order to open a new one with a Queen’s Speech on October 14th. The advantage being that in the meantime, parliament members can’t pass any laws, so they won’t be able to hamstring Johnson any further, at least not until October 14th. That is when they will probably start yelling at him again for being a dictator and trying to destroy democracy, even though he is the one who is trying to fulfill a democratic referendum where the people chose to leave the European Union by a wide margin.
According to Johnson’s lawyers, the matter is political and therefore not justiciable by the courts. According to the lawyers for the prorogued MPs, prorogation for the purpose of stymieing parliament is illegal and the body must be recalled. Meanwhile, Queen Elizabeth II is stuck in the middle of this mess because she is the one that actually prorogues parliament, technically. At 93, she probably never believed she’d be involved in politics so closely.
CannTrust Smashed Again for Illegal Grow Operations
CannTrust (NYSE:CTST) got walloped again yesterday and is down another 4% in premarket trade after Canada’s health regulator, the cleverly-named Health Canada, suspended its license to produce and sell cannabis, accusing it of illegal grow operations. Trading in its stock was halted yesterday morning. Health Canada is in the process of seizing and detaining all cannabis products in Pellham and Vaughn. The firm can still cultivate and harvest existing crops and can at least dry and trim what they still have. They are not allowed to grow fresh batches or sell any cannabis while the suspension is in effect. CannTrust was previously caught growing crops in unlicesnsed room, product which went to sick people in Denmark. After all, it is Health Canada. Not Health Denmark.
FedEx Craters on Lower Outlook Due to Trade War
Who would have guessed, but apparently the trade war negatively affects trade. One of the companies that heavily relies on trade is FedEx (NYSE:FDX), which of course ships stuff back and forth between countries, in other words stuff that is traded. FedEx tanked 8% yesterday on the back of missed profit expectations and a lower outlook for 2020 thank to increasing trade tensions. FedEx earned $745 million compared with $835 million same quarter last year. “Our performance continues to be negatively impacted by a weakening global macro environment driven by increasing trade tensions and policy uncertainty,” Chief Executive Frederick W. Smith said in a statement.