US

Fannie Mae and Freddie Mac are once again back in the spotlight, with American treasury secretary Steven Mnuchin proposing to reform and recapitalized these government enterprises.

The Fed has cut rates by 25 bps to a range of 1.75% – 2%, in line with market expectations while resisting the Trump Administration’s calls for further decreases. This is the second time within 2 months. This move was to support the weakening business investment and exports, to further sustain expansions. The USD rose in response, with the T-bill yield jumping from 1.66% to 1.77% at its peak. The US markets also ended in the green on that day, by 0.1%

The Fed has also intervened in the market, injecting billions into the financial system as banks reveal their unexpected shortfall of cash, thereby leading to a surge in the repo rate of overnight loans. This also marks the first surprise intervention since the financial recession of 2008 in the US.

WeWork has aborted its botched attempt of IPO, faced with apathetic investor interest and strong urging from Softbank. Adam Neumann, the founder and CEO, said he was very much “humbled” by this experience.

UK

The London Stock Exchange (LSEG) has been in the spotlight recently. It first acquired Refinitiv, a global financial markets data provider for $27bn, to increase its foothold in the US and preparing for further international expansion. LSEG’s rival, Hong Kong Exchanges and Clearing (HKEX), however, pounced with a surprise takeover bid to the tune of $58bn, which was promptly rejected.

The Brexit dilemma has led to a surge in options trading to 18.4mm contracts, betting and hedging against moves in the UK rates. This is worth GBP 22.6 tn, up from 14.8mm contracts at GBP 18.4 tn at August, to cover the UK negotiations with the EU and the pegged departure date of October 31 2019. Only time will tell if it will be held to.

Europe

The ECB has cut interest rates and restarted its QE program. This, of course, gave rise to fierce criticism from Germany, known for its austere stance. The main rate now lies at -0.5%.

Optimism remains, even after the ascension of Mr Boris Johnson as Prime Minister. The Sterling has rallied on upbeat comments from Mr Juncker, where he believed that a Brexit deal remained within reach. It rose by 0.4% against the dollar, to reach $1.2581, the highest, since July 2019.

The Swiss National Bank has lowered its forecasts for growth to 0.5% – 1% and inflation to 0.4%. Interest rates, however, would be left at 0.75%, even in the face of weaker prospects abroad and the stronger Franc.

RoW

The tit-for-tat trade war between South Korea and Japan has been intensifying of late, as South Korean Courts demand WWII reparations for forced labor, which led to Japan’s limiting crucial exports to the Korean electronics industry.

AB InBev has revived its IPO of its Asian (ex-Australian) business, having shelved the much more ambitious plan earlier this year. It plans to float them on the Hong Kong Stock Exchange at the end of September.

The worsening Hong Kong crisis has led to an exodus of gold from Hong Kong to safe havens Singapore and Switzerland. The increasingly tense situation has led to a gradual loss of Hong Kong’s status as an offshore center, as the threat of military interference increases with each passing day. Correspondingly, this has led to a boom of private wealth businesses in Singapore as Hong Kong wanes.

Saudi Arabia’s key oil-producing fields were attacked by UAV drones by the Yemeni Shia Houthi rebels backed by Iran. The kingdom’s crude oil production fell by more than half, spiking oil prices higher by 20% on Monday. The total loss of the attack was pegged at 5.7m barrels a day, more than 6% of the world’s supplies. Full production capacity, however, is expected to be restored at the end of September, leading to downward pressures on oil prices as Brent crude fell 6.5% to $64.55 a barrel and WTI by 5.7% to $59.34.

Saudi Arabia is purportedly to be pressuring wealthy Saudi families to buy into the Aramco IPO, many of which were involved in the Ritz-Carlton anti-corruption probe.

 


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