“President Trump held a conference call Wednesday amid a plunge in the stock market with three of Wall Street’s top executives — JPMorgan Chase & Co.’s Jamie Dimon, Bank of America Corp.’s Brian Moynihan and Citigroup Inc.’s Michael Corbat,” Bloomberg reports.
Financial Times: “The inversion of the U.S. yield curve, a measure investors view as the surest predictor of an impending recession, on Monday became deeper than at any point since the onset of the financial crisis a decade ago, as the U.S.-China trade war spread to the currency markets.”
“The difference between the yield on three-month Treasury bills and the benchmark 10-year bond, which has turned negative or ‘inverted’ before every U.S. recession of the past 50 years, widened to minus 32 basis points at its worst.”
“The U.S. Treasury Department officially labeled China a currency manipulator after the country’s central bank allowed the yuan to fall below 7 per dollar in retaliation for new tariffs on its imports,” Bloomberg reports.
Axios: “Under a 2015 law, in order to be a currency manipulator, a country needs to spend 2% of GDP on currency manipulation over a 12-month period. China is not doing this. If anything, China was keeping the yuan artificially strong until Trump ratcheted up the trade war on Thursday.”
“In the biggest Fed decision since 2015, the Federal Reserve said on Wednesday it would slash its benchmark interest rate by a quarter point, as expected,” Axios reports.
“While previous Fed regimes have cut rates when the economy was not in the throes of a recession, it’s still a rare move — one that will likely be a legacy-shaping milestone in Jerome Powell’s tenure as Fed chairman.”
The New York Times says the cut “is meant to protect the economy against the potentially harmful effects of a growth slowdown in China and Europe and uncertainty from President Trump’s trade war.”
Wall Street Journal: “The Federal Reserve is expected to say Wednesday it will reduce its benchmark interest rate by one quarter percentage point. That would mark just the fifth time in the past 25 years that the central bank switched from raising to lowering rates.”
Politico: “Central bank officials are expected to cut interest rates for the first time since the global financial crisis not because Trump demanded it. Instead, they will move in part because the president’s bruising trade policy has helped fuel a global manufacturing slowdown and injected deep uncertainty into executive suites around the world.”
“Fed Chairman Jerome Powell won’t directly say it directly after his meetings Tuesday and Wednesday. But the central bank will reverse course at least in part to save the Trump economy from Trump.”
“Executives at Wall Street’s biggest banks have begun throwing financial support to their early favorites in the 2020 Democratic presidential field: Joe Biden, Kamala Harris and Pete Buttigieg,” CNBC reports.
” The donations represent just a fraction of the millions the candidates brought in during the three-month frame. Yet they provide clues about where these well-heeled donors could place their support as the campaign barrels toward the first voting contests of the season, which begin in February.”
“Federal Reserve officials signaled they are ready to lower interest rates by a quarter-percentage point later this month, while indicating the potential for additional reductions, despite the recent surge in market expectations of a half-point cut,” the Wall Street Journal reports.
“Elizabeth Warren is teaming up with a slate of fellow congressional Democrats who are calling for greater federal regulation of private-equity firms, which the presidential candidate likened to ‘vampires’ in a policy proposal that would alter the way the funds acquire other companies,” the Wall Street Journal reports.
“Ms. Warren, a senator from Massachusetts, unveiled legislation Thursday that would require private-equity funds to assume responsibility for the liabilities of companies under their control—including debt and pension-related obligations.”
CNN: “The proposal is red meat for the Democratic party’s liberal base, which has zeroed in on Wall Street speculation as a root cause of growing economic inequality. Backlash from the financial industry would be an added bonus for Warren’s campaign.”
In prepared remarks, Fed Chairman Jerome Powell is set to say that business investment has “slowed notably” and that trade tensions and weak global growth “continue to weigh” on the U.S. economy, a strong signal that the Fed is likely to lower the benchmark interest rate in July, the Washington Post reports.
“President Trump wrapped up the weekend as he started it, jawboning the Federal Reserve to lower interest rates at a time when he may be sizing up his two latest picks for Fed governor as successors to Chairman Jerome Powell,” Bloomberg reports.
“The fresh criticism is consistent with ideas that the president is laying the groundwork to replace Powell when the chairman’s term is up in 2022, assuming Trump is re-elected, or will attempt to do so earlier if the Fed doesn’t bend quickly enough to his will.”
President Trump took aim at the Federal Reserve on Saturday, labeling it the “most difficult problem” the U.S. faces, The Hill reports.
Said Trump: “Strong jobs report, low inflation, and other countries around the world doing anything possible to take advantage of the United States, knowing that our Federal Reserve doesn’t have a clue! They raised rates too soon, too often, & tightened, while others did just the opposite.”
He added: “As well as we are doing from the day after the great Election, when the Market shot right up, it could have been even better – massive additional wealth would have been created, & used very well. Our most difficult problem is not our competitors, it is the Federal Reserve!”
President Trump accused China and Europe of playing a “big currency manipulation game” and said the United States should match that effort, a move that directly contradicts official U.S. policy not to manipulate the dollar’s value to gain trade advantages, the AP reports.
Trump said if America doesn’t act, the country will continue “being the dummies who sit back and politely watch as other countries continue to play their games — as they have for so many years.”
“As President Trump named his picks to fill two influential seats on the Federal Reserve’s Board of Governors, the price of gold surged. That may be because one of the them, Judy Shelton, is a believer in the return to the gold standard, a money policy abandoned by the U.S. in 1971,” CBS News reports.
“Shelton is raising eyebrows among mainstream economists for her views, which include slashing the Fed’s benchmark rate to zero and pegging the value of the dollar to gold prices.”
New York Times: “The investigation includes a review of Deutsche Bank’s handling of so-called suspicious activity reports that its employees prepared about possibly problematic transactions, including some linked to President Trump’s son-in-law and senior adviser, Jared Kushner.”
“President Trump has told confidants as recently as Wednesday that he believes he has the authority to replace Jerome Powell as chairman of the Federal Reserve Board,” Bloomberg reports.
“In Trump’s line of thinking, he could demote Powell to be a board governor, but isn’t planning to do so right now.”
“Federal Reserve Chairman Jerome Powell said he intends to serve his full four-year term as head of the Federal Reserve, after President Trump asked White House lawyers earlier this year to explore options for removing him,” Bloomberg reports.
Said Powell: “I think the law is clear that I have a four year term, and I fully intend to serve it.”
Federal Reserve officials held their benchmark interest rate steady on Wednesday, but hinted they would cut rates in the months ahead if the economic outlook weakens, the Wall Street Journal reports.
CNBC: “The decision came amid divisions over what is ahead and still leaves open the possibility that policy loosening could happen before the end of the year depending on how conditions unfold.”