Daily Market Color

Rally in Risk Assets Eases with Fed Meeting in Focus

US financial markets held within a tight range throughout the trading session ahead of tomorrow’s FOMC monetary policy decision and subsequent press conference.  This morning, President Trump’s first ever speech to the United Nations received significant attention, where he focused on the cooperation of the member nations represented in the council to peacefully, if possible, help to resolve the North Korean nuclear threat.  Trump went on to inform the assembly that “the United States has great strength and patience, but if it is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea,” before referring to North Korea’s leader, Kim Jong Un, as “Rocket Man.”  The Iran nuclear agreement was also denounced by Trump throughout the course of his speech, which drew mixed reactions from the other world powers present at the meeting.
All three major stock indices posted slight gains (+0.1% to +0.2%) on the day while all hit new record highs for a third consecutive session.  Treasury prices edged lower, with yields/swap rates rising 1-2 bps across the curve as the yield on the 10-year note reached 2.25%.  The US dollar fell an average of 0.1% against major currencies, with a 0.4% decline against the euro.



WTI crude oil rose above $50/barrel today, supported by bullish rhetoric from an OPEC member and further resumption of operations at US refineries.  In an interview with Reuters, Iraqi Oil Minister Jabbar al-Luaibi acknowledged the consideration of either extending or deepening the current supply cutting agreement amongst the majority of oil producing nations in advance of OPEC’s next meeting in November.  An additional 1% cut to production was specifically mentioned in the text, however it is worth noting that Iraq has still yet to adhere to its promised cuts under the current agreement.  In the US, crude demand has been boosted as refineries pushed back normally scheduled maintenance in order to continue daily activity and recover from the disruptions caused by Hurricane Harvey.
The Commerce Department’s report on US homebuilding headlined a light day of economic data reporting.  Housing starts during the month of August fell less than expected to a seasonally adjusted rate of 1.18 million units, representing a 0.8% decline from the prior month’s revised level.  Much of the weakness was attributed to the multi-family component, which declined 6.5% to a seasonally-adjusted rate of 299,000, while single-family starts rose 1.6% to an 851,000 rate.  Also detailed in the report, building permits surged 5.7% last month, led higher by a significant uptick in the multi-family segment (+19.6%).  Volatility is expected in homebuilding data over the next few months as the impacts from Hurricanes Harvey and Irma will begin to get reflected in the upcoming data.


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