Daniel Tarullo

Futures Drop As ECB Confusion Persists, Dollar Rises To Seven Month High; Yuan Plunges

Asian stocks and S&P futures fall modestly and European shares are little changed as traders digested the surprising reticence from yesterday's ECB meeting. The dollar jumped to 7 month highs, pressuring EM currencies and pushing the euro to its weakest level since March and below the Brexit lows, after Mario Draghi shut down talk of tapering, while the Yuan dropped to the lowest since 2010.

Key Events In The Coming Week

The key economic releases this week include industrial production on Monday, CPI on Tuesday, and housing starts on Wednesday. There are several scheduled speeches from Fed officials this week. The Beige Book for the November FOMC period will be released on Wednesday.

Janet Yellen Testimony Live Feed: Five Key Things To Look For

This morning, Janet Yellen testifies before the House Financial Services Committee on financial regulation topics. While there us unlikely to be much talk of monetary policy, it may come up, although most of the lawmakers’ questions are likely to relate to the Fed’s oversight of banks; other questions may touch on the Fed's recent bank commodity oversight push, the November election, and especially the recent Wells scandal.

US Bank Stocks Slide After New Fed Tests Suggest Need For "Significant Increase In Capital"

Two weeks after European and Japanese banks threatened mutiny against new banking capital requirements set forth by the Basel Committee, Bloomberg reports that Wall Street would have to come up with billions of dollars in additional capital in a proposed revamp of the Fed’s stress tests. US bank stocks are sliding on the news, falling back to the reality of lower and flatter yield curves as well as systemic threats from Deutsche Bank.

Key Events In The Coming Extremely Busy Week

The week ahead is striking in the sheer number of central bank speakers, but with the Fed on hold until December and the BoJ’s new framework now revealed, focus turns squarely from central banks to US politics. The first US presidential debate at the start of the week will be a key focus.

Stress Test 2016: Fed Says All 33 Banks Can Surive 70 VIX Without Needing Outside Capital

While hardly coming as a surprise to anyone, moments ago the Fed announced that all 33 banks have enough capital to withstand a severe economic shock, though Morgan Stanley trailed the rest of Wall Street in a key measure of leverage, Bloomberg reports. The biggest bank cleared the most severe scenario handily, with the exception of Morgan Stanley whose projected 4.9% leverage ratio tied for last place alongside a Canadian bank’s U.S. unit, falling within a percentage point of the 4 percent minimum. As a result of today's "test result" many banks will likely win regulators' approval next week to boost dividends.

Futures Flat Ahead Of Strike-Impacted Jobs Report; Commodities Approach Bull Market

After yesterday's two key events, the ECB and OPEC meetings, ended up being major duds, the market is looking at the week's final and perhaps most important event of the week: the May payrolls report to generate some upward volatility and help stocks finally break out of the range they have been caught in for over a year.

Stocks Tumble After Fed Plans Too-Big-To-Fail Bank Counterparty Risk Cap

US financials are tumbling after The Fed proposed a rule that would limit banks with $500 bln or more of assets from having net credit exposure to a “major counterparty” in excess of 15% of the lender’s tier 1 capital. Bloomberg reports that The Fed's governors plan to vote today on the proposal. The implications of this are significant in that it will force some banks to unwind exposures and delever against one another (most notably with potential affect the repo market which governs much of the liquidity transmission mechanisms). Guggenheim's Jaret Seiberg warns the proposal is likely to be "stringent," though less onerous than the Dec 2011 proposal... which Goldman Sachs more specifically warned that it could destroy 300,000 jobs.

Crunch Time?

It seems monetary policy is exhausted and the next exogenous lever to pull would be political fiscal initiatives. If/when they fail to stimulate demand, there would be only one avenue left – currency devaluation. If/when confidence in the mightiest currency wanes, we would expect the US dollar to be devalued too - not against other fiat currencies, but against a relatively scarce Fed asset.

The Complete Fed Decision Preview: All You Need To Know

At 2 p.m. EST, the only thing the financial world will care about and discuss will be the Fed's [first rate hike in 9 years|epic disappointment]. So for those who still haven't made up their mind about what the Fed's [dovish|non-dovish] rate hike means, here is all you need to know.

Janet Yellen Explains Why The Fed Will Raise Rates Amid A Revenue, Profit & Manufacturing Recession - Live Feed

Janet Yellen is set to begin the first part of her two-day excuse-fest for why The Fed will raise rates (market implied odds at 74%) in December despite Chinese stocks crashing again, carnage in commodities, a revenues recession, plunging EBITDA, a collapse in US manufacturing, housing rolling over, and auto sales fading (yes, read the facts here). Few expect her to rock the boat to change the market's perception, especially following Lockhart's confirmation that The Fed's job mandate has been met.

Frontrunning: October 14

  • Democratic rivals back Clinton on emails, but little else in scrappy debate (Reuters)
  • Hillary Clinton Shows Relentless Efficiency in First Democratic Debate (WSJ)
  • U.S. Examines Goldman Sachs Role in 1MDB Transactions (WSJ)
  • JPMorgan Says Trading Pain Isn't Over After Third-Quarter Slump (BBG)
  • Islamic State battles insurgents near Aleppo as army prepares assault (Reuters)
  • Oil Slide Means `Almost Everything' for Sale as Deals Accelerate (BBG)