With the market now responding almost exclusively to political developments (in a bizarro way of course: US-China trade war is bad for the USD, hence good for stocks), fundamentals long forgotten, and as a result HFT algos now moving primarily to FX trading (just read the following story about a Reuters data feed break causing a currency spike), focusing on politics, especially with both the US and China having fired the first trade war shots, will be unfortunately increasingly more important. Thus, here is what to expect out of our (and by our we naturally mean Wall Street's) "best and brightest" representatives today.
From Goldman Sachs
Free trade deals likely to pass the House and Senate, along with a number of hearings, and continued action on the Volcker Rule…
10:00 am -- Republican leadership press conference. Now that the Senate has rejected the President’s jobs package, one of the main questions is whether the House will take up any of the measures on a piecemeal basis as the Senate appears likely to do. So far, House leaders have signaled they may move certain parts of the package on a standalone basis, but haven't indicated which parts those might be. Regardless, the most likely path to enactment still seems to be inclusion in the legislation produced by the super committee in November, assuming it is able to reach some type of agreement.
10:00 am -- SEC open meeting on Volcker Rule. The SEC will consider the draft rulemaking on prohibitions on certain investments and trading pursuant to the Volcker Rule enacted in the Dodd Frank Act, as well as registration of swap dealers and “major swap participants.”
10:00 am -- Derivatives regulation. The House Agriculture Committee will review legislative proposals to modify Title VII of the Dodd-Frank Act, which covers derivatives regulation.
10:00 am -- National Infrastructure Bank. The House Transportation Committee’s title sums up the view of the committee’s Republican leaders: “The National Infrastructure Bank: More Bureaucracy and More Red Tape.”
10:00 am -- House Financial Services Committee votes on capital stock increases for IBRD, IADB, EBRD, and ADB. The legislation is called “Supporting Economic and National Security by Maintaining U.S. Leadership in Multilateral Development Banks Act.” However, the more important step is for Congress to actually order the Treasury to write the check providing funding; that occurs as part of the appropriations process, where recapitalization will compete with other domestic priorities.
12:30 pm – Sen. Lindsey Graham (R-SC) speaks on the future of the just-passed currency legislation. The Senate passed currency legislation aimed at China last night with 63 votes. In theory, the next event could be the release of the Treasury’s semi-annual report on foreign exchange, which is technically due October 15, but like previous administrations, the Treasury hasn’t been holding to the formal deadline recently. So far, indications from the House are that hearings will be held on the issue, but there is no plan to consider the Senate’s bill at present.
1:00 pm -- Federal Home Loan Banks. The House Financial Services Committee will review the state of the FHLB system, which came under new regulation in 2008 but hasn’t seen the same level of legislative focus as the GSEs or the FHA. The former director of the FHFB (the FHLB system’s former regulator until FHFA took over after 2008) and representatives from the FHLB system and the banking industry will testify.
Afternoon -- House and Senate vote on trade agreements with Columbia, Panama, and South Korea. The House is likely to pass all three agreements, along with renewal of the Trade Adjustment Assistance (TAA) program, which provides training, health benefits, and other assistance for workers displaced by trade competition. The Senate is expected to vote on the measures later today as well, which would put them on their way to the President’s desk to be signed into law.