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TODAY ON WALL STREET: Fed outlook dampens mood across stock markets

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09/17/2020 | 07:56am EDT

US markets halted their rebound yesterday, following the Fed's dour outlook and announcements on its monetary policy. Last night, financial markets have more or less received what they expected from the US central bank, namely a guarantee that rates will remain at the floor in the medium term, but the economic outlook dampened the mood. Powell also insisted on the need for politicians to do their part to help maximize the effects of monetary policy. In this case, it would be a matter of breaking the deadlock in Congress by agreeing on a support plan.

Clearly, Wall Street was hoping for more, as indices were falling off at the end of the session, with new drops on technology stocks. Well, not all of them, since we witnessed a new moment of delirium, when the action of the data storage and exploitation specialist Snowflake closed up 130% for its first day of listing in New York. Either the risk appetite is completely out of control, or the advisory banks that prepared the deal missed something. What is certain is that appetite for the sector remains intact.

Meanwhile, the Financial Times published an article noting that so far in September, about 24% of the money raised on the US debt market has been used to finance the payment of dividends to private equity funds. Over the last two years, this has averaged 4%. In other words, funds owning companies have them take out loans, a quarter of which are used to pay a dividend. A practice favored by investors' craze for corporate debt, which still raises questions, especially when the companies that subscribe to the loans start to show unreasonable coverage ratios. But as long as the money isn't worth much...

Despite some efforts to compromise in the United Kingdom on Brexit and in the United States on the Congressional stimulus package, the morning mood remains tense on markets, with bearish leading indicators.

Three central banks are on the agenda today with the decisions of the Bank of Japan (status quo, no surprise), the Bank of Brazil (status quo, no surprise) and the Bank of England, which does not intend to tighten monetary policy either. Other macroeconomic events of the day include European inflation, US housing starts & building permits and weekly US unemployment registrations, as well as the Philly Fed index.

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