Morning Markets Aug 22th 2019

Good Thursday morning, hope all is well-Markets are cautious after yesterday's FOMC Minutes which immediately after I read through them thought we have a divided Fed (2 favored 50bp cut, Kashkari is one of them), while Several favored no cut at all), now I know its old news in a way since the new tariffs, violent market volatility happened after 7/31st (and once Powell speaks tomorrow who cares ), but still it shows what I believe to be a cautious, not stubborn Fed, one that said themselves needs flexibility (be open-minded as outlook lacks clarity-Trade risks), won't get bullied by Trump or markets (so mid-cycle adjustment, re-calibration with no pre-set course for a full blown easing cycle, but let's monitor all)-their main 3 reasons to cut in July 25bp, is still true (Business, manufacturing slump due to trade uncertainty (Trade policy-war creating a 'persistent headwind'), global slowdown/prudent risk mgmt.. due to global slowdown & risks (Brexit)/soft inflation, 'stubbornly low' ) so expect another 25bp in September and constant monitoring, more on FOMC below !!! Now- -Jackson Hole begins (22ND-24TH), Jobless claims, KC Fed, 4wk $55b-2mo $40b T-Bill auctions, Treasury auction announcement, Markit PMIs (Overall beat, but Germany saw orders fall to 6+ yr. low-concerns over German recession coming), ECB minutes (Look hints of upcoming stimulus, size and shape, especially after Rehn's strong, dovish comments last Thursday/'significant and impactful' package.); Gap & CIBC report ! Italy's President meets with 5 Star/League as Conte resigned yesterday; Macron/UK Johnson meeting !!!

*************We Begin with stocks mixed in Asia, but negative in Europe and U.S futures in the red with Dow -30 right now ! Treasuries trading sideways this morning after a bit of fluctuation & move higher after yesterday's minutes which even sent the 2yr/10yr YC inverted for a brief period (market reacted a bit disappointed, concerned Fed being stubborn, possibly behind the curve)- 2yr 1.565%/10yr 1.58%/30yr 2.065%, 3mo-10yr -39bp ! VIX 16-16.5 range ! Oil rising to $56.10 ! Gold falling to $1,496 ! USD hanging steady ! LIBOR FELL TO NEW LOW 1MO -2.1BP/3MO FELL -1.5BP/6MO ROSE +1.7BP/1YR ROSE 1.9BP

• European PMIs 47 vs 46.5, composite 41.8 vs 51.5; Germany 43.6 vs 43.2
  MFG. PMI * Fannie-Freddie stocks rose yesterday on news official report to end U.S control has been sent to the White House-Kudlow and others- reviewing it, still weeks away from public release ! Plans how to rebuild their capital, path out of conservator-ship (since 2008) !
• FOMC MINUTES ! *MOST FED OFFICIALS VIEWED JULY RATE CUT AS MID-CYCLE
  ADJUSTMENT/'ongoing reassessment' of the policy path that began in late 2018 !! *A NUMBER OF FED OFFICIALS STRESSED NEED FOR FED FLEXIBILITY !! *A COUPLE OF
  FED OFFICIALS FAVORED 50 BPS CUT AT JULY FOMC !! *SEVERAL FED OFFICIALS FAVORED KEEPING RATE UNCHANGED IN JULY !! *PRUDENT RISK MANAGEMENT ALSO SUPPORTED FED-EASING DECISION !! *OFFICIALS FAVORING A CUT CITED TRADE UNCERTAINTY, LOW INFLATION !! *SEVERAL OFFICIALS NOTED RISK OF CORP. DEBT, LEVERAGED LENDING !! *A FEW OFFICIALS EXPRESSED CONCERN ON YIELD CURVE INVERSION !! *FED OFFICIALS SAW TRADE UNCERTAINTY AS A PERSISTENT HEADWIND' !! *NUMBER OF OFFICIALS SAID FED COULD'VE USED QE MORE AGGRESSIVELY !! *FED OFFICIALS VIEWED SUSTAINED EXPANSION AS BASELINE OUTLOOK !! *FOMC MEMBERS AGREED IT WAS IMPORTANT TO MAINTAINOPTIONALITY' !! Fed Officials Viewed July Rate Cut as "Recalibration" of Policy-Insurance for growth and inflation !! No 'pre-set' course for cuts !! "Members who voted for the policy action sought to better position the overall stance of policy to help counter the effects on the outlook of weak global growth and trade policy uncertainty (Trump's trade war), insure against any further downside risks from those sources, and promote a faster return of inflation" to the 2% target, No talk of standing repo facility