Dow fell 34, decliners over advancers 3-2 & NAZ lost 19. The MLP index added 1+ to the 248s. Junk bond funds inched higher& Treasuries were sold. Oil climbed in the 57s (more below) & gold finished up 5 to 1402 (5 year high).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
EU to hold high-level meeting on Iran nuclear deal as Middle East tensions rise
This week, the Federal Reserve voted almost unanimously to leave interest rates unchanged with the exception of one voting member: James Bullard, the pres of the Federal Reserve Bank of St Louis. Bullard advocated for a rate cut at the Jun meeting, although the FOMC ultimately held its target rate range steady at 2.25-2.50%. “Lowering the target range for the federal funds rate at this time would provide insurance against further declines in expected inflation and a slowing economy subject to elevated downside risks,” he said explain his decision. “Even if a sharper-than-expected slowdown does not materialize, a rate cut would help promote a more rapid return of inflation and inflation expectations to target.” His dissent was not unexpected; at the beginning of Jun, he had suggested the Fed needed to cut rates due to muted inflation, the inverted yield curve & ongoing uncertainty about global trade disputes. Inflation has indeed remained well-below the Fed's preferred target range of 2%. The PCE inflation -- the Fed’s preferred measure -- rose a seasonally adjusted 0.31% in Apr from Mar & 1.5% from a year earlier. “The forces that are keeping inflation below target seem unlikely to be solely transitory,” Bullard added. However, Bullard isn't alone in his dovish policy stance. According to a "dot plot" of FOMC members' expectations, 7 other members favor one rate cut this year (compared to 8 who prefer for rates to stay unchanged & one who wants a rate hike). Minneapolis Federal Reserve Pres Neel Kashkari, who is not a voting member of the 10-person FOMC this year, said on today that he argued during the meeting for a 50 basis point cut to deal with falling inflation. “I believe an aggressive policy action such as this is required to re-anchor inflation expectations at our target,” he said.
Federal Reserve Governor Lael Brainard suggested she would support interest rate cuts in coming meetings to guard against downside risks to the economy. In a speech, Brainard said “important downside risks” have emerged in recent weeks. “Crosscurrents from policy uncertainty have risen since early May, crimping business investment plans, raising concerns in some financial market segments, and weighing on global growth prospects,” she said. Indicators of inflation has been disappointing, she added. “The downside risks, if they materialize, could weigh on economic activity. Basic principles of risk management in a low neutral rate environment with compressed conventional policy space would argue for softening the expected path of policy when risks shift to the downside,” she continued. Brainard said she was worried about lower rates adding to financial market imbalances but that would not stop her from supporting an easing. The best way to address financial imbalances is by using macroprudential tools, like activating the Fed’s countercyclical capital buffer, rigorous use of stress tests & beefed-up monitoring of leveraged lending, she said.
The Fed on Wed voted 9-1 to hold interest rates steady.
Oil futures gained, with US prices rising nearly 9% for the week & highest settlement this month, lifted by expectations for economy-boosting central bank policy & continued Middle East tensions that could disrupt oil markets. Gasoline led the climb among energy futures, up almost 4% for the session, amid reports that a fire at a 150-year-old refinery complex in Philadelphia startled residents with explosions. Any permanent damage to the facility, the largest on the Eastern Seaboard, was as yet unclear. The new front-month contract, Aug West Texas Intermediate crude rose 36¢ (0.6%) to settle at $57.43 a barrel. Based on front-month prices, WTI finished at its highest since May 29. It rose 8.8% for the week, the biggest such percentage climb since Dec 2, 2016. Philadelphia Energy Solutions says the oil refining complex is the largest on the Eastern Seaboard, processing 335K barrels of crude oil daily. Oil prices saw hefty gains Thurs after Iran shot down a US military drone, adding to fears of a deepening conflict & potential disruption to oil supplies. That news fueled an already price-bullish backdrop, created by expectations the Federal Reserve & other central banks will cut interest rates in coming months to sustain economic growth.
The Dow recovered this week, bringing it near to its record high. Other popular stock averages are also in record high territory. However the appetite for safe have investments has also been growing with gold & Treasuries near multi year highs. That disparity will be cleared up when present day uncertainties quite down.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
The EU is slated to chair a meeting of the countries involved in the Iran nuclear deal at the end of Jun, as tensions between the US & Tehran continue to escalate. High-level
representatives from China, France, Germany, Russia, Britain & Iran
will attend the meeting -- the purpose of which is to ensure the
“continued implementation” of the nuclear deal, the bloc said. The Obama-era deal has come under increased
pressure after Pres Trump announced more than one year ago that the US would withdraw from the foreign policy initiative, bucking
US allies while imposing a punishing round of economic sanctions. Representatives
in the meeting hope to address “challenges arising from the withdrawal
and re-imposition of sanctions by the United States on Iran,” as well as
Iran's announcement earlier this week that it could break the limits
set on its uranium stockpile by the 2015 deal. News
of the meeting comes in the midst of rising concerns about the
possibility of a military confrontation between the US & Iran after
an Iranian missile shot down a spy drone over the Strait of Hormuz.
Officials on both sides have disputed whether the drone was
in Iranian airspace or not. Trump confirmed in
a tweet that the US was “cocked & loaded” to retaliate last night, but that he ultimately decided against doing so because
150 people would have died. “I stop it, not proportionate to shooting down an unmanned drone. I am
in no hurry, our Military is rebuilt, new, and ready to go, by far the
best in the world. Sanctions are biting & more added last night.
Iran can NEVER have Nuclear Weapons, not against the USA, and not
against the WORLD!” he added.
EU to hold high-level meeting on Iran nuclear deal as Middle East tensions rise
Treasury Secretary Steve Mnuchin warned that Iran's financial system will soon face additional
penalties if the nation doesn't comply with intl guidelines to
combat money laundering. Mnuchin's remarks at a
2019 summit for the Financial Action Task Force (FATF), an intl
organization with a mandate to police money-laundering & the financing
of terrorist networks, came amid escalating tensions between the US gov & Iran. The FATF removed Iran from its financial blacklist in 2016
after gov officials agreed to implement policies that would bring
its financial institutions into compliance with intl
standards. As of this month, Iran had yet to comply with the
FATF's standards. Mnuchin said further delay would result in more
intl audits of its financial institutions, as well as other
“counter-measures” if Iran fails to act. “The
FATF responded to Iran’s willful failure to address its systemic money
laundering and terrorist financing deficiencies by requiring increased
supervisory examination for branches and subsidiaries of financial
institutions based in Iran and calling for additional counter-measures
to be re-imposed if Iran does not make further progress,” Mnuchin said. The FATF said Iran has until Oct to come into compliance with intl standards or it will trigger counter-measures. Mnuchin's
comments came hours after Pres Trump ordered retaliatory strikes
after Iran shot down an unnamed surveillance drone, only to reverse
course minutes before the attack was set to occur. Trump said he
withdrew the order because it was a disproportionate response to the
downing of the drone. Trump added that “sanctions are biting” Iran’s
economy and that additional penalties were “added last night.” The
latter remark was a reference to the FATF's warnings outlined by
Mnuchin. "FATF will be
announcing the increased supervisory examination, a deadline for Iran to
comply with certain FATF standards, and the additional counter-measures
if the deadline is not met,” according to a senior Treasury official.
This week, the Federal Reserve voted almost unanimously to leave interest rates unchanged with the exception of one voting member: James Bullard, the pres of the Federal Reserve Bank of St Louis. Bullard advocated for a rate cut at the Jun meeting, although the FOMC ultimately held its target rate range steady at 2.25-2.50%. “Lowering the target range for the federal funds rate at this time would provide insurance against further declines in expected inflation and a slowing economy subject to elevated downside risks,” he said explain his decision. “Even if a sharper-than-expected slowdown does not materialize, a rate cut would help promote a more rapid return of inflation and inflation expectations to target.” His dissent was not unexpected; at the beginning of Jun, he had suggested the Fed needed to cut rates due to muted inflation, the inverted yield curve & ongoing uncertainty about global trade disputes. Inflation has indeed remained well-below the Fed's preferred target range of 2%. The PCE inflation -- the Fed’s preferred measure -- rose a seasonally adjusted 0.31% in Apr from Mar & 1.5% from a year earlier. “The forces that are keeping inflation below target seem unlikely to be solely transitory,” Bullard added. However, Bullard isn't alone in his dovish policy stance. According to a "dot plot" of FOMC members' expectations, 7 other members favor one rate cut this year (compared to 8 who prefer for rates to stay unchanged & one who wants a rate hike). Minneapolis Federal Reserve Pres Neel Kashkari, who is not a voting member of the 10-person FOMC this year, said on today that he argued during the meeting for a 50 basis point cut to deal with falling inflation. “I believe an aggressive policy action such as this is required to re-anchor inflation expectations at our target,” he said.
Fed's Bullard argues interest rate cut is 'insurance' against rising risks
Federal Reserve Governor Lael Brainard suggested she would support interest rate cuts in coming meetings to guard against downside risks to the economy. In a speech, Brainard said “important downside risks” have emerged in recent weeks. “Crosscurrents from policy uncertainty have risen since early May, crimping business investment plans, raising concerns in some financial market segments, and weighing on global growth prospects,” she said. Indicators of inflation has been disappointing, she added. “The downside risks, if they materialize, could weigh on economic activity. Basic principles of risk management in a low neutral rate environment with compressed conventional policy space would argue for softening the expected path of policy when risks shift to the downside,” she continued. Brainard said she was worried about lower rates adding to financial market imbalances but that would not stop her from supporting an easing. The best way to address financial imbalances is by using macroprudential tools, like activating the Fed’s countercyclical capital buffer, rigorous use of stress tests & beefed-up monitoring of leveraged lending, she said.
The Fed on Wed voted 9-1 to hold interest rates steady.
Fed’s Brainard suggests she supports interest-rate cuts
Oil futures gained, with US prices rising nearly 9% for the week & highest settlement this month, lifted by expectations for economy-boosting central bank policy & continued Middle East tensions that could disrupt oil markets. Gasoline led the climb among energy futures, up almost 4% for the session, amid reports that a fire at a 150-year-old refinery complex in Philadelphia startled residents with explosions. Any permanent damage to the facility, the largest on the Eastern Seaboard, was as yet unclear. The new front-month contract, Aug West Texas Intermediate crude rose 36¢ (0.6%) to settle at $57.43 a barrel. Based on front-month prices, WTI finished at its highest since May 29. It rose 8.8% for the week, the biggest such percentage climb since Dec 2, 2016. Philadelphia Energy Solutions says the oil refining complex is the largest on the Eastern Seaboard, processing 335K barrels of crude oil daily. Oil prices saw hefty gains Thurs after Iran shot down a US military drone, adding to fears of a deepening conflict & potential disruption to oil supplies. That news fueled an already price-bullish backdrop, created by expectations the Federal Reserve & other central banks will cut interest rates in coming months to sustain economic growth.
Oil logs 9% weekly rise — biggest since late 2016; refinery fire jolts gasoline futures
The Dow recovered this week, bringing it near to its record high. Other popular stock averages are also in record high territory. However the appetite for safe have investments has also been growing with gold & Treasuries near multi year highs. That disparity will be cleared up when present day uncertainties quite down.
Dow Jones Industrials
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