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Brexit stress gets reprieve due to Supreme Court ruling

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The RSM Brexit Stress Index eased slightly during the week, as Britain’s Supreme Court ordered the resumption of Parliament and restored some sort of order to the Brexit chaos.

The composite index, which measures financial-market stress surrounding Britain’s impending departure from the European Union, closed the week at 1.20 standard deviations above normal levels of stress, down from last week’s close at 1.27. While stress remains high, it has retreated from the extreme levels of earlier this month when a constitutional crisis and a clumsy exit appeared inevitable. … READ MORE >

RSM manufacturing outlook signals additional decline

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The RSM US Manufacturing Outlook Index continues to anticipate a decline in manufacturing, falling in September to -0.84 standard deviations below normal conditions for the manufacturing sector from -0.55 standard deviations in August. It the latest signal that manufacturing is contracting. … READ MORE >

Brexit stress rises amid Bank of England’s caution

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The RSM Brexit Stress Index rose slightly during a week that included conciliatory tones regarding proposals for a Northern Ireland economic zone, the High Court’s hearings over the suspension of Parliament and the Bank of England warning that continuing anxiety over Brexit and global trade disputes are taking their toll on the economy. … READ MORE >

FOMC policy decision: ‘Catch-22’ in a monetary context

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Demands by market actors for accommodative policy linked to a diminished global and domestic economic outlook resulted in a reduction in the federal funds rate by 25 basis points to a range between 1.75% and 2%. In our estimation, this is likely not the final rate cut of 2019 by a central bank clearly concerned with the direction of trade policy, a modest exogenous supply shock in oil markets and political pressure from the executive branch to reduce rates. … READ MORE >

Modest supply shock to global oil to boost US retail gas prices

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The attack on the Saudi oil production facility at Abqaiq over the weekend will temporarily remove roughly 5.7 million barrels of oil production per day, or about 5% of total global supply, and is set to send U.S. retail gas prices 15% higher. As long as the geopolitical situation on the ground does not change, we will not expect the supply shock to spur a recession at this time. … READ MORE >

Fed preview: Difficulty and divided FOMC

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Monetary policy is difficult under the best of circumstances. The cross currents of the trade war, a modest exogenous supply shock in oil markets, political pressure from the executive branch to reduce interest rates are among the factors that make the upcoming FOMC meeting one of the more challenging policy decisions in some time. … READ MORE >

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