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Thursday Financial Report

Good morning.

The Federal Open Market Committee has decided to keep interest rates where they are. At her press conference yesterday Janet Yellen said “We judged that the case for an increase had strengthened but decided for the time being to wait for continued progress toward our objectives,” leading many to count on a December rate hike. This added to the price of U.S. indices and helped out shares in Europe overnight. Brent crude oil was up almost a whole percent over the evening to $47.27 a barrel while copper and gold both rose, 1.1% and 0.36%, respectively. Commodity sensitive companies helped to lead the S&P up.

As an additional consequence of  the FOMC’s decision not to raise rates, the USD fell against 16 foreign currencies, most notably falling 1.1% against the Japanese Yen. The currencies of emerging markets, namely the South Korean Won and the South African Rand, gained the most.

The U.S. equity-capital-market revenue for banks is the lowest it has been in about 20 years. This is the market for banks to make money on companies through underwriting an Initial Public Offering. IPO’s are getting squeezed because the markets have been flooded by cheap capital facilitated by low interest rates. The fall in IPOs are a primary issue for banks because IPO underwriting is usually the highest margin business that a bank conducts. Political uncertainty is bound to reduce the amount of IPO volume going forward as well.

9.22.16

SnoQap Team

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