Key Takeaways
- Federal Reserve's Lorie Logan is advocating for a significant modernization of the interest rate targeting system, proposing a shift to the tri-party general collateral repo rate to address growing fragility in the fed funds market, a move she describes as technical rather than a policy shift.
- Oracle (ORCL), Silver Lake, and MGX are poised to become the primary investors in TikTok U.S., collectively securing a 45% ownership stake in the popular social media platform.
- Russia and China have formally requested the U.N. Security Council to hold a vote on Friday on a draft resolution aimed at delaying the reinstatement of sanctions on Iran by six months, seeking to extend the current pause in diplomatic efforts.
- The U.S. Q2 GDP was revised upward to a robust +3.8% on stronger-than-expected consumption, with Goldman Sachs (GS) subsequently boosting its Q3 GDP tracking to +2.6%.
- A potential partial U.S. government shutdown threatens to freeze air traffic controller hiring and could impose a staggering $1 billion weekly cost on the travel sector, according to industry groups.
Monetary Policy Under Review
Dallas Federal Reserve President Lorie Logan has called for a timely modernization of the Federal Reserve's interest rate target system, emphasizing the need to act while markets remain calm. Logan stated that the current fed funds market, while still functional, is becoming increasingly fragile due to a shift towards secured markets. She proposes updating the framework by transitioning to the tri-party general collateral repo rate, highlighting the repo market as the core of money markets. Logan stressed that this change would be purely technical, not a shift in monetary policy, and some repo rate volatility would be acceptable given the Fed targets a range.
TikTok Secures Key U.S. Investors
In a significant development for the tech sector, Oracle (ORCL), private equity firm Silver Lake, and MGX are set to become the main investors in TikTok's U.S. operations. These entities will collectively hold a 45% combined ownership in the U.S. entity of the popular video-sharing app. This investment aims to address U.S. national security concerns while maintaining TikTok's commercial viability.
Geopolitical Standoffs Intensify
Geopolitical tensions remain high as Russia and China have formally requested a U.N. Security Council vote on Friday. The draft resolution seeks to delay the reinstatement of sanctions on Iran by six months, aiming to extend the current pause in sanctions amid ongoing diplomatic efforts. Meanwhile, in Europe, Denmark's Defence Intelligence Chief reported that the perpetrators of recent drone incursions remain unknown. However, he noted that these events resemble hybrid warfare patterns observed elsewhere and assessed the risk of Russian sabotage as high.
U.S. Economic Indicators Show Strength
Positive economic news emerged with the U.S. Q2 GDP being revised upward to a robust +3.8%, driven by stronger consumption. Following this encouraging data, Goldman Sachs (GS) has boosted its Q3 GDP tracking to +2.6%. Additionally, durable goods orders came in above expectations, and initial jobless claims were below expectations, further signaling economic resilience.
Government Shutdown Looms Over Travel Sector
The prospect of a partial U.S. government shutdown is casting a shadow over the economy, particularly the travel sector. An industry group warns that such a shutdown would freeze the hiring of air traffic controllers. This disruption could cost the travel sector an estimated $1 billion weekly, impacting millions of travelers and businesses.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.