sp'daily5
VIX'daily3
Summary
US equities opened significantly higher, on increased hopes of a trade deal. The afternoon saw a closing hour high of 2992 (1pt below the late morning high), but then leaned distinctly weak, as initial details of 'phase one' of Trade-deal LITE, were released.
With equity strength, volatility was ground lower, settling -11.3% at 15.58. S/t outlook offers some cooling to the upper end of secondary downside gap to sp'2911.
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QE4 begins next week
On Tuesday, Powell alluded that the Fed was considering buying more US Govt' bonds. Today saw confirmation. Official press release: https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20191011a3.pdf
QE4 begins Wednesday Oct'16th...
see: https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/treasury-securities/treasury-securities-operational-details#current-schedule
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I would especially note...
The Fed sure doesn't want to call it QE, and instead deem it as 'Reserve Management Purchases'.
Lets be clear, QE4 begins next Wednesday morning, with a starting annualised rate of $720bn.
Earlier and larger than expected
I had expected at least another two rate cuts, with QE4 launching as early as late Spring 2020. Instead, the printing will resume next week, with the Fed starting pretty big at $60bn a month. I have to think that behind the scenes, the monetary masters of print central are absolutely terrified of even a mild recession.
Whilst lower rates are not going to help stave off a recession, I'm not sure if $60bn will be enough to juice the market above the next decisive level of sp'3050. As ever, how the month settles will be telling.
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Goodnight from London
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