Federal Reserve will increase supply of bank reserves | Calamatta Cuschieri

Market summary

Maltese market closed in red on Tuesday, with MSE total index ending the session 0.369% lower to 9,901.103 points. Best performer was Simonds Farsons Cisk plc, it jumped 5.22% to close at 12.10, followed by 2.91% rise of BMIT Technologies plc and Midi plc which added 1.33% to close at 0.53 and 7.60 respectively. Most of equity market closed in red. Biggest fall, of 3.55% was seen from HSBC Bank Malta plc with closing price of 1.36. Followed by MaltaPost plc with 2.96% drop to 1.31 and Mapfre Middlesea plc, which slid 2.73% to 2.14.

European stocks finished lower on Tuesday after the US blacklisted 28 Chinese companies just three days before the next round of trade negotiations and amid reports that the Chinese delegation might cut its visit short by a day, denting hopes of a deal. By the end of trading, the Stoxx 600 was 1.10% lower at 378.71, as Germany's Dax dropped by 1.05% to 11,970.20 and the French CAC 40 fell by 1.18% to 5,456.62. London's FTSE 100 was down 0.76% at 7,143.15.

Wall Street stocks closed firmly lower yet again on Tuesday after the US expanded its trade blacklist to include China's top artificial intelligence firms. At the close, the Dow Jones Industrial Average was down 1.19% at 26,164.04, while the S&P 500 was 1.56% weaker at 2,893.06 and the Nasdaq Composite saw out the session 1.67% lower at 7,823.78.

Central bank would increase purchases of government-backed securities over time

The Federal Reserve will soon increase its purchases of short-term Treasury securities to avoid a recurrence of the unexpected strains experienced in money markets last month, Fed Chairman Jerome Powell said Tuesday.

Fed officials stopped shrinking the assets on their balance sheet in August but never said when they would allow the balance sheet to grow again. As a result, a crucial liability on the balance sheet—bank deposits held at the Fed, called reserves—have continued declining.

Stresses in very-short-term funding markets last month suggested banks have grown reluctant to lend those reserves. Officials hadn’t said until Tuesday when they would allow reserves to grow again to avoid further scarcity issues from roiling funding markets.

The Fed’s plan hasn’t been finalized, but Mr. Powell suggested would be ready by or before officials’ Oct. 29-30 policy meeting. The goal would be to rebuild the level of reserves in the system sufficiently above the low point of less than $1.4 trillion reached last month.


This article was issued by Nadiia Grech, Junior Trader at Calamatta Cuschieri. For more information visit, https://cc.com.mt/. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.