Unable to shake off credit market angst, Wall Street turns its attention to an upcoming US Federal Reserve meeting where policymakers will attempt to restore market confidence.
Confidence was shaken again in the the past week as investment giant Bear Stearns said it had gained emergency funds from the Federal Reserve Bank of New York and rival bank JPMorgan Chase to shore up its stretched finances.
Market participants said Bear Stearns' woes, triggered by mounting losses from mortgage-backed securities, and ongoing economic worries will likely spur the Fed to cut US interest rates at a policy meeting on Tuesday.
Most economists expect the US central bank to cut its key short-term federal funds interest rate, but opinion is divided over the size of a possible cut. Analysts believe it will be between 50 and 100 basis points, marking a significant reduction in borrowing costs.
The Fed has slashed its fed funds rate by 225 basis points to 3 percent since September in a bid to shore up economic momentum which is being threatened by a multiyear housing slump, a credit crunch, rising jobs cuts and skyrocketing crude oil prices.
Despite such turmoil, the stock markets mostly posted modest gains in the past week.
The leading blue-chip Dow Jones Industrial Average rose 0.48 percent for the week ended on Friday to close at 11,951.09 points, although the index is down 10 percent for the year to date.
The NASDAQ composite finished the week unchanged at 2,212.49, while the broad-market Standard & Poor's 500 index gained 0.4 percent to 1,288.14.
"We are projecting that the FOMC [Federal Open Market Committee] will vote to reduce the federal funds rate by 75 basis points on March 18. There is an outside chance of a deeper 100-basis-point cut, given turbulent conditions in financial markets," economists at Global Insight said in a briefing note.
The yield on the 10-year Treasury bond declined to 3.421 percent from 3.541 percent a week earlier, while that on the 30-year bond fell to 4.348 percent from 4.541 percent.
GEOPOLITICAL ISSUES? The economics ministry said that political factors should not affect supply chains linking global satellite firms and Taiwanese manufacturers Elon Musk’s Space Exploration Technologies Corp (SpaceX) asked Taiwanese suppliers to transfer manufacturing out of Taiwan, leading to some relocating portions of their supply chain, according to sources employed by and close to the equipment makers and corporate documents. A source at a company that is one of the numerous subcontractors that provide components for SpaceX’s Starlink satellite Internet products said that SpaceX asked their manufacturers to produce outside of Taiwan because of geopolitical risks, pushing at least one to move production to Vietnam. A second source who collaborates with Taiwanese satellite component makers in the nation said that suppliers were directly
Top Taiwanese officials yesterday moved to ease concern about the potential fallout of Donald Trump’s return to the White House, making a case that the technology restrictions promised by the former US president against China would outweigh the risks to the island. The prospect of Trump’s victory in this week’s election is a worry for Taipei given the Republican nominee in the past cast doubt over the US commitment to defend it from Beijing. But other policies championed by Trump toward China hold some appeal for Taiwan. National Development Council Minister Paul Liu (劉鏡清) described the proposed technology curbs as potentially having
EXPORT CONTROLS: US lawmakers have grown more concerned that the US Department of Commerce might not be aggressively enforcing its chip restrictions The US on Friday said it imposed a US$500,000 penalty on New York-based GlobalFoundries Inc, the world’s third-largest contract chipmaker, for shipping chips without authorization to an affiliate of blacklisted Chinese chipmaker Semiconductor Manufacturing International Corp (SMIC, 中芯). The US Department of Commerce in a statement said GlobalFoundries sent 74 shipments worth US$17.1 million to SJ Semiconductor Corp (盛合晶微半導體), an affiliate of SMIC, without seeking a license. Both SMIC and SJ Semiconductor were added to the department’s trade restriction Entity List in 2020 over SMIC’s alleged ties to the Chinese military-industrial complex. SMIC has denied wrongdoing. Exports to firms on the list
TALENT FACTOR: The nation’s chip sector would be difficult to replace, but to maintain that advantage, Taiwan must retain skilled workers, an academic said A group of experts on Sunday called on Taiwan to strive to maintain its world-leading position in the semiconductor industry, with a US-China chip dispute expected to continue regardless of who becomes the next US president. Tamkang University Graduate Institute of International Affairs and Strategic Studies director Li Da-jung (李大中) said at a Taipei seminar on global semiconductor security that the relationship between the two superpowers would remain confrontational. There appears to be “no turning back” in US-China relations, as US presidential candidates US Vice President Kamala Harris and former US president Donald Trump are both expected to continue Washington’s hawkish stance
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