Global investors took a deep breath ahead of a holiday week in many markets, as they awaited reaction to an unusual statement made over the weekend by the United States Treasury Secretary about the health of the American banking system.
The US Treasury Secretary Steven Mnuchin has telephoned the heads of the six largest banks in the country. The measure followed the significant losses on the stock markets since the last week and the partial cessation of work of the federal government.
“The executives have confirmed they have enough liquidity available to lend to consumers, business markets and all other market operations”, said Steven Mnuchin in a statement.
The US Treasury Secretary spoke to the heads of Bank of America (Brian Moynihan), Citi Corp (Michael Corbat), Goldman Sachs (David Solomon), JP Morgan Chase (Jamie Dimon), Morgan Stanley (James Gorman) and Wells Fargo (Timothy Sloan).
The Minister also confirmed that the banks had no problems and the markets continued to function properly.
On Monday, Steven Mnuchin will hold a talk with the Financial Markets Working Group to the President. The representatives of the Federal Reserve Board, the Securities and Exchange Commission, and the Commodity Futures Trading Commission will take part in it.
“We continue to observe strong economic growth in the US economy with strong consumer and business activity”, added Steven Mnuchin.
The finance ministry spokesman said that the minister had initiated individual talks with the six bankers because, in his view, such dialogue and the convening of the working group were appropriate given current market volatility.
The US indices reported significant drops last week. The blue-chip index Dow Jones Industrial Average reported its worst weekly performance since October 2008, wiping out 6.8% of its value. In turn, the S&P 500 dropped by 7% and is now 17.8% below its record earlier this year. For the technology index Nasdaq Composite, the difference from its peak in August is now 22%.
On Saturday, Steven Mnuchin tried to calm the financial markets that Federal Reserve Governor Jerome Powell would not leave the post after released information the Donald Trump is considering his dismissal.
Upcoming economic events
During the week will be released some key indicators for the economic stability of the US. The markets will expect the release of the US home prices, which have risen more slowly in recent months as higher mortgage rates weigh on sales. The data will be released on Wednesday with expectations the index decrease to continue.
The US consumer confidence will be released on Thursday. The index remains strong, but it has been slipping lately. The Conference Board’s consumer confidence index fell to 135.7 in November from October’s 18-year high 137.9.
On Thursday will be released another important data. The US Labor Department releases unemployment benefit applications data from last week. These so-called jobless claims hit a 49-year low in mid-September before rising modestly, a development that was likely related to two hurricanes striking the southern US.
On Friday, the National Association of Realtors will report its tally of November pending US home sales. The pending home sales index fell 2.6% in October, as higher mortgage rates made home buying less affordable, discouraging some would-be buyers. The index, which is based on contract signings, has tumbled 6.7% from a year ago. Pending sales are a barometer of future home purchases.