Oil, Ruble and US stocks faltered after the FED's statements

Oil, Ruble and US stocks faltered after the FED's statements
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Oil prices, stock indexes in the United States and the ruble exchange rate at the Moscow exchange slid lower in evening trading on Monday, amid statements from the US Federal Reserve that the program of monetary pumping of financial markets will be curtailed after the state of the US economy returns to normal.

The US stock market, having started trading in the positive, went into the negative by the end of the session in New York: the S&P sank 0.9%, the Nasdaq 2.1%, and the Dow Jones gave up all its morning gains.

Brent crude futures fell 2.34% to $ 42.23 per barrel.

The dollar exchange rate in Moscow again exceeded the level of 71 rubles. The Euro shuddered by 0.82%, to 80.5375 rubles.

The reason for selling came in a wake of statements of the head of the Federal Reserve Bank of Dallas, Robert Kaplan, who warned that emergency stimulus from the FED is not eternal.

Since March, the FED has pumped $ 3 trillion into the markets, buying up assets and issuing REPO loans. Kaplan said that some of those steps were necessary but markets need to return to a situation where they function without FED interventions. He noted that it would be wise if they send a signal that as soon as the economy improves, it is right for us to limit and scale back some of these programs. However, he added that this moment “has not yet come,” reports Bloomberg.

On Monday, the Federal Reserve Bank of New York published a schedule of operations for the next two weeks. Until the end of July, the FED will continue to buy assets at the same rate, pouring $ 9 billion a day into the market. Of this amount, the FED will buy $4.5 billion in Treasury bonds and the same amount in mortgage-backed securities.

This, however, does not guarantee an influx of liquidity. Over the past three weeks, the FED’s balance sheet has been shrinking, indicating that the US Central Bank is withdrawing the dollar mass pumped into the system at the peak of the crisis.

The FED is reducing swap operations with foreign Central banks, under which it provided almost half a trillion dollars of loans to foreign markets. In addition, primary dealer banks are gradually repaying REPO loans that the FED has been issuing since October.

Of these transactions, the FED’s balance sheet fell by $88.3 billion in the week ending July 8, a record amount for the past 11 years, and by $ 245 billion since the beginning of June.

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