September 30th Financial News
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2024-09-30Iran calls for emergency UN Security Council meeting as Lebanese-Israeli conflict intensifies. Meanwhile, oil prices rebound slightly as the crude market weighs supply and demand.
[Quick Facts]
1. Iran calls for emergency UN Security Council meeting as Lebanon-Israel conflict intensifies.
2. More than 100,000 US workers will strike, and the impact is widespread. The Biden administration will find it hard to intervene before the election.
3. Oil prices rebound slightly as crude oil market weighs supply and demand.
4. Moody downgrades Israel's credit rating, and further downgrades are possible.
5. Musalem: Faster rate cuts may be appropriate if labor market weakens further.
[News Details]
Iran calls for emergency UN Security Council meeting as Lebanon-Israel conflict intensifies
Iran's Permanent Representative to the United Nations, Iravani, sent a letter to the United Nations Security Council on November 28th, calling for an urgent meeting of the Council. In his letter, Iravani said that Israel, with the support of the United States, has committed aggression against Lebanon, which poses a serious threat to regional and world peace and security and violates the Charter of the United Nations and international law. Iran strongly condemns this. Iran calls on the Security Council to take immediate and decisive action to stop the ongoing Israeli aggression and avoid dragging the region into an all-out war.
Iran also warns that it will not tolerate attacks against its diplomatic facilities and personnel. Iran will not hesitate to exercise its inherent rights under international law and take all measures to defend its vital national and security interests.
More than 100,000 US workers will strike, and the impact is widespread. The Biden administration will find it hard to intervene before the election
On 30 September, 45,000 people will strike on the US East Coast and the Gulf Coast, which, stacked with a strike by Boeing machinists, could result in 100,000 people temporarily losing their jobs. CBS News said that US East Coast port workers have been negotiating with shipping organizations representing terminal operators and ocean carriers over pay rises, with a demand for a 77 percent pay rise over a six-year period, due to a basic wage that is far lower than that of West Coast port workers. In addition, the unions are demanding a ban on the automation of machinery and equipment used to load and unload cargo at more than 30 ports.
This would be the first strike since 1977, meaning that more than 68 percent of US container exports and 56 percent of import business would then be affected. Economists say that for every week that port workers are on strike, US economic activity is reduced by $4.5 to $7.5 billion, and clearing the backlog of cargo can take up to a month. If the strike lasts more than a month, some US companies will face shortages of raw materials, such as cotton, lumber, and copper, which are mostly transported through East Coast and Gulf Coast ports, while the pharmaceutical and tobacco industries may also be affected.
According to an analysis by the Associated Press, the Biden administration may use the Taft-Hartley Act to force dockworkers to return to work, as it did to intervene in the rail strike in 2022. However, this may not happen before the presidential election. The Biden administration has long been considered pro-union, and forcing workers back to work could raise political risks, especially so close to the presidential election.
Oil prices rebound slightly as crude oil market weighs supply and demand
After the continuous decline in oil prices, although Saudi Arabia tends to follow a small increase in production, the market expects a suspended production raise. Now, the market is waiting for the follow-up of Saudi Arabia's production cuts agreement. It is expected that oil prices will oscillate despite frequent conflicts in the Middle East because the market is less sensitive to the geopolitical situation. At the same time, there is a large amount of idle capacity in the Middle East. Thus, the market is more concerned about issues including the economic downturn and weakening demand. As a result, the rebound was insufficient, and the consolidation will be extended. Investors should take a look at the key level at $70/bbl.
Moody downgrades Israel's credit rating, and further downgrades are possible
On Friday, Moody's downgraded Israel's credit rating by two notches to 'Baa1' from 'A2' and maintained a negative outlook due to the escalation of the conflict between Israel and Lebanon's Hezbollah in the region. Moody's said, " the primary factor driving this downgrade is their assessment that geopolitical risks have escalated to very high levels, with significant negative implications for Israel's creditworthiness in both the near and long term."
Moody's warned that the uncertainty surrounding Israel's security and long-term economic growth prospects is "much higher than typical for the Baa rating category," suggesting that slipping below this level would strip Israel of its investment-grade status. The agency added, "Should current tensions with Hezbollah escalate into full-blown conflict, further downgrades could occur, potentially multiple notches."
Musalem: Faster rate cuts may be appropriate if the labor market weakens further
On September 27th, ET, Alberto Musalem, President of the Federal Reserve Bank of St. Louis, stated in an interview that the US labor market has cooled somewhat in recent months. However, given low layoff rates and overall robust economic conditions, he maintains an optimistic outlook.
There is a possibility that the US economy may react "very strongly" to overly accommodative financial conditions, stimulating demand and prolonging the time needed to rein inflation back to the target rate of 2%. At present, the most critical step involves easing policy constraints gradually. It's essential to ensure that any relaxation occurs steadily.
Currently, the US business sector is in a “sound condition,” with commercial activities generally 'solid.' Large-scale job cuts do not appear imminent. Nevertheless, risks facing the Federal Reserve might necessitate quicker interest rate reductions.
Economic weakness could potentially surpass my current expectations, and labor market softening might exceed anticipated levels. Should this scenario unfold, a faster pace of rate cuts could prove appropriate. For me, the priority now lies in taking the foot off the brake gently – in other words, incrementally reducing the restrictiveness of monetary policy.
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