Morgan Stanley Asks Fed to Lower Bank’s Capital Requirement

Central Bank

Political

Summary:

Morgan Stanley asked the Federal Reserve to reduce its capital requirements, the regulator said as it announced upcoming capital requirements for most Wall Street banks that are in line with lenders’ expectations.

“The firm requested reconsideration to reduce this requirement,” the Federal Reserve said in a statement Friday. “The board is reviewing the request to reduce the firm’s stress capital buffer requirement,” and plans to make and publish a decision by Sept. 30.

The central bank’s announcement formally wraps up its annual stress-tests exercise, a multistep process that assesses how the nation’s largest lenders are likely to perform under hypothetical economic conditions. It concludes with an updated total Common Equity Tier 1 capital-ratio requirement for each firm, which will take effect Oct 1.

“Morgan Stanley remains actively engaged with the Federal Reserve to reach a final SCB requirement” before Oct. 1, the New York-based bank said in a statement.

The Fed didn’t specify the reduction that Morgan Stanley was requesting. The company said last month that, based on its stress-test result, it expected its CET1 requirement to drop to 12.6% from the current 13.5%.

A total of 22 banks, including Morgan Stanley, underwent and comfortably passed this year’s Fed stress test that determined they would be able to withstand more than $550 billion in losses. Friday’s capital requirements tied to that test is made up of several components, including a minimum CET1 capital-ratio requirement of 4.5% — the same for each company — and the stress capital buffer requirement. The biggest lenders, or so-called global systemically important banks, are also subject to a capital surcharge.

The Fed’s announcement comes as the industry awaits the outcome of the Fed’s planned changes to its stress-test process. In April, the agency unveiled a proposal to average results over two years when setting capital requirements. Michelle Bowman, the Fed’s vice chair for supervision, has said that potential changes would help the agency address the “excessive volatility in the stress-test results and corresponding capital requirements.”

“The individual capital requirements announced today represent a period of transition,” Bowman said in the statement, adding that finalizing the April plan would be an important next step to reducing year-over-year volatility in bank capital requirements.

The Fed also unveiled plans to decrease what’s called the enhanced supplementary leverage ratio, which requires banks to hold a certain amount of capital relative to their assets. The regulator also will move to propose a fresh risk-based capital plan that Wall Street has advocated for.

Source: Bloomberg

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Manuel

Commodity

Political

Oil notched its first monthly loss since April, with trading dominated by concerns about a looming glut and geopolitical issues, including US-led efforts to end the war in Ukraine.

West Texas Intermediate for October delivery slid 0.9% to settle near $64 a barrel, with the US benchmark down 7.6% this month. Brent closed above $68. Oil has lost ground in August on worries that global supplies will run ahead of demand in the coming quarters, boosting stockpiles.

The commodity’s slump deepened on Friday after US consumer sentiment declined to a three-month low, reflecting concerns that tariffs will hurt the economy. Oil Slides to Monthly Loss as Traders Weigh Glut, Geopolitics_1

Oil Slides to Monthly Loss as Traders Weigh Glut, Geopolitics_1

nvestors are also focused on Ukraine and potential shifts in crude flows from Russia. US President Donald Trump was “not happy” about Moscow’s recent strikes on Ukraine, White House Press Secretary Karoline Leavitt said. Washington has imposed a 50% levy on most Indian imports to punish the South Asian nation for buying Russian crude.

Moscow unleashed a wave of drone and missile strikes on Kyiv earlier this week, in defiance of US calls for an end to the fighting, killing 18 people, Ukrainian authorities said.

A meeting between Ukrainian President Volodymyr Zelenskiy and Russia’s Vladimir Putin was unlikely, according to German Chancellor Friedrich Merz. Trump has threatened “very big consequences” if Moscow doesn’t come to the negotiating table.

Oil is down 11% this year on concerns that Trump’s trade war will hurt energy consumption at the same time that OPEC+ is working to restore idled capacity.

“More OPEC+ oil is coming to the market amid worries over US economic growth, which keeps the market well-supplied,” said Jens Naervig Pedersen, a strategist at Danske Bank AS.

Trading volumes on Friday were muted ahead of the Labor Day holiday weekend in the US, contributing to exaggerated price swings.

Source: Bloomberg

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Manuel

Economic

Stocks

US stocks fell from record highs on Friday as Wall Street digested an update on consumer inflation that showed prices firming higher above the Fed's target in July.

The Dow Jones Industrial Average (^DJI) fell around 0.3%, and the S&P 500 (^GSPC) lost about 0.8%. The tech-heavy Nasdaq Composite (^IXIC) led the retreat, down over 1.2%. Big Tech slumped, with Nvidia (NVDA) declining over 3% to end the week not long after releasing its highly anticipated earnings report.

A key Fed-watched measure of inflation rose as expected in July, new government data showed Friday. The "core" Personal Consumption Expenditures index, closely studied by the central bank, rose 0.3% on a monthly basis and 2.9% on an annual basis, above the Fed's 2% inflation target. Both numbers matched economist expectations, though the annual pace marked the biggest rise since February.

Meanwhile, US consumer sentiment declined to a three-month low as consumers in a University of Michigan survey suggested they expect inflation to surge over the next year.

Friday's data comes after signs of a resilient economy helped lift the S&P 500 and Dow Jones Industrial Average to new all-time highs on Thursday.

Bets that the Fed will ease rates at its September meeting were still riding high Friday, and traders were pricing in an 87% chance of a quarter-point cut following the PCE reading.

The inflation data caps a whirlwind week for markets gripped by Nvidia earnings and President Trump's effort to oust Fed governor Lisa Cook, which took a new turn. On Friday, a judge is expected to rule on Cook's bid for a temporary restraining order.

Despite the pullback in stocks on Friday, the major indexes were set for their longest streak of consecutive monthly gains in more than a year.

The tech-heavy Nasdaq Composite was on track to see a 2% bump in August, marking its fifth straight monthly rise, the longest winning streak in nearly a year and a half. For their part, the S&P 500 and the Dow were set for their fourth consecutive month of gains, on track to add 1.6% and 2%, respectively — the longest since September 2024.

And the Russell 2000 (^RUT), which includes small market capitalization companies, eyed a 6% jump for August, on course for its fourth monthly uptick, the longest streak in over four years.

Source: Yahoo Finance

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Manuel

Cryptocurrency

Bitcoin (BTC) holding patterns suggest a potential resumption of the uptrend starting in late September 2025, as long-term accumulation data reveals evolving market dynamics driven by institutional adoption and policy catalysts.

CryptoQuant Korean Community Manager Crypto Dan’s analysis reveals that the current cycle differs from previous bull markets due to extended timeframes and flattening momentum slopes.

The percentage of Bitcoin held for over one year based on realized market cap demonstrates the current cycle’s unique characteristics compared to previous phases.

Unlike past cycles, where sharp surges led to rapid peaks, institutional adoption through spot exchange-traded funds (ETFs) and nation-state purchases has extended the bull market’s duration while gradually flattening the uptrend’s slope.

Market momentum faces periodic stalls when capital flows shift toward altcoins, a pattern that has repeated multiple times during the current cycle. It contrasts with 2023-2024, when Bitcoin dominated market attention before capital began migrating to alternative cryptocurrencies.

Favorable backdrop

Crypto Dan noted that September rate cut expectations align with Bitcoin’s seasonal patterns and technical indicators.

Polymarket traders currently place 81% odds on a 25 basis point Federal Reserve rate cut at the September FOMC meeting, providing a potential catalyst for risk asset appreciation.

The analysis also anticipates additional momentum from the expected approvals of altcoin ETFs in October.

Bloomberg ETF analyst James Seyffart stated in April that most crypto ETF applications face final deadlines in October, making it the likely approval month for spot altcoin products.

This timeline creates a favorable policy window for crypto markets as they enter the fall season.

Combined with seasonal patterns that show Bitcoin’s strength in autumn months, the convergence of dovish monetary policy and regulatory clarity positions the market for renewed upward momentum following the current consolidation phase.

Extended cycle characteristics

Institutional adoption fundamentally altered Bitcoin’s cycle dynamics compared to the retail-driven phases that preceded it.

The introduction of spot ETFs and corporate treasury adoption created more stable demand flows but extended the cycle’s duration. The analysis suggested these structural changes support sustained bull market conditions despite periodic consolidation phases.

Given the favorable policy backdrop and development of institutional infrastructure, any additional corrections during the transition period could present attractive opportunities for accumulation.

The combination of rate cuts, ETF approvals, and seasonal factors supports an optimistic market outlook for fall and winter 2025.

Source: Cryptoslate

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Manuel

Political

Central Bank

Questions about whether President Donald Trump had cause to try to push out Federal Reserve Governor Lisa Cook dominated a court hearing Friday, as a judge weighs whether he had proper reasons to order her removal from the US central bank.

US District Judge Jia Cobb peppered lawyers for Cook and the administration for about two hours Friday, before ending the hearing without ruling on the Fed governor’s request for a temporary order blocking Trump’s effort to oust her.. The judge, who isn’t expected to make a decision this week, didn’t indicate which way she is leaning in a landmark lawsuit that could determine the future of the Fed’s independence.

The hearing capped weeks of criticism of the Fed by the Trump administration and signaled the beginning of a pitched legal fight that is likely to land before the US Supreme Court. Cook sued after Trump moved to fire her for allegedly engaging in fraud by declaring two homes as her primary residence in separate mortgage applications. She hasn’t been charged with wrongdoing.

The judge focused in particular on Cook’s argument that being accused of wrongdoing and fired through a series of social media posts didn’t amount to proper due process under US law.

Cook lawyer Abbe Lowell spent more than an hour fielding questions from the judge over what cause the president needs to fire a Fed governor and whether Trump acted on an improper pretext. The judge also probed whether Cook received appropriate notice.

Lowell said that fraud allegations have become a “weapon of choice” for Trump as he seeks to remove officials whom he views as obstacles to his agenda. Trump’s motive, he argued, signaled he didn’t have the necessary cause to fire Cook.

Trump is not seeking a Fed governor who “has never committed an infraction in their life,” Lowell said, but one who “would lower the interest rate” to what the president “demanded.”

No Explanation

Justice Department attorney Yaakov Roth argued that Cook’s failure so far to explain the alleged mortgage discrepancies suggests she did something wrong and supports Trump’s right to remove her for cause. If there was an explanation, he said, “we would have heard it by now.”

As part of her lawsuit, Cook suggested that an unintentional “clerical error” may have been behind the mortgage filling.

Roth denied that Trump is looking to remove Cook over policy disagreements. She was appointed by former President Joe Biden and her term was set to expire in 2038. Roth also disputed the claim by Cook that Trump has violated her right to contest the claims against her.

Cook sued Trump on Thursday, arguing that his attempt to fire her was a power grab that could cause “irreparable harm” to the US economy. The president is seeking to remove her over claims by Federal Housing Finance Agency Director Bill Pulte that she lied on mortgage documents.

At the hearing, the judge said she is “uncomfortable” with Cook’s argument that she was fired on a pretext. But she said she’s also uncomfortable with Trump explicitly saying he wanted a majority on the Fed’s board and then saying “find reasons to kick all these people off so I can get my people in.”

Cobb also signaled that she is grappling with whether she has authority at all to review the legitimacy of Trump’s stated reasons for firing Cook, or if he’s entitled to wide discretion when deciding to remove someone “for cause.”

The judge is not expected to issue a ruling before at least Tuesday, when Cook’s lawyers are due to file another legal brief addressing the judge’s questions on Friday and responding to the government’s arguments.

Next Steps

In a statement Tuesday, the Fed acknowledged Cook was seeking a court order clarifying whether she could continue serving in her role while the case proceeds. The Fed said it would abide by the court’s decision, and a spokesperson added the agency would defer any decision on her work status.

Just before the hearing, the Justice Department said in a filing that courts should defer to Trump on whether he has sufficient “cause” to fire Cook. Her request for an order temporarily allowing her to remain employed should be denied, the government said. Cook is “highly unlikely to prevail on the merits” of her claim that Trump illegally fired her without cause, they argued.

“Removal for ‘cause’ is a capacious standard, and one Congress has vested in the discretion of the President,” the government said. “Even if it were subject to any judicial review — and over a century of caselaw suggests it is not — that review would have to be highly deferential, lest it intrude into the President’s constitutional authority over principal officers.”

A central claim of Cook’s lawsuit is that Trump violated her constitutional due process rights as well as the Federal Reserve Act by firing her without “cause,” a term that’s been defined to mean inefficiency; neglect of duty; and malfeasance, or wrongdoing, in office.

But the Justice Department argued that Cook was relying on an “artificially narrow interpretation” of what constitutes “cause” for her firing. In the hearing, Roth disputed Cook’s argument that she did not receive the necessary notice of the allegations against her because they were made in a social media post.

“You’re not suggesting what happened would satisfy due process requirements?” the judge asked Roth. He replied that he would.

Source: Bloomberg

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Kevin Du

Economic

Austria's next central bank governor, behavioural economist Martin Kocher, is expected to be milder in public than his outspoken predecessor, although he has rebuked the Trump administration over threats to central bank independence.

Kocher, 51, will take office on Monday, succeeding Robert Holzmann, 76, who, in six years leading the Austrian National Bank, was repeatedly a lone dissenter in Frankfurt as the European Central Bank's most hawkish Governing Council member.

While there are few clear clues about Kocher's approach to monetary policy, he is seen as a safe pair of hands with experience both in academia and in government.

"I think his approach will be not to be all that outspoken, tending towards more of a hawk than a dove," Bank Austria's Chief Economist Stefan Bruckbauer said, referring to Austria and Germany's general tradition of conservatism in monetary policy.

"He is definitely qualified for the job and has the required background to grasp the complexity of all the decisions that a central bank must take."

Kocher, a marathon runner whose personal best is just over three hours, left his post at the head of the Institute for Higher Studies economic think-tank in 2021 to enter a previous government under the conservative People's Party (OVP).

The OVP nominated him for the job of governor and he was confirmed last summer. Holzmann had been nominated by the far-right Freedom Party under a previous coalition with the OVP.

Kocher made few waves as minister and left government after his confirmation for the central bank post. One of his few recent public pronouncements relevant to his future job was a blog posting in July entitled "Washington - get a grip!" criticising the Trump administration for undermining the Federal Reserve's independence and increasing economic uncertainty.

"It is violating the independence of the Federal Reserve - not through constant criticism of its monetary policy (which is, of course, permissible), but through institutional considerations based on dubious legal arguments and with the clearly stated desire to reduce the U.S. national debt," he wrote.

"Central bank independence includes a duty to point out how dangerous it is when that independence is undermined."

Source: Yahoo Finance

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Devin

Political

French President Emmanuel Macron reiterated his support for Prime Minister Francois Bayrou’s decision to call a confidence vote on Sept. 8, one that may well lead to the government’s ouster.

Macron declined to discuss his options if Bayrou’s government were to collapse. Those include naming a new premier or dissolving the National Assembly and holding elections. But the French president insisted he wouldn’t resign, as some parties have demanded.

“The mandate entrusted to me by the French people and by no one else will be exercised until its term expires,” Macron said in a press conference Friday alongside German Chancellor Friedrich Merz in Toulon, on the Mediterranean French coast.

Bayrou’s ouster would return Macron to an impasse he’s struggled to exit since snap elections last year: There is no obvious candidate capable of getting legislation through a National Assembly split between three antagonistic blocs.

“What he is doing isn’t completely crazy,” Macron said, citing Germany as an example where ideologically diverse parties are part of the same government. “He’s right to hold political and parliamentary forces accountable for the situation.”

Opposition parties including Marine Le Pen’s far-right National Rally are pressing for Macron to role the dice again with fresh legislative elections. But he’s so far resisted that with polls showing that both he and his allies are deeply unpopular.

Macron said in Toulon he believed that Bayrou’s rounds of talks with political parties starting next week can convince them to vote for the government’s survival.

But the balance of power in parliament leaves little hope for Bayrou. To avoid being forced to resign on Sept. 8, the premier must convince either the far right or an improbable series of leftist lawmakers to abstain, going back on their repeated pledges to vote against him.

Earlier this year, Bayrou managed to negotiate the deadlock by getting Socialists to abstain in a no-confidence vote over the 2025 budget. They’ve indicated that won’t happen again, even as the premier has invited them and other political groups for talks next week.

The government’s probable downfall has already rattled financial markets as investors price in greater risks around reducing a debt burden that Bayrou says crushes the country.

Market selloffs in recent days pushed the spread between France’s 10-year borrowing cost and Germany’s over 80 basis points — highs not seen since January. On Friday, it was around 79.