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Breaking financial news from 26 june 2019.

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Kaplan: it is premature to talk about a Fed rate cut

Dallas Fed President Robert Kaplan thinks that it is premature to talk about the possibility of a rate cut by the Federal Reserve over the next few months. “The question is whether trade and global growth uncertainties are likely to persist in a manner that leads to a material deterioration in the outlook for U.S. economic growth,” Kaplan said in an article. “At this stage, I believe it is too early to make a judgement on this question,” he thinks. It should be noted that Robert Kaplan is not a FOMC voting member this year.
However, his article makes it possible to assume that he would support the decision to hold the key rate steady at 2.25-2.5%, which the Federal Reserve adopted at the June 19-20 meeting. To remind, 9 out of 10 FOMC voting members backed this decision, and only St. Louis Fed President James Bullard voted for a rate cut. According to Kaplan, given an unexpected deterioration in the prospects of trade policies “it would be wise to allow events to unfold a bit more making judgements regarding the stance of monetary policy”. He pointed out that the central bank’s movement to monetary easing will also require stricter regulatory measures to forestall bubbles in the economy and especially to prevent excess corporate borrowings.

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US CCI reaches 2017 low

The US Consumer Confidence Index decreased from 131.3 in May to 121.5 in June, the Conference Board said in a press release. This is the lowest reading since September 2017, while analysts on average forecast a much smaller drop, only to 131. The Present Situation Index for June fell from 170.7 to 162.6, while the Expectations Index for the next six months dropped from 105 to 94.1. The percentage of those expecting market conditions to improve over the next six months decreased from 21.4% in May to 18.7%. The percentage of those expecting job gains during the sixmonth period fell from 18.4% to 17.3%. The percentage of Americans expecting higher wages over the next six months decreased from 22.2% to 19.1%.

US new home sales unexpectedly drop in May

US new home sales declined 7.8% m-o-m to an annual rate of 626,000 in May, Department of Commerce data show. Analysts on average forecast sales to increase to 684,000. As experts note, new home sales are in decline amid falling home prices and mortgage rates, and consumers’ quite high optimism, which could imply hidden problems in the sector. Home sales declined the most in western regions, a record monthly decrease since 2010. In May, the median home price fell 2.7% y-o-y to USD 308,000. As of late May, US new homes stood at 333,000, or nearly the same as the end of the previous month. Given the pace of sales in May, it would take 6.4 months to sell them compared to 5.9 months in April. New homes account for roughly 10% of the US housing market.
However, new home sales are registered immediately after contracts are signed, which makes them a more up-to-date gauge of market conditions.

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US: Powell’s comments weigh on equities

Major US stock indices landed in negative territory on Tuesday, June 25, amid geopolitical uncertainty in the Middle East and remarks by Fed Chair Jerome Powell that the regulator has been closely watching for upside risks to the US economy and stands ready to act to forestall adverse consequences. Based on the Federal Reserve’s estimates, sooner or later the US inflation rate will approach the 2% target, although not as quickly as previously expected. In his speech, he did not drop any hint about a forthcoming rate cut, disappointing investors.

The media wired on Monday that President Donald Trump announced sanctions against Iranian leader Ayatollah Ali Khamenei. Trump has already signed off on the relevant order and noted that the sanctions will also affect the Ayatollah’s circle, sparking pessimism among market participants. Yesterday’s macro turned out to be a letdown. US new home sales totaled 626,000 in May, missing the median consensus of 680,000, while the June CCI stood at 121.5 vs. 131.1 expected after 131.3 (revised) in May.

Recapping the indices, the Dow Jones Industrial Average retreated 0.67% to 26,548.22, the S&P 500 decreased 0.95% to 2,917.38, and the tech-heavy Nasdaq declined 1.51% to 7,884.72.

In commodities, August NYMEX WTI ticked down 0.1% to USD 57.83/bbl, whereas August COMEX gold was up 0.1% at USD 1,418.70/oz. The 10-year US government bond yield stood at 1.99%.

Among the underperformers, biopharmaceutical company AbbVie tanked 16.3% on reports that it agreed to take over Ireland-based Allergan for USD 63 bn. Notably, Allergan shares rocketed 25.4%.

Home builder Lennar gave up 6.21%, although the stock enjoyed strong demand in early trading due to encouraging financial results for the past quarter. Net income totaled USD 421.5 mn, or USD 1.30 per share, compared with USD 310.3 mn or 94 cents per share a year ago, exceeding the median consensus (USD 1.15 per share). Revenue also rose to USD 5.56 bn, while analysts expected USD 4.78 bn.

Food delivery company Grubhub stood out among the outperformers. The stock spiked 5.14% after being upgraded from Hold to Buy at Citi Research.

S&P 500

The daily chart shows that the S&P 500 has rebounded from the key 2,955 resistance level, while the Slow Stochastic Oscillator, which has long been in overbought territory, is set to exit it. As a result, we expect the index to extend downward movement in the short term.

Breaking financial news from 26 june 2019.

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Breaking financial news from 26 june 2019.

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