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Breaking financial world news from 12 july 2019.

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Breaking news

Fed Chair Jerome Powell signals rate cut

Fed Chair Jerome Powell delivered the first part of his congressional testimony before the House Financial Services Committee on Wednesday, July 10. According to the report, the US economy remains robust, while the strong jobs report in June does not mean that the regulator will necessarily keep the Fed funds rate on hold at its July policy meeting. Moreover, Powell noted uncertainties over trade frictions and concerns about the global economic outlook, weighing on US growth. He said that earnings are currently not increasing quickly enough to boost inflation, which remains subdued. Furthermore, business confidence fell after the Fed downgraded its economic forecasts. Investors flagged Powell’s testimony as dovish, signaling a 0.25% rate cut at the FOMC’s July meeting. To remind, US President Donald Trump has repeatedly criticized Jerome Powell for the Fed’s monetary policy stance, calling for the regulator to cut interest rate as stimulus for economic expansion.

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Fed policymakers call for monetary policy easing

Minutes from the FOMC’s latest meeting was published on Wednesday, July 10. According to the minutes, most policymakers see a case for monetary policy easing amid risks to the US economic outlook stemming from trade frictions. However, a few policymakers do not think a rate cut would be warranted at this point. Several committee members said that risks to the economy are skewed to the downside as lower interest rates could overheat the labor market. Finally, some policymakers believe that the outlook could improve once trade frictions are resolved.

Bank of Canada keeps key rate steady at 1.75%

The Bank of Canada held a meeting on Wednesday, July 10, at which the board predictably decided to keep the policy interest rate unchanged at 1.75%. The bank lending rate currently stands at 2.0%, while the deposit rate is 1.5%. In its policy statement, the regulator noted increasing evidence that trade frictions are having an adverse impact on the global economic outlook. The Bank of Canada had accounted for such negative effects in its previous monetary policy reports and updated its projections in light of weaker sentiment and business activity across major economies. According to the statement, the US-China trade dispute is “curbing manufacturing activity and business investment and pushing down commodity prices.” The country’s inflation rate remains close to the 2% target, with pressure having increased recently due to rising food and car prices. Meanwhile, core inflation is also hovering close to the 2% mark. However, recent data shows that the Canadian economy is reverting to a trajectory of potential growth.

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Markets

US: Nasdaq Composite hits all-time high

Key US stock indices landed in positive territory on Tuesday, July 10, with each of them touching all-time highs in intraday trading. The case for a rate cut strengthened again after Fed Chair Jerome Powell, in his congressional testimony, sent clear signals that the regulator is prepared for monetary policy easing.

Specifically, Powell said that the Fed will “act as appropriate to sustain the expansion.” He noted risks to the economic outlook stemming from trade frictions and highlighted that, despite a robust US jobs report, business investment and industrial output data remains weak.

Notably, minutes from the latest FOMC meeting were published, which investors also read as positive as many policymakers called for broader stimulus before long unless the economic outlook improves.
Recapping the benchmarks, the blue-chip gauge Dow Jones Industrial Average added 0.29% to 26,860.20, the broad market index S&P 500 advanced 0.45% to 2,993.07, and the tech-heavy Nasdaq Composite closed 0.75% higher at 8,202.53.

In commodities, August NYMEX WTI traded up 2.60% to USD 60.43/bbl. On the COMEX, August gold added USD 12.00 to USD 1,412.50/oz. The 10-year UST yield widened 0.01% to 2.06%.
Levi Strauss & Co tanked 12.0% after reporting worse-than-expected earnings as net income declined to USD 28.2 mn, or 7 cents per share, in Q2 2019 from USD 74.9 mn, or 19 cents per share, for the yearearlier period.

T-Mobile soared 4.6% on news that the stock will be excluded from the S&P 500 Index and replaced by Red Hat after IBM closed a deal to acquire the latter.

Tesla surged 3.9% on news that it plans to expand capacities at its factory in Fremont, California.

In the blue-chip universe, almost two thirds of names traded in the green, with Chevron (+1.7%), Pfizer (+1.6%) and Exxon Mobil (+1.4%) leading the gains. Among the underperformers, Caterpillar (-1.2%), Goldman Sachs (-0.9%) and Nike.

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S&P 500

The daily chart shows that the S&P 500 is trading close to the upper line of Bollinger bands, while the Slow Stochastic Oscillator is about to exit overbought territory, with the RSI hovering in close proximity. Consequently, the benchmark will likely head lower in the short term.

Breaking financial world news from 12 july 2019.

Europe: European Commission’s forecast dampens investor sentiment

Key European stock indices landed in negative territory on Wednesday, July 10 as traders awaited Fed Chair Jerome Powell’s congressional testimony. Moreover, markets came under pressure after the European Commission cut its GDP forecast for 2020.

Specifically, the Commission currently expects the economy of the 27 member countries in the EU to expand 1.6% next year, down from 1.7% anticipated earlier, citing higher US and Chinese import tariffs that could weigh on investor confidence and global financial markets.

As regards macro data, the UK’s industrial output increased 0.9% y-o-y and 1.4% m-o-m in May, missing expectations of 1.1% y-o-y and 1.5% m-o-m, while the country’s trade deficit stood at GBP11.5 bn in the same month vs. GBP 12.6 bn projected.

Telecom, automotive names as well as food and beverage makers underperformed the broader market.

Recapping the benchmarks, the UK’s FTSE 100 edged down 0.08%, the French CAC 40 ticked up 0.08%, and the German DAX pulled back 0.51%. The regional indicator STXE 600 closed 0.2% lower at 387.15.

British recruitment services provider Hays sank 5.8% after its rival PageGroup guided for a decline in profits.

British IT player Micro Focus International tanked 11.73% after guiding for a 6% y-o-y decrease in fullyear revenue.

Airbus was well bid, gaining 1.3% on reports that it beat US rival Boeing in terms of aircraft deliveries in H1 2019.

Deutsche Bank rebounded 0.38%, snapping a multi-session losing streak.

Key European stock indices have been on the rise during the first half of Thursday, July 11, with O&G names leading the gains. Notably, markets are drawing support from expectations of a Fed funds rate cut at the FOMC’s July meeting after Fed Chair Jerome Powell said in his congressional testimony that the regulator is going to assess a broad range of macro data, while the strong US jobs report did not change the outlook.

By 9:15 GMT, the UK’s FTSE 100 firmed 0.30%, the German DAX added 0.17%, and the French CAC 40 advanced 0.39%. The regional barometer STXE 600 was 0.21% higher at 387.97.

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DAX

The daily chart shows that the German DAX has broken out of the lower line of a rising band to the upside, while the Slow Stochastic Oscillator has just exited overbought territory. Consequently, the benchmark will likely extend the downtrend in the short term.

Breaking financial world news from 12 july 2019.

Asia: markets rise on Powell’s testimony Asian stock indices turned in positive performance on Thursday, July 11, specifically after Fed Chair Jerome Powell’s semi-annual congressional testimony, in which stated that a rate cut could be made at the FOMC’s July meeting.

On the macro data front, Japan’s net foreign investment came out, with the weekly inflow at JPY 192.2 bn compared to a JPY 58.5 bn outflow a week earlier.

In Australia, housing financing was unchanged m-o-m in May. The Japanese Nikkei 225 advanced 0.51%, the Chinese Shanghai Composite ticked up 0.08%, Hong Kong’s Hang Seng firmed 0.10%, the South Korean KOSPI rose 1.06%, and the Australian S&P/ASX 200 closed 0.39% higher.

On the S&P/ASX 200, Resolute Mining and Cooper Energy outperformed the broader market, soaring 9.75% and 8.74%, respectively. On the other side of the spectrum, Sims Metal Management and Platinum Asset Management retreated 3.86% and 3.40%.

The Nikkei 225 gainers were led by Dainippon Screen and SUMCO, which surged 4.29% and 3.77%, respectively. On the other side of the ledger, Suzuki Motor and Chiyoda pulled back 2.82% and 2.59%. On the upside, Australia’s Resolute Mining climbed 9.75% to a 12-month high.

In Japan, game console maker Nintendo spiked 4% after announcing the launch of Nintendo Switch Lite. Insurance services provider Japan Post Insurance plummeted 9% after saying it is having trouble with 90,000 insurance policies.

Bandai Namco Holdings bolted up 19% on news that the stock will be included in the Nikkei 225 Index.

Tech stocks were well bid, with Samsung Electronics and SK Hynix adding over 2%. In the Australian banking sector, Commonwealth Bank, National Bank of Australia, Westpac and Australia & New Zealand Banking landed in the green.

Australian mining giant Rio Tinto closed 0.85% higher, tracking metal prices. Hang Seng From a technical standpoint, the Hang Seng is attempting a rebound as it closes a bearish gap, while looking set to retrace downward before long and head lower towards the closest support level at 28,000.

Breaking financial world news from 12 july 2019.

Commodity markets

Crude futures have been trending higher on Thursday morning, even after a major bull run in the previous session. Notably, the market is drawing support from several factors, including a storm in the Gulf of Mexico and weekly US crude inventories data. To remind, EIA data showed a 9.5 mn bbl drawdown vs. the median consensus of 3.0 mn bbl. Gasoline inventories shrank by 1.5 mn bbl, while distillate inventories showed a build of 3.7 mn bbl, compared to expectations of -400,000 bbl and +1.5 mn bbl, respectively.

By 6:10 GMT, Brent futures added 0.59% to USD 67.10/bbl, while WTI futures advanced 0.20% to USD 60.57/bbl.

On the COMEX, August gold traded up 0.21% to USD 1,421.9/oz during the Asian session, while August silver appreciated 0.13% to USD 15.25/oz.

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Breaking financial world news from 12 july 2019.

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