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Breaking financial world news from 18 july 2019.

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Fitch expects only one Fed rate cut in 2019

In contrast to market expectations, the US Federal Reserve will deliver only one Fed funds rate cut this year, analysts at Fitch Ratings forecast. “A 25 bp cut now appears probable at either the July or September FOMC meeting but is unlikely to signal the start of a series of interest rate cuts,” the agency said. Fitch anticipates that, after this one cut, the Fed funds rate will remain unchanged until end 2020. Meanwhile, market participants are pricing in three rate cuts by end 2019, which would essentially offset all rate increases in 2018. Notably, analysts at Fitch see this scenario as highly unlikely. In their view, the US economy is growing faster than expected, while consumer spending and employment growth remain robust amid a low unemployment rate. Fitch concludes that the interest rate will probably be cut as a pre-caution against downside risks to the economic outlook rather than a reaction to incoming US macro data. The FOMC’s next meeting is scheduled for July 30-31.

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German investor confidence falls in July

Germany’s ZEW Economic Sentiment Index for the next six months dropped to -24.5 in July from -21.1 in the previous months, the Leibniz Centre for European Economic Research (ZEW) said in a report. Notably, the indicator has been in negative territory for three consecutive months. The assessment of current economic conditions in Germany also slipped into the red for the first time since 2010, as the respective ZEW indicator came in at -1.1 vs. 7.8 in June. Commenting on the report, ZEW president Achim Wambach highlighted negative trends in new factory orders as well as persisting uncertainties in export-focused sectors. The list of uncertainties includes geopolitical tension surrounding Iran and the US-China trade dispute that poses downside risks not only to the Chinese economic outlook, but also to the UK as it exits the EU. The ZEW indicator of Economic Sentiment for the Eurozone decreased to -20.3 in July from 20.2 in the previous month, while the Current Situation Index for the region slipped by 6.9 points to -10.6.

US retail sales beat expectations in June

US retail sales rose 0.4% m-o-m in June, data from the US Department of Commerce showed, while, analysts expected the gauge to pick up by only 0.2%. Retail sales excluding cars, gasoline and construction materials (core sales used to calculate US GDP) advanced 0.7%, up from 0.3%. Higher sales were reported in 11 out of the 13 key retail goods categories. Furniture, food and beverage as well as clothing and construction materials sales all added 0.5%, while car sales increased 0.7%. Sports goods sales were unchanged from May. Gasoline sales surged 2.8% money terms, electronics sales picked up 0.3%, and department store sales rose 1.1%. According to experts, the sales data signals that the US consumer sector remains robust despite the ongoing trade dispute with China and other risks.

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Markets

US: Trump narrative alarms investors

Key US stock indices landed in negative territory on Tuesday, July 16, amid renewed concerns that the US-China trade war might gain momentum. In particular, Donald Trump told a news conference that the countries have a long way to go in trade negotiations, highlighting that, if needed, he could impose additional tariffs on Chinese products valued at USD 325 bn.
On the macro data front, export and import prices decreased 0.7% and 0.9%, respectively, in June vs. expectations of -0.2% and -0.7%. Furthermore, retail sales rose picked up 0.4% in June, the same as in the previous month, outpacing 0.1% projected. Industrial production was unchanged from May vs. +0.1% expected, while business inventories increased 0.3%, in line with the consensus forecast.
Furthermore, incoming corporate earnings releases were in the spotlight. Major US lenders JPMorgan Chase, Wells Fargo and Goldman Sachs reported yesterday.
Recapping the indices, the Dow Jones Industrial Average edged down 0.09% to 27,335.63, the S&P 500 slipped 0.34% to 3,004.04, and the tech-focused Nasdaq ended 0.43% higher at 8,222.80.
In commodities, August WTI retreated USD 3.3% to USD 57.62/bbl on the NYMEX. On the COMEX, August gold eased 0.2% to USD 1,411.20/oz. The 10-year UST yield stood at 2.12%.
In the banking sector, JPMorgan Chase & Co. added 1.07 after reporting upbeat revenue and net income for Q2. Goldman Sachs Group firmed 1.86% on the back of better-than-expected quarterly earnings.
However, Wells Fargo & Co. plunged 3.02% despite reporting a 22% rise in Q2 net income, which beat expectations. Notably, net interest income decreased to USD 12.5 bn, up from USD 12.1 bn in the year-earlier period.
Johnson & Johnson, the largest US cosmetics maker, shed 1.64% as revenue fell in Q2.
Domino’s Pizza declined 8.66% after reporting weak quarterly revenue.
Tesla shed 0.4% on reports that it cut US prices on its Model 3 sedan to make it more affordable after a federal tax credit on electric cars was halved.

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S&P 500

The daily chart shows that the S&P 500 is trading within a rising wedge and has bounced off its upper end, while Slow Stochastic Oscillator has long been in overbought territory. As a result, the benchmark will likely head towards the lower line of the current formation in the short term.

Breaking financial world news from 18 july 2019.

Europe: benchmarks close to the upside

Key European indices landed in positive territory on Tuesday, July 16, as investors were galvanized by an encouraging start to the corporate earnings season in the Eurozone and the US. Notably, the list of outperformers included lenders and luxury product suppliers.
As regards macro data, the UK’s unemployment rate was unchanged from the previous month at 3.8%, in line with the consensus forecast.
Recapping the benchmarks, the French CAC 40 firmed 0.65%, the UK’s FTSE 100 Index advanced 0.60%, and the German DAX picked up 0.35%. The regional indicator STXE 600 closed 0.35% higher at 389.10.
As noted above, luxury product makers and retailers outperformed the broader market. In particular, British industry player Burberry shot up 14.4% after reporting a 4% increase in retail revenue in fiscal Q1 2020, citing strong sales of its new collection.
Hermes, LVMH and Kering followed suit, adding 0.3%, 1.4% and 2.0%, respectively.
Meanwhile, Irish airline Ryanair advanced 2.2% after saying that it trimmed expansion plans for next year as deliveries of Boeing planes were postponed. The news sparked a positive reaction in peer stocks as concerns eased that Ryanair’s business expansion could exert pressure on air fares.
In the upshot, Lufthansa, IAG and Air France rose 2.6%, 2.6% and 2.9%, respectively.
Norwegian fertilizer producer Yara soared 4.2% after reporting better-than-expected quarterly earnings.
Key European stock indices have been trading moderately lower during the first half of Wednesday, July 17, as losses in O&G names and renewed concerns about the US-China trade dispute outweigh positivity sparked by earnings releases from microchip supplier ASML and pharmaceutical player Swedish Orphan Biovitrum.
On the macro data front, the UK’s June CPI was unchanged m-o-m and up 2.0% y-o-y, in line with expectations, compared to 0.3% m-o-m and 2.0% y-o-y in May.
By 8:58 GMT, the French CAC 40 eased 0.11%, the UK’s FTSE 100 retreated 0.19%, and the German DAX edged down 0.08%. The regional barometer STXE 600 was off 0.03% at 388.97.

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DAX

The daily chart shows that the German DAX has bounced off the lower line of a rising band and is heading further north. Given where the Slow Stochastic Oscillator and the RSI are pointing, the benchmark will likely move towards the upper end of the current formation in the short term.

Breaking financial world news from 18 july 2019.

Asia: equities retreat on Trump comments

Asian stock indices closed mostly in the red on Wednesday, July 17, on the heels of US President Donald Trump’s comments that the US and China still have a long way to go until they seal a trade deal. He noted that, if needed, he could hike tariffs on a list of Chinese products valued at USD 325 bn.
As regards macro data, Singapore’s exports excluding petroleum products for June dipped 7.6%, while analysts, on average, projected -3.9%. In y-o-y terms, the indicator was down 17.3% vs. -9.9%.
The Japanese Nikkei 225 slipped 0.31%, the Chinese Shanghai Composite declined 0.20%, Hong Kong’s Hang Seng eased 0.09%, the South Korean KOSPI fell 0.96%, while the Australian S&P/ASX 200 closed 0.49% higher.

On the S&P/ASX 200, Elders and Austal outperformed the broader market, spiking 14.35% and 10.95%, respectively. On the other side of the spectrum, Speedcast International and Galaxy Resources plunged 6.89% and 6.59%.
The Nikkei 225 gainers were led by Daiichi Sankyo and Toyobo, which surged 3.13% and 2.66%, respectively. Among the decliners, Terumo and TDK slid 2.85% and 2.60%.
Japanese financial equities were well bid on the back of higher US government bond yields. Specifically, Sumitomo Mitsui Financial and T&D Holdings each gained over 0.7%.
Conversely, Japanese tech stocks took a beating, with TDK and Taiyo Yuden shedding over 1.1%.
Japanese heavyweights came under pressure, with SoftBank Group and FamilyMart dipping over 1.3%.
Japan’s Aeon Fantasy soared over 9% after reporting a 13% increase in like-for-like sales for June.
In the Australian banking sector, Commonwealth Bank, National Bank of Australia and Australia & New Zealand Banking ended in the green. However, Westpac closed slightly lower.
Australian mining giant Rio Tinto ticked up 0.03%.
China’s oil major CNOOC closed down 2.24%, tracking yesterday’s decline in oil prices.

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Hang Seng

From a technical standpoint, the Hang Seng continues to trade within a side trend in the range of 28,000-28,600, with the benchmark expected to break out to the upside and head further north towards 29,100.

Breaking financial world news from 18 july 2019.

Commodity markets

Crude futures have been correcting higher on Wednesday after a sharp decline in the previous session as Donald Trump’s narrative re-ignited concerns about the US-China trade war. In particular, Trump said that the countries still have a “long way to go” in trade negotiations, highlighting that, if needed, he could impose tariffs on an additional list of Chinese products valued at USD 325 bn. Furthermore, signals emerged that the US-Iran geopolitical tension might be easing. According to US State Secretary Mike Pompeo, Tehran made it clear that it was prepared to discuss its ballistic missile program under certain conditions. Iranian foreign minister Javad Zarif said in an interview that the door would be “wide open” to negotiations, if Trump lifted sanctions imposed in 2017.
Meanwhile, oil prices came under pressure from earlier API data, showing that US crude inventories declined only by 1.4 mn bbl, while analysts, on average, projected a 3 mn bbl drawdown. Gasoline inventories decreased by 476,000 bbl, while distillate inventories rose by 6.2 mn bbl. The EIA petroleum status report is due out at 14:30 GMT today.
Non-ferrous metals have been trading sideways on the LME, while gold prices reversed to the downside, retreating below USD 1,410/oz on the COMEX.

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Breaking financial world news from 18 july 2019.

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