Breaking world news

Breaking financial world news from 30 october, 2019.

Breaking news

US recession is more likely in 2021 than in 2020

The odds of a recession in the US starting over the next year are low, but the likelihood of a severe downturn rises as time goes by, according to a survey of business economists among 54 members of the National Association for Business Economics (NABE). The respondents, on average, saw a 7% chance of a recession starting in H2 2019. However, the odds increase steadily to 69% by early 2021. Overall, economists expect GDP growth will fall below 2% next year, with more than 80% of the participants viewing the risks to the outlook as tilted to the downside. The median of the five most pessimistic forecasts suggests GDP growth will be flat in Q2 2020 and decline 0.3% in Q3 2020. Interest rates are expected to remain low. Yields on 10-year Treasury notes will likely close 2019 at 1.75%, and only rise to 2% by the end of next year. Economists are split about the outlook for Fed policy. Slightly over 50% think the Fed will be hold off through the end of the year, while 43% see one rate cut. Only 10% expect rates to be cut by 0.5 pps and 2% see a 0.75 pps reduction by year end, the survey found. Only six of the economists projected the Fed to slash rates to zero by end 2020.

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More than half of global banks might not make it through a new recession

McKinsey experts believe that more than half of the world’s banks are currently so weak that they will be unable to withstand another potential economic recession. The situation is getting worse due to fierce competition from financial startups and tech giants. Such companies include US-based Amazon and China-registered Ping An Insurance have been trying to squeeze out banks in the most profitable segments, e.g. credit cards, while tapping into financial service consumers. Banks earmark only 35% of their IT budgets to innovation, while financial technology companies spend over 70% on this, McKinsey said in an annual overview. Experts recommend conventional banks to take measures to roll out technologies, contain costs, outsource some functions, and expand via mergers and acquisitions. McKinsey’s clients are the world’s biggest companies and the company is a consultant in various areas, including development strategies, M&A, outsourcing and stock offerings.

US CCI down in October

The US Consumer Confidence Index decreased from 126.3 in September to 125.9 in October, research association Conference Board reported. The index dropped for the third straight month to the June 2019 low. The gauge measuring how Americans assess their current financial situation rose from 170.6 in September to 172.3, while the sub-index of consumer expectations for the next six months fell from 96.8 to 94.9. The percentage of Americans who expect business conditions to improve over the next six months declined from 20% in September to 18.6%, while those who anticipate job growth during this period went up from 19.7% to 21.1%. The percentage of Americans who plan to purchase a car dropped to a multi-year low of 9.9% vs. 12.1% in September.

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US: bears gain upper hand

Key US equity benchmarks closed lower on Tuesday, October 29, amid unfavorable macro data and news that Washington and Beijing might not have enough time to sign a partial trade deal during the APEC summit in November.

As regards the key macro data, the US Consumer Confidence Index came in at 125.9 in October, down from 126.3 (revised) in September, while analysts expected 128. Furthermore, market participants waited for the preliminary reading of US GDP (due out today). The US economy could see its expansion slow to 1.6% q-o-q in 3Q.

The week’s highlight is the FOMC meeting, the outcome of which will be released today. A market majority expects the Fed to reduce the key rate for the third time this year.

Recapping the indices, the Dow Jones Industrial Average ticked down 0.07% to 27,071.46, the S&P 500 shed 0.08% to 3,036.89, and the tech-focused Nasdaq retreated 0.59% to 8,276.85.

In commodities, December NYMEX WTI dropped 27 cents to USD 55.54/bbl, while December COMEX gold closed USD 5.10 lower at USD 1,490.70/oz. The 10-year US government bond yield stood at 1.84%.

Encouraging earnings reports for the past quarter gave a shot in the arm to such pharmaceutical companies as Pfizer and Merck (+2.5% and +3.53%, respectively).

Another top performer was printer maker Xerox (+11.8%) after reporting higher revenue and earnings than Wall Street expected. Net of some items, quarterly earnings reached USD 1.08, while analysts on average forecast 87 cents per share.

Auto maker General Motors surged 4.28% as quarterly earnings exceeded the median consensus.

Google’s parent company Alphabet gave up 2.12% on the heels of a 23% decline in 3Q earnings. In addition, the number missed analysts’ average expectations.

Another decliner was food delivery service Grubhub whose shares tanked 43.3% due to disappointing sales in the past quarter.

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S&P 500

The daily chart shows that the S&P 500 continues to trade within a rising band, while the Slow Stochastic Oscillator has long been in overbought territory. As a result, we expect the index to correct lower in the short term.

Breaking financial world news from 30 october, 2019.

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Europe: benchmarks close mostly in the red

Key European stock indices turned in predominantly negative performance on Tuesday, October 29, as weak earnings reports from several regional heavyweights outweighed positive signals from the US-China trade talks. Moreover, traders took to the sidelines ahead of the FOMC’s rate decision, which will be announced on Wednesday. To remind, the investment community widely expects the Fed to go for another rate cut.

Recapping the benchmarks, the French CAC 40 added 0.17%, the UK’s FTSE 100 Index eased 0.34%, and the German DAX edged down 0.02%. The regional indicator STXE 600 closed 0.16% lower at 398.37.

Finnish paper product maker Stora Enso slipped 1.5% as it reported a decrease in Q3 profit and provided downbeat earnings guidance, citing global political uncertainty.

Other industry players Mondi and Smurfit Kappa followed suit, shedding 0.03% and 2.2%, respectively.

Telecom stocks were out of favor. In particular, Orange gave up 2.6%, guiding that sales in Spain, its second largest market, will remain under pressure in the coming months as competitors continue to slash prices.

O&G names took a hit after a disappointing earnings release from BP, which plunged 3.3%. Notably, the company reported a sharp decline in quarterly profit, citing lower oil prices and output.

German medical equipment maker Fresenius soared 5% as its quarterly revenue beat expectations due to stellar performance in emerging markets.

European bourses have been trading mixed during the first half of Wednesday, October 30 as concerns about the FOMC’s upcoming rate decision and the US-China trade negotiations are being offset by gains in automakers on news that Fiat Chrysler and PSA Group are in merger talks.

As regards macro data, Switzerland’s Kof Leading Indicators Index for October increased to 94.7 from 93.1 in the previous month, beating 93.9 expected. Furthermore, Germany’s unemployment rate came in at 5.0% in October, in line with the consensus forecast.

By 09:34 GMT, the French CAC 40 added 0.13%, while the UK’s FTSE 100 pulled back 0.20%, and the German DAX eased 0.23%. The regional indicator STXE 600 was off 0.12% at 397.90.

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On the daily chart, the German DAX continues to trade near the upper line of Bollinger bands, while the Slow Stochastic Oscillator is still hovering in overbought territory, while the RSI has also already entered it. As a result, a downturn could be in the offing.

Breaking financial world news from 30 october, 2019.

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Asia: markets retreat ahead of Fed and BoJ decisions

Asian stock indices turned in negative performance on Wednesday, October 30 as investors likely closed some long positions ahead of policy updates from the Bank of Japan and the US Federal Reserve. The American regulator is widely expected to cut the Fed funds rate by 25 bps, taking the target range to 1.5-1.75%, while Fed Chair Jerome Powell might signal a breather in the monetary easing cycle. As regards the Bank of Japan, economists expect it to leave monetary policy settings unchanged, with the focus shifting to the latest updates of its macro outlook.

Moreover, traders continue to monitor developments surrounding the US-China trade talks. The media earlier speculated that the two sides might fail to sign off on phase one of the trade agreement by the APEC summit in Chile on November 16-17.

Notably, Japanese equities drew support from incoming macro data. In particular, the country’s retail sales climbed 9.1% y-o-y in September, or the strongest gain since March 2014.

The composite regional barometer MSCI Asia Pacific slipped 0.6% to 161.6. The Australian ASX 200 dipped 0.8%, the Chinese Shanghai Composite eased 0.5%, while the Japanese Nikkei 225 and the South Korean KOSPI each closed 0.6% lower.

LG Electronics gave up 0.7% after reporting a 31% decline in Q3 profit, while Samsung followed suit, shedding 1.4% on the day.

In Australia, mining giants BHP Billiton and Rio Tinto underperformed, sliding 1.2% and 1.1%, respectively.

In Japan, electronics maker NEC tumbled 5.7%, telecom giant SoftBank receded 1.5%, and retail player Fast Retailing dropped 2.2%.

In Hong Kong, PetroChina traded 2% lower, while Apple component supplier AAC Technology picked up 1.1%.

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Hang Seng

From a technical standpoint, the Hang Seng has failed to break out the upper end of a symmetrical triangle, with the benchmark likely to retrace towards the 50-day moving average at 26,300.
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Commodity markets

Oil prices continue to ease moderately on Wednesday, while investors wait for the outcome of the FOMC meeting (due out this evening) and the preliminary reading of US 3Q GDP. The market remains under pressure from global oversupply concerns. Keisuke Sadamori, Director of Energy Markets and Security at the International Energy Agency, expects the market to experience an overhang next year due to higher output amid weak demand growth. Overall, the Agency continues to see high supply in the market in 2020, he said, addressing the Singapore International Energy Week. If nothing changes, there will be an overhang unless demand recovers substantially. The recovery of Saudi Arabian oil production after the September attacks on the country’s oil facilities was quite impressive, making investors confident that global crude markets are stable, Sadamori pointed out.

Non-ferrous metals are trading slightly lower on the LME, while gold continues to hover within a narrow range of USD 1,480-1,500/oz.

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Breaking financial world news from 30 october, 2019.

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