› News for January 15.

News for January 15.

Global financial markets were focusing on monetary policy update in the leading world’s economy. US Federal Reserve Chairman Jerome Powell spoke last week, trying to calm down investors, facing tremendous pressure after the latest rate hike in December 2018. Lots of questions were raised about the Fed’s ability to feel the market and perform a flexible monetary policy after the regulator ignored preliminary signs of the economic slowdown, tightening the financial conditions further. US President Donald Trump was one of the leading opponents to Powell’s hawkish rhetoric during his last press conference, which caused a sharp market drop in US equities. There were even rumours circulating across financial markets that the president was consulting with lawyers to find legal mechanisms to fire Powell. The Federal Open Market Committee’s forecast was updated after Powell expressed readiness to press the brakes and be patient. Moreover. Fed Rates Futures showed that traders started to price in even a rate cut instead of two hikes in 2019. Two-year Treasury yields went off the recent high levels sharply, indicating additional demand for bonds and savings securities. Powell also underlined that the quantitative tightening program could be lowered. Currently, the regulator clears the balance sheet with a total volume of 50 billion dollars monthly, eliminating additional excessive dollar liquidity which has been pumped into the financial system during soft-policy years.

Financial markets reacted with a positive tone after Powell’s dovish notes. Although the Fed Chairman refused to resign even if President would have asked him, the overall impression was that FOMC is ready to be flexible and act accordingly to the market's view, especially in the equities side. US Stock indices rallied, bouncing off the local bottom posted in December 2018. Some of the technical analysis tips point to the shares market to come back to gradual growth, according to the fundamental outlook which is quite positive nowadays. The US economy showed strength with stronger-than-expected Non-Farm Payrolls report, adding 312 thousand jobs, compared to 155 thousand in November. That result was one of the highest figures since February 2018. In addition, average hourly earnings also jumped in December, beating the market consensus expectations. All of that positiveness together with dovish Fed and updated FOMC economic statement, released on Wednesday, forced traders to buy call options for high-yield asset classes. In opposite, the US dollar fell versus its major peers as the expectations of interest rates hikes lowered significantly, decreasing the demand from the fixed-income international market, as well as currency speculations. The Canadian dollar was leading the gains among major currencies on a sharp bullish run of the price of oil. OPEC leading oil producers and Saudi Arabia agreed to cut the global output in order to stabilize the supply issue. US Crude oil inventories were published surprisingly lower-than-expected, adding positive factors for the black gold price, which breached the $50 level, the first time since December 2018.

Source: phonesdata.com

In other markets, Samsung published a weak quarterly operating profit forecast. Korean tech giant failed to meet experts’ predictions in the fourth quarter of 2018, posting lower-than-expected profit report. What’s interesting, the report came together with comments from Samsung officials, which never happened since 2014, when smartphone industry suffered a sharp drop in demand. Company’s analysts explained the drop in profits by lowering demand for smartphone products globally, as well as a cut in consumption of memory chips from data-centres. The preliminary reading was noted at the level of $9.67 billion which is 28.71% lower than in the same period of 2017. Analysts were forecasting a profit result 18% higher than that figure. The total revenue also dropped to $52.4 billion, while experts were expecting the much stronger result of $55.8 billion for Samsung quarterly revenue. That disappointing results followed Apple’s failure to meet the market consensus, released earlier. Both tech corporations struggled to perform in a sustainable manner due to several factors, including macroeconomic uncertainty, the slowdown in Chinese consumption and tighter competition in the smartphone market. Some of the economists were glad to see Apple’s fail, predicting a sharp rise in Samsung sales and profits. However, that’s a completely wrong opinion as Apple orders several components for its own production, including memory chips and touchscreens. The expectations are quite low for the first quarter of 2019 for both companies, while a pick up in strong growth momentum is forecasted for the second half of the current year for smartphone markets as several new products will be released.

Political turbulence kept weighing on the financial markets in the United States. The government shutdown is already taking the longest period in history. Many Federal workers cannot get their paychecks, going out for protests. The story started with US President Donald Trump’s controversial decision not to sign the budget bill, agreed by both House and Senate. The reason is simple and complicated at the same time - Trump requires US taxpayers to fund the border wall with Mexico, insisting on the urgent need to spend another $3.6 billion for monumental construction which he promised to build during his election campaign. Many observers describe that wall as completely useless in terms of migration flows. The fule was added to fire as the House of Representatives has a new majority after Democrats won the mid-term election. Trump does not have any significant achievements in negotiations with Democrats, as the latest turbulence show. US President even reminded about his legal right to implement emergency status for the country, hosting an urgent TV press conference. He named the current situation on the border with Mexico as the migration crisis, insisting on emergency measures to be performed. Illegal migration and drugs traffic keep worrying US President, who had already sent several thousand US troops to the border. He stated that only wall could help to stabilize the situation, that’s why the shutdown story is taking so long. However, the opposition does not rush to step aside from their requirements, calling the wall issue as unnecessary spending, adding more volume to the negative Treasure balance in the country. The US budget deficit was increased by $2 trillion during Trump’s presidency, having the most threatening gap than ever. As a result, the external debt was rising as well, worsening the current financial situation.

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