› News for January 22.

News for January 22.

Talks about the economic slowdown in China were reinforced this week as the second largest world’s economy reported 6.4% GDP growth in the fourth quarter of 2018, the slowest pace since 1990. Meantime, the Chinese government does not hesitate to implement new supportive measures for its economy, answering the challenge from U.S.-China trade tensions. Premier Minister Li Keqiang announced large-scale tax cut and fiscal stimulus for small and micro business. According to Keqiang, such steps should lead to employment growth and simultaneous consolidation of the private sector. The preferential corporative tax will spread its influence on small and low-profit businesses and tax cut implementation will be widened. That might lower the fiscal pressure by 5-10%, while fiscal stimulus would cover 95% of corporate taxpayers, the vast majority of which is in the private sector. Provincial governments will get the right to cut taxes by 50% for small VAT taxpayers in the scope of several local tax items including resource tax. The total volume of fiscal stimulus will be enlarged for startups in the high-tech industry, including venture companies and institutional investors in the field. At the same time, the central government fiscal system will increase payments to local authorities, filling gaps of funding on the local level. All of those measures are supposed to drive business activity in China.

US Federal Reserve is also concerned about a potential slowdown in the leading world’s economy. The Federal Open Market Committee (FOMC) published meeting minutes protocol from the latest decision in December. The economic statement confirmed the regulator’s cautious approach for the monetary policy, in the same tone as Chairman Powell announced during his speech in the first week of January 2019. Further interest rate hikes became more data-dependent and FOMC will monitor the upcoming macroeconomic reports very closely before making conclusions about the continuation of the tightening cycle. In simple words, the Federal Reserve signalled its readiness to halt tightening, pushing the ‘pause’ button. That rhetoric was immediately reflected in the market’s expectations for interest rates hikes this year. It’s been widely anticipated that the Fed will hike at least two times in 2019, however, the odds for a rate cute jumped dramatically. One of the key reasons for such Powells’ dovishness was related to the inflationary pressure which has been lowered recently. Both Consumer and Producer price indexes failed to meet market expectations, slowing down in December, as the reports showed. Although the last FOMC decision to hike the interest rates was unanimous in December, most of the FOMC members agree on the need to wait-and-see policy in order to avoid a possible negative impact on the economic growth in the United States.

FOMC
Источник: Emirates NBD Research


One of the largest US tech giants -- Facebook -- published a financial report for 2018. The resulting figures are looking ugly, as the company lost billions of dollars due to several scandals throughout the past year. Facebook shares plunged 25%, while the company’s capitalization fell to $376 billion at the end of last year from $513 billion in 2017. The main trouble for Mark Zuckerberg and Co. was related to users’ data leakage which happened to millions Facebook accounts. The company’s shares started dropping in March 2018 when Cambridge Analytica had got the access to more than 100 million social network accounts. After that, Facebook lost billions of dollars while several celebrities even deleted their accounts completely. Mark Zuckerberg, the owner and CEO of the social network company, is still in the list of richest US billionaires. However, he is also one of the leading losers among the most wealthy people on the planet, according to several sources.

Argentina appeared in the market focus last week, as the country reported inflation in December. The total yearly inflation was 47.6% in 2018, which is the highest figure not only in Latin America but also in the world. The main problem is that the country is in the short-list of developing countries and emerging markets. But such soaring inflation might kick the country out of the list, lowering the demand for Argentine assets from international investors. December’s consumer prices growth was published at the level of 2.6% compared to November 2018, while the yearly inflation growth reached 47.6%. The largest figures were noticed in food and non-alcohol drinks (51.2%), housing and communal services (45.7%), healthcare (50.2%), transport (66.8%) and telecom industry (55.3%). Argentine authorities predict inflation to slow down to 28.7% in 2019. There were also reports from several sources that local elite realty struggles from the most severe crisis in a decade with lots of owners being unable to sell their houses. Such a dramatic change might lead to prices falling in the housing sector, creating attractive investment opportunities in the long-term perspective. Argentine Peso was also among the losers in the currency market.


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