July 26, 2019
Asia-Pacific stocks fall amid less aggressive Federal Reserve expectations
Asian equities fell on Friday, July 26, amid expectations that the U.S. Federal Reserve could be less aggressive than expected with monetary policy when it meets next week.
Mainland Chinese equities fell at the end of the session. Hong Kong’s Hang Seng index fell by 0.45%, after it saw its biggest annual drop in exports in nearly three and a half years in June. Australia’s S&P/ASX 200 also fell slightly with most sectors down.
Japan’s Nikkei 225 fell 0.49%, with Softbank Group shares trading slightly higher. In South Korea, the Kospi fell 0.49%. Tokyo may decide to remove Seoul from the so-called white list, with trade restrictions, on August 2.
European markets rise slightly, after the ECB maintains interest rates.
The ECB kept interest rates stable, but outgoing President Mario Draghi pledged to further soften monetary policy as growth prospects deteriorate. At the press conference, Draghi said the economic outlook was getting worse and worse, citing a weak manufacturing sector as well as uncertainty over trade and Brexit. Central bank policymakers are also considering other measures to support the euro zone in the coming months, including the resumption of quantitative easing (QE).
The dollar rose to 108,620 yen, reaching a two-week high. The euro traded at $1.1151, a slight recovery from a two-month low. However, the EUR has lost value over the past week. The British pound lost ground and is on its way to a 0.5% weekly loss. This currency has stabilized since Boris Johnson became the new British prime minister, but there is still uncertainty about Britain’s negotiations to leave the European Union.
Oil prices rose on Friday, due to concerns about tensions in the Middle East, offset by declining global economic growth prospects in the midst of the US-China trade war. Growing challenges in the macroeconomic environment have slowed upward bets, as risk appetite remains weak in the face of possible weakness in global fuel demand.
Gold rallied on Friday, after the fall of the previous session, as investors waited for US economic growth data, which could give clues about the Federal Reserve’s monetary policy meeting. The precious metal has lost 0.5% so far this week, putting it on track for its first weekly decline of the last three.
European markets are expected to open Friday’s trading session lower.
Biggest movements out of hours
U.S. stocks make the biggest movements out of hours.
Alphabet shares rose 9% in extended trading on Thursday, July 25, after Google’s parent company reported earnings in the second quarter that exceeded Wall Street estimates.
Amazon fell 2.5% after the company reported mixed results in the second quarter and lower than expected growth of 37% in Amazon Web Services, it’s most lucrative business.
Intel’s stock rose more than 6% after the chips manufacturer’s second quarter earnings exceeded Wall Street’s expectations and the company published an optimistic forecast.
European shares close with investors taking profits
The ECB kept interest rates stable on Thursday, July 25, but outgoing President Mario Draghi pledged to further soften monetary policy as growth prospects deteriorate.
Traders are closely following the evolution of business results. Construction and materials values rose, leading the gains.
The eurozone trade balance showed a surplus of 23 billion euros in May. The July economic sentiment figures for Germany stood at -24.5 against expectations of -22.3, adding to the economic uncertainty surrounding Europe’s largest economy.
The Federal Reserve is leading a global push to cut interest rates
Europe is preparing to follow their example.
As the ECB cuts interest rates, a wave of central banks could do the same in the hope of boosting economies and maintaining control over their currencies.
Several banks have already mobilized to ease the situation before the Federal Reserve’s expected interest rate cut next week.
The current situation is reminiscent of the financial crisis, when all central banks agreed to coordinate their policies.
Technology shares reach highest levels ever reached despite trade war
The shares of the big technology companies reached an all-time high on Tuesday, with the help of a semiconductor industry that is recovering amid some signs of progress in the U.S.-China trade war.
The semiconductor sector has risen 10.5% in the last month.
The semiconductor sector is a cyclical sector and is leading the way towards more defensive software and a possible sign of change in stock market leadership.
JP Morgan warns of a significant sale of U.S. shares in this quarter
American stocks have gone up so far this year. However, that rise could end this quarter.
A possible sale would be driven by a downward revision of next year’s earnings outlook. Analysts expect earnings to grow by around 14% in 2020, which seems quite high given the weak global economic outlook.
The Fed is expected to cut interest rates at its next meeting later this month. Investors will then be ready to turn their attention to other factors such as corporate earnings.
Many analysts will start adjusting their 2020 earnings forecasts in the second half of this year, so that will determine the performance of stocks in the coming months.
The social weariness with taxes has gone to more
According to polls, around 60% of the population considers that they pay too much, especially in relation to what they receive in return.
If we sanction tobacco, it is so that people stop smoking. If we penalise alcohol, it is to prevent irresponsible consumption. Why do we tax job creation, investment, to the extent that an average income loses half of its wealth in taxes?
The obsession with punishing savers and entrepreneurs is surprising… Raising taxes on the rich is a mistake, a serious mistake. It is an economic error and it is a moral error.
You need a fair system that rewards effort. However, in some countries, what they are doing is quite the opposite. The taxpayer should not be punished: he should be sent flowers.
Stop mistreating those who create wealth. Friends of high taxes hate rich people, they hate successful people. But they forget the important thing: poverty.
The social challenge we face is to enrich the poor, not impoverish the rich. We must help those who are below, not overthrow those who are above.
No country thrives on punishing wealth creators.
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