Stocks mixed in New York – outlook unclear

The stocks ended mixed in New York after the Federal Reserve rate cut on Wednesday. The Dow Jones ended up 0,31% to 27147 points, but the tech-heavy Nasdaq lost 0,11% to 8177 points.

The messages from the Fed were clear – the central bank is ready to act more if needed. The Fed also mentioned that the central bank will keep the reserves supply sufficient over time. The Fed Chairman Jerome Powell said that the global economic outlook is still uncertain due to trade talks with China and the Brexit-situation.

The markets are still expecting another rate cut for this year. On Thursday, the Bank of England and the Bank of Japan will also have their own meetings.

The negative rates are common for government bonds in Europe. For example the German 10 year bond was trading -0,51 % and the 10 year Dutch bond was -0,37 %. Bank of America Merrill Lynch senior analyst said in Bloomberg that US bonds may start to outperform Russel small cap. Much remain to be seen related to October and for example to the new trade talks with US China level.

The large S&P 500 index ended up 0,03 % to 3006 points while the Nyse closed down -0,09 % to 13 119 points. The Brent oil was trading down – 1,39% to 63 dollars after the highs due to the oil attacks in Saudi Arabia last weekend.

Business Finance

Fed to cut rates due to global growth

The US Federal Reserve FED has cut the short-term overnight rates to a range of 1,75 % to 2 % in its meeting today. The Federal Open Market Committee was not united about the decision, but voted  7- 3 to lower the rates. According to the Fed, the global growth concern and the US China trade talks were the main reasons for the uncertainties in the economic outlook.

– Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1-3/4 to 2 percent. This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain, the Fed said in its press release.

During the last few days, there has been a financial liquidity shortage in the repo-markets and the Fed has been in the markets to add the liquidity. According to Reuters, the central bank has added 125 billion dollars to the financial system during the couple of days.

One of the reasons why the liquidity was happening in the short-term, is the popular swapping. According to market participants, banks and investors are swapping different maturities in the interest rates markets and using the short-term repo-rates to fund the trades.

The Fed also published its economic outlook update and according to it, the inflation is expected to be 1,5 % during this year and 1,9 % in 2020. The GDP is expected to be 2,2% this year and 2,0% next year.

Business Finance

Fed to add liquidity in the markets – FT

The US Federal Reserve has today added 75 billion dollars into the financial system after the sharp rise in the short term repo-rates, Financial Times reports today.

The Fed started its open-market committee (FOMC) meeting today and the press conference is expected to be tomorrow after the two-day meetings.

The Central bank is expected to cut rates again, although the decision to cut rates in July was made by 8-2 votes. During the summer and autumn time the US China trade tensions have continued and for example the German negative gdp during the second quarter this year showed slowing economic growth. The US inflation was 1,6 % in July, below the Fed target 2 %.

 

Business Finance

HongKong to open Dialoque Office – South China Morning Post

The HongKong city has opened a Dialoque Office in order to start the engagement with different stakeholders regarding the protests in the city.

According to the South China Morning Post, this will help to build bridges in the area with over 100 days of ongoing protests. The city has faced many cancellations in the tourism business due to the protests. According to the newspaper, hotel stays and airplane ticket sales have fallen.

The credit rating company Moody’s have lowered the HongKong’s outlook to negative, but kept the rating the same Aa2 level.

Business Travel

WeWork is postponing IPO to October earliest – WSJ

The US office rental company WeWork is postponing its planned IPO untill October at earliest, says the Wall Street Journal.

According to the newspaper, the company has faced so many valuation concerns that the company is postponing the IPO.

In August WeWork indicated that the listing would be with 3-4 billion dollars. The company also informed about plans to raise debt up to 6 billion dollars.

The recent speculation about the unicorns techvaluation have raised some concerns about the market values in general and the corporate governance practises related for example privacy issues.

Business Finance Tech

Saudi Aramco IPO delayed – Brent +14%

The weekend oil attacks in Saudi Arabia have lead to postponing the planned IPO of the state oil company. According to Wall Street Journal, the delaying would last so long until the halved production cap would be filled.

The company is planning to list 1 % of its shares in Riyadh Stock Exchange this year with the company valuation of 2 trillion dollars.

After the oil attacks, the oil markets saw a rapid upward trend and for example the Brent Oil was trading 14% up to 68,51 dollars.

Business Finance