ECB Lagarde: Strategy work will start in January – digital currency piloting

The President of the European Central Bank, Mrs Christine Lagarde said that the ECB will start its strategy work in January 2020. According to her, the central bank will engage with different stakeholders like the Members of the EU Parliament, civil societies, academics and investors in order to deliver its mandate in Europe.

– The Central bank´s strategy will include all the major changes the economy is facing like the big technology change, climate change and inequality issues, she said in the press conference in Frankfurt on Thursday.

She did not close much details of the framework as such, while it is still under consideration in the Governing Council. The new strategy will be ready during the next year´s time. The EU´s Climate Change package “the Green Deal” will be part of the work as the digital currency and the digital payment system as well.

According to Lagarde, she is in favour of the digital currency and digital payment as she mentioned that it would be good that “the ECB would be ahead of the tech curve”.

The Central Bank has formed a Taskforce for the digital currency and according to her there are several piloting projects “here and there” in order to get better understanding of the possibilities the new currency could provide. The piloting is expected to be ready by the mid 2020.

The new ECB President also emphasised the independence of the Central Bank. – Independence is important, she said and urged the fiscal policy makers to take the full advantage of the monetary policy in their decision making processes. – It takes monetary policy, fiscal policy and structural changes, in order to make the ballet of the economy, she referred.

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US stocks up – Uber & Lyft gained

The US stocks gained modestly in New York on Wednesday trading. The Fed, central bank left the key rates unchanged and expects that there is no need to change the rates during next year. The inflation is estimated to increase next year and would reach the inflation 2 % target in 2021.

Dow Jones closed up 0,11% to 27911,09 points, S&P 500 -index closed up 0,29% to 3141,62 points and tech-focused Nasdaq up 0,44 % to 8654,05 points. Tech and materials were the leaders of the trading day.

The ride-hailing companies Uber (UBER) and Lyft (Lyft) gained on Wednesday due to the positive report from Barclays. According to the estimate, Barclays estimates that both companies are well positioned to turn profit. Uber closed up 1,86 % to 28,42 dollars and Lyft closed up 4,64 % to 47,36 dollars.

Tesla (TSLA) closed up 1,11 % to 352,70 dollars, Ford up 0,44 % to 9,11 dollars and Apple (AAPL) up 0,85 % to 270,77 dollars.

The Fed also published its economic outlook, which estimates moderate growth for the next year and the unemployment rate is expected to stay at 3,5 %.

The big question of the US China trade deal is still open. The 15th December trade tariffs deadline is on Sunday and according to some media information, there have been talks to delay the deadline.

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Powell: Monetary policy is not the tool to volatility – rates unchanged

The Chairman of the Federal Reserve Jerome Powell said in the press conference today, that the monetary policy is not the right tool to tackle market volatility.  He commented the overall market volatility and the US China trade tensions, which have caused the global growth stagnation. The Federal Reserve have been in the repo-markets adding liquidity several times during this quarter.

Mr Powell also said that the central bank did not expect this kind of slowing global growth in the beginning of this year. – We did not expect this kind of slow growth for this 2019 year, he said today.

The Federal Reserve Open Market Committee FOMC decided the leave the rates unchanged. The federal funds rates range is between 1,5 % and 1,75 %. Mr Powell also mentioned that the central bank is interested to monitor changes in the repo-market operations in the future.

 

 

 

 

 

 

 

 

 

 

 

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EU presented the Green Deal – climate-neutral continent (updated)

The European Commission presented today the “Green Deal” proposal for the climate-neutral continent in the world.  According to the Commission, becoming the world’s first climate-neutral continent by 2050 is the greatest challenge and opportunity of our times.

According to the Deal, it should “enable European citizens and businesses to benefit from sustainable green transition. Measures accompanied with an initial roadmap of key policies range from ambitiously cutting emissions, to investing in cutting-edge research and innovation, to preserving Europe’s natural environment.”

The European Green Deal covers all industry sectors, for example transport, energy, agriculture, buildings, and industries such as steel, cement, ICT, textiles and chemicals.

The EU Commission will also present the first European Climate Law and Biodiversity Strategy for 2030, the new industrial Strategy and Circular Economy Action Plan. The aim is also to make the Farm to For Strategy for sustainable food and pollution-free Europe.

All these actions require major investment and therefore the EU is also presenting a Green Financing Strategy next year.

-Achieving the current 2030 climate and energy targets is estimated to require €260 billion of additional annual investment, representing about 1.5% of 2018 GDP. This investment will need the mobilisation of the public and private sectors. The Commission will present in early 2020 a Sustainable Europe Investment Plan to help meet investment needs, the release says.

-At least 25% of the EU’s long-term budget should be dedicated to climate action, and the European Investment Bank, Europe’s climate bank, will provide further support. For the private sector to contribute to financing the green transition, the Commission will present a Green Financing Strategy in 2020, the EU said on Wednesday.

 

 

 

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US stocks flat in the Tuesday trading

The US stocks were flat on the Tuesday trading in New York. The markets were waiting for the big news related to central banks, Brexit and trade talks.

The oil company Aramco, which starts trading on Wednesday in Ridyah, is trying to reach again the 2 trillion dollars valuation with the help of state investment funds and wealthy families. Financial Times reported to news first.

S&P 500 -index closed down 0,11 % to 3132,52 points, Dow Jones -index closed down 0,10% to 27881,72 points and tech-heavy Nasdaq closed down 0,07 % to 8616,18 points.

The US Federal Reserve will have its FOMC meeting on Wednesday with the press conference as well. Rates are expected to be unchanged. On Tuesday there has been also speculation of digital currencies and the central banks interest to join the development with their own currencies. Bloomberg News reported that some of the ECB (European Central Bank) members would be interested to take a closer look at the digital, European currency, while others are clearly against the new money. The European Central Bank is having their rate meeting on Thursday.

The UK Brexit-vote will be on Thursday as well and the market polls show again that the Tories are expected to win the general election although the race has tightened.  According to Sky News, the Tories are expected to win, but it is not secured that the Tories would get the clear majority. The FTSE 100-index closed down 0,28 % to 7213,76 points in London on Tuesday.

In Germany the DAX-index closed down 0,27 % to 13070 points, while in France the CAC 40 -index closed up 0,18 % to 5848,03 points.

 

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US stocks closed down due trade situation in the superweek start (corrected)

Corrected: Morgan Stanley is expected to cut jobs 1500, not 500

The US stocks closed down in New York on Monday. The main reason for the trend was the US China trade situation and with the 15th December deadline on Sunday. Apple (AAPL) was one of the biggest losers with its 1,4 % decline. Morgan Stanley is expected to cut about 1500 jobs globally, which may lead to 150 -200 million dollars onetime costs during the last quarter of this year, the Bloomberg News says.

Dow Jones closed down 0,39 % to 27910,7 points, S&P 500 -index closed down 0,32 % to 3135,99 points and Nasdaq down 0,40 % to 8621,83 points.

Morgan Stanley is said to cut job cuts that are related to changing banking sector due to technology and will include up to 200 million dollars onetime costs. The estimate is based on Bloomberg News. The company shares closed down 0,39 % to 49,60 dollars. Apple was also down due to the unsolved US China trade negotiations. Apple closed down to 266,92 dollars.

The US and Mexico are heading to the USMCA trade deal, the Trump administration officials said on Monday. According to Bloomberg News, President Donald Trump secured approval for his U.S.-Mexico-Canada Nafta trade agreement from a key U.S. labor leader, clearing one of the final hurdles. The deal is to get a vote in Congress next week.

The markets are also waiting for more info related to central banks monetary policies during this week with the FOMC meeting on Wednesday and the ECB on Thursday. The central banks are expected to keep the rates unchanged in their last meetings this year.

The UK Brexit vote on Thursday did not have any significant impact on stocks while the FTSE 100 index was down slightly 0,80 % to 7233,90 points in London. In Germany the DAX-index closed down 0,4 0% to 13105,61 points and in France the CAC40 -index closed down 0,59 % to 5837,25 points.

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Superweek in the financial markets next week

Next week will be a superweek for the financial markets globally. There will be more information about the UK Brexit elections, the trade deal tariffs with US China will come into force if no new deal is agreed and there are several central banks meetings regarding the interest rates.

The US Federal Reserve will start its FOMC meeting on Tuesday the 10th December and the rate decision is expected on Wednesday the 11th December in press conference. The last Friday data of US payrolls was better than expected and the estimate is that Fed will not make any changes in its last meeting this year. So Fed rates are expected to be unchanged. The press meeting will start at 2.0 pm local time.

On Wednesday the 11th December, the debut of the Saudi oil company Aramco´s trading will start on the Saudi Stock Exchange. The IPO price was 32 riyals and the company was valued at 1,7 trillion dollars making it the world largest IPO ever.

On Thursday the 12th December the UK will vote in the general elections regarding the Brexit. According to several polls the Tories are leading the race. According to Telegraph newspaper,  the PM Boris Johnson’s lead over Labour has stabilised at 10 points, although the Labour Jeremy Corbyn has slowly started to narrow the gap.

On Thursday there will be also the European Central Bank´s Governing Council meeting in Frankfurt. The expectations of rate cut are not high due to the lates economic data and the widely concerns related to subzero rates. The Russian Central Bank is having a rate meeting on Friday the 13th with the expectation of interest rate cut.

The Bank fo England and the Japan Central Bank are holding their interest rates meeting on the following week, on the Thursday 19th December. Well behind the UK elections and the US China trade situation.

On Sunday the 15th December the US will raise the tariffs in China trade if no new deal is reached before that. The countries have been discussing about the Phase 1 deal during the autumn time and it was widely expected that the deal would be done by the end of this year.  The US support to the democratic movement in Hong Kong has delayed the negotiations.

On the other hand the latest data from China shows that the China exports dropped 1,1% in November and the exports to US declined 23 %. This might indicate that the countries, on both sides, are willing to make the deal before the year end.

 

 

 

 

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