US stocks had their largest one-day gains for more than two and a half years on Monday, as fears of a trade war eased and investors regained their taste for technology shares. The improved mood on Wall Street reversed some of last week’s upheaval, with the S&P 500 — which last week suffered its worst weekly performance in more than two years — adding 2.7 per cent. The Dow Jones Industrial Average was up 2.8 per cent and the Nasdaq Composite increased 3.3 per cent. The positive sentiment flowed through to Asia-Pacific markets on Tuesday, with the Topix in Tokyo rising 2.2 per cent and the Hang Seng index in Hong Kong climbing 0.9 per cent. Investors pointed to optimism over trade talks between the US and China, after Steven Mnuchin, the US Treasury secretary, told Fox News on Sunday that he was “cautiously hopeful” that an agreement between the US and China could be reached. Britain’s closest allies, led by the US, will expel more than 100 Russian officials from their national capitals in a co-ordinated diplomatic offensive aimed at isolating the Kremlin for its alleged role in the poisoning of a former spy on UK soil. Donald Trump, who was slow to link the nerve agent attack on Sergei Skripal to Moscow and has been criticised for trying to improve ties to the Kremlin, accounted for most of the expulsions. He gave 60 Russians in Moscow’s Washington embassy and UN mission one week to leave the country. US officials said they were intelligence officers operating under diplomatic cover. But in a significant diplomatic victory for Theresa May, the British prime minister who has spent two weeks rallying support for her claim that the Kremlin was behind the Skripal attack, the US was joined by every large Nato ally — including France, Germany, Italy, Poland and Canada — in announcing Russian expulsions. Stock markets came under heavy pressure on Friday on fears over the impact of escalating trade tension between the US and China on global economic growth and corporate earnings. President Donald Trump announced tariffs on Thursday on up to $60bn in annual Chinese imports, declaring Beijing needed to pay the price for decades unfairly acquiring US intellectual property. Beijing responded with plans to apply tariffs on 128 US products accounting for roughly $3bn in imports. China’s US ambassador, Cui Tiankai, said the accusations against his country were “groundless” and warned that Beijing would stand up for itself. Asia markets were hit hard after heavy falls on Wall Street on Thursday, with “cyclical” stocks most exposed to economic swings leading the sell-off. The S&P 500 index closed 2.5 per cent down in its biggest one-day fall for the US market benchmark since February. The Federal Reserve lifted short-term interest rates by a quarter-point and forecast that rates will rise higher than expected in the coming years as its new chairman Jay Powell responds to strengthening growth at home and abroad. The US central bank raised the target range for the federal funds rate by a quarter point to 1.5-1.75 per cent as it predicted inflation would accelerate in the coming months. The Fed’s median forecast for interest rates at the end of 2018 was left unchanged, but its projections pointed to an extra increase in 2019 with more tightening to come in 2020. Britain secured the economic prize of a 21-month Brexit transition on Monday, offering the EU concessions over sovereignty in exchange for stronger assurances that a cliff-edge exit would be avoided next year. The conditional agreement reached by Michel Barnier, the EU’s chief negotiator, and David Davis, the UK’s Brexit secretary, represents one of the most valuable breakthroughs for UK business since Brexit talks began. Markets welcomed what Mr Davis hailed as a “significant” moment in talks, which would allow business to stop “guessing” about the immediate aftermath of Brexit. Sterling climbed above $1.40 to the dollar to reach its highest level in three weeks. The leaders of the other 27 EU member states are expected to acknowledge the progress made at a summit on Friday, as they adopt new guidelines for Mr Barnier to negotiate a framework for future relations. Facebook’s shares fell the most in four years on Monday, wiping $36.7bn off the market value of the world’s largest social network as a backlash intensified over claims it had been used to harvest the data of millions of US voters. EU lawmakers joined their UK and US counterparts by saying they would investigate reports that Cambridge Analytica, a data analysis firm employed by Donald Trump’s presidential campaign, mined the personal data of 50m users to create profiles to target them in elections. The reports in The New York Times and The Observer say the company broke Facebook’s rules by using data collected solely for research. Vladimir Putin won re-election as Russia’s president in a landslide on Sunday for which Moscow partly credited the diplomatic storm with Britain over the poisoning of former double agent Sergei Skripal. “Turnout is higher than we expected, by about 8-10 per cent, for which we must say thanks to Great Britain,” said Andrei Kondrashov, Mr Putin’s campaign spokesman, as preliminary results suggested Mr Putin had won 75.6 per cent of the vote in Sunday’s presidential election. Yields on one-year US Treasury bills are hitting levels not seen since the financial crisis, driven by a combination of tighter Federal Reserve policy and looser fiscal policy. The one-year Treasury bill yielded 2.052 per cent in afternoon trading on Friday. The last time they were so high was in 2008, when the Fed was cutting rates aggressively to fight the worsening US financial crisis. Nearly a decade later, market prices suggest that traders overwhelmingly expect a policy tightening when the Fed meets on March 21, which would mark the sixth quarter percentage point shift higher in the overnight borrowing rate in the current cycle. The steady tightening of Fed policy — the central bank has decided to shrink its balance sheet as well — has contributed to the rise in Treasury yields. Prime minister May has today expelled 23 Russian diplomats from England. She even threatened Russia further to freeze Russian state assets in the UK when they will be used against Britain nationals or residents. These steps come after the UK has enough evidence of Russian involvement in the poisoning of a former Russian spy (Sergei Skripal). The steps are still 'light' and May tried to do not take measures that could hurt the already fragile UK economy. Donald Trump sacked Rex Tillerson as his secretary of state on Tuesday, making the US’s top diplomat the latest casualty of a White House that has been in near-constant, open conflict with some of the president’s most senior aides. Mr Trump immediately named Mike Pompeo, the CIA director, as Mr Tillerson’s replacement, swapping a soft-spoken former ExxonMobil chief executive with a former Republican congressman with a far more hawkish foreign policy record. Five years after he set out to accumulate more power than any Chinese “paramount leader” since Deng Xiaoping and Mao Zedong, Xi Jinping revealed just what he intends to do with that influence. With the annual session of China’s rubber-stamp parliament in its second and final week, Mr Xi unveiled key personnel appointments and a government restructuring that will indicate his priorities — such as a further blurring of the boundaries between the Chinese state and the ruling Communist party. The constitutional change allows Mr Xi to remain as president beyond the end of his second term in 2023 represents a doubling down on a centralisation of power that he pursued in his first five years in office. President Donald Trump is to meet Kim Jong Un within weeks, the first summit between the US and North Korea, after Pyongyang offered to suspend nuclear and missile tests. Mr Trump later hailed the breakthrough but cautioned that the policy of putting pressure on Pyongyang would stay in place. Investors’ attention on Thursday will focus on whether the European Central Bank gives any signal that it could soon call time on its landmark quantitative easing programme under which the bank has promised to buy €30bn of bonds a month until September. As Trump discussed about the tariffs for steel imports there is a lot of debate within the Republican Party about wether this is what the US needs. Today even one of his most important economic advisors, Gary Cohn, resigned as he couldn't agree with the choices Trump is making. Financial markets reacted immediately as again one the staff members of the Trump administrations 'bites the dust'. Cohn was a former COO of Goldman Sachs. Trump immediately stated on his twitter account that a new economic advisor will be announced shortly. An EU plan to respond to Donald Trump’s promised tariffs on aluminium and steel by targeting US products such as Harley-Davidson motorcycles risks running afoul of World Trade Organization rules itself, according to experts. European Commission officials on Monday presented EU member states with a €2.8bn list of more than 100 US products that could be affected in response to any move by Washington to levy tariffs. Italy yesterday went to the polls to choose over 900 members of its two houses of parliament. Former prime minsters Silvio Berlusconi and Matteo Renzi were the big losers as voters opted for anti-establishment parties. The results from Italy’s general election show the country split three ways. None of the three factions – Silvio Berlusconi’s Forza Italia and the anti-immigration the League; a centre-left coalition headed by Matteo Renzi; and the anti-establishment Five Star Movement (M5S) – look likely to have enough seats to govern alone, and no government is possible without the support of either the League or M5S. Donald Trump said he would impose heavy tariffs on imports of steel and aluminium “for a long period of time”, in a move likely to trigger retaliation from the EU and China and raise fears of a trade war. The US president announced that he would next week sign an order imposing global tariffs of 25 per cent on steel and 10 per cent on aluminium, breaking a deadlock among his advisers that had delayed action for months. The news prompted warnings from the EU and China, outrage from other countries and a steep fall in US equity indices, although shares in US producers jumped. 2018 seems to be the year when some hot tech companies will be making their debut on the stock exchanges. Lately the rumours of the Dropbox IPO became louder and today there was news that also Spotify want to make its debut on the US stock exchange. Both companies already have enormous cash flows and als a steady growing user-base. Latest numbers of both companies look promising, but Dropbox still loses money each year (2017 roughly $100 million), and also Spotify shows a loss of over $1 billion in 2017. Appetite however for these new giants is expected to be huge. |
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March 2021
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