Amazon blew past Wall Street earnings forecasts as its diversification into higher-margin cloud computing and the dominance of its online retail business produced the first $2bn quarterly profit in its history. The second-quarter results were a bright spot in gloomy week for the technology sector, coming a day after Facebook stunned investors with a prediction of slowing growth, sending its shares down almost 20 per cent and wiping off more than $120bn from its market capitalisation. Facebook lost more than $140bn from its market capitalisation in after-hours trading as it forecast slowing revenue and lower margins, missed revenue expectations and saw about a million European users leave the platform in the last quarter. Shares in Facebook tumbled as much as 24 per cent after the bell on Wednesday, falling from an all-time high, in one of the largest ever drops in market value. Mark Zuckerberg, Facebook’s founder and chief executive, personally lost almost $20bn in paper wealth in the sell off. The shares were trading at $172 each after the company briefing call, against a closing price of $217.50, or down about 22 per cent. Rumours about Berkshire buying back it's own share came into the market after they eliminated the rule that they can't buy back own stock when the price is more than 20% above book value. Now they can buy back shares whenever the board feels like it's a good buy. Buffett is saying the current intrinsic value of Berkshire is way above the book value which might signal he is ready to announce a share buyback program at current levels. The money is there as the fund is holding over $100 billion in cash and T-bills. Share price reacted with a 5% gain.
President Donald Trump publicly criticised the Federal Reserve’s recent interest rate rises, breaking with White House tradition to raise concerns about the impact of tighter monetary policy on US economic growth. “I’m not thrilled,” Mr Trump said in an interview on CNBC. “Because we go up and every time you go up they want to raise rates again . . . I am not happy about it. But at the same time I’m letting them do what they feel is best.” The Fed started raising rates in late 2015, and did so again last month against a backdrop of low unemployment, strong economic growth, and inflation approaching its target. The president’s comments triggered a decline in the dollar. Fed chief has downplayed the significance of a flattening in the US yield curve. In late 2005 Alan Greenspan assured Congress that the bond market’s ability to predict a recession wasn’t what it used to be. The former Federal Reserve chairman was testifying just as shorter-dated interest rates threatened to climb above longer-dated ones, a rare event in markets and one that has been a reliable indicator of downturns. This week Fed chair Jay Powell found himself quizzed on Capitol Hill on the same subject because short-dated rates are close to exceeding longer-dated ones in what would be an inversion of the yield curve for the first time since 2006. It is a prospect that some investors once again believe is an early warning of an economic slowdown. Although there are some worries in the markets about the trade war, a downturn in economic growth and some political issues, the price of gold has reached a one year low and stands now around $1220, a price which was last seen a year ago. Analysts still see gold as a good buying opportunity at current prices saying it's to cheap comparing it to some popular equities. A good reason for the poor performance of gold is unknown, but some say the positive flow of the US economy weighs on the gold price as investors seek other opportunities.
Netflix, the online video demand service, has experienced record growth the last few years, but today they showed some weakness and lowered their growth targets. They've reached a high in growth in Q4 2017 and now they can't meet their own expectations which arised from the past growth. The share price plummeted in after hours trade by roughly 15%, this comes after the price of Netflix doubled over the last 12 months.
Trump doesn't hold back in his trade war and has warned he is preparing another 200 billion in tariffs for China. He is preparing a 10% levie on several products that will be imported from China, it includes automotive parts, food ingredients and construction. There are several product groups that will immediately hurt US consumers and will have an upward effect on inflation. These new tariffs started a further sell-off in the Asia Pacific reason, with China leading the way. Trump had a meeting in London with Theresa May regarding Brexit and their current and future deal on trade. Trump told that depending on the outcome of the US-EU deal it could hurt and kill any US-UK free trade agreement. Afterwards the tone changed somewhat when Trump told the press he hopes the UK and US can make a new agreement. May insisted there are no limitations on trade for the UK, as a UK standpoint, but other countries and regions might have constraints
Debt is on the rise and noted a new record of $247 trillion on March 31, and seems to be rising further. Roughly $60 trillion of this amount is from the financial sector. Also the debt to GDP ratio increased to 320% worldwide states the report of the IFF. Investors are worries about this rise, along with the tightening of the FED. The corporate sector is highly leveraged, with cheap rates, and a further rise in rates could hurt the corporations. Donald Trump has nominated Brett Kavanaugh to the Supreme Court in a decision that could cement a conservative majority on America’s highest court for a generation. The announcement at a live televised White House event follows 12 days of speculation after Justice Anthony Kennedy, long a swing voter on the Supreme Court, said he would retire. Republicans and Democrats have geared up for a battle over Mr Trump’s pick as both try to use the Senate confirmation process to rally voters ahead of the midterm elections in November. Last week two major resignations were witnessed in the UK, all regarding the path to Brexit that May is proposing. David Davis and Boris Johnson both resigned as they believe May made too much concessions to the EU. This made seven resignations since November 2017, which shows there are a lot of different opinions about the Brexit. Beijing accused Donald Trump of “trade bullying” as it imposed retaliatory tariffs against new US duties on $34bn of Chinese imports on Friday in the biggest escalation yet in a trade war between the world’s two largest economies. The consequences of a trade war that could threaten global supply chains have alarmed governments and multinational corporations around the world. But Mr Trump has continued to raise the stakes, threatening to extend levies to all $500bn of goods imported from China in a blunt outline of his plans to escalate the fight. US yields are on the rise and this also hurts the corporate bond sector. This seems logical, but the last back to back quarterly losses happened the last time during the financial crisis in 2008. Q1 showed a 2.2% loss, and Q2 a 1% loss. It wasn't just the rising interest rates that hurted, but also the spread widened by roughly 40 basis points for investment grade credit. |
PurposeMajor markets news headlines which captured the markets. Archives
March 2021
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