1) The WHO (World Heath Organization) has declared the coronavirus to be a pandemic, which in turn has cause the markets to make another plunge after its apparent recovery on Tuesday. The number of coronavirus cases world wide is now in excess of 100,000 with more than 1,000 in the U.S. The central banks in other western nations are cutting their interest rates in an attempt to minimize the effects of the virus and avoid a world wide economic slowdown. At present, there doesn’t seem to be an end to the markets volatility.
2) The United Kingdom is levying an additional 2% tax on big high tech companies starting the first of April. Call the ‘digital services tax’, it will levy a tax on the revenues from search engines, social media services and online marketplaces used by British citizens, but it only applies to companies making more than $650 million dollars and derive more than $35 million dollars revenue from UK users. This will encompass companies like Amazon, Apple, facebook and Google. The EU (European Union) is considering a similar tax, but with a 3% rate.
3) Oil production in the U.S. is expected to drop as a result of the dramatic collapse in oil prices. This would be the first decline in output since 2016 as drillers are cutting back on capital spending. Oil prices are below $35 a barrel, well below the breakeven price for most American shale fields. Oil prices have been pushed down by the economic impact of the coronavirus plus Saudi Arabia and Russian failing to agree on limited oil production.
4) Stock market closings for – 11 MAR 20 Stocks down 20% from their high.
Dow 23,553.22 down 1464.94 Nasdaq 7,952.05 down 392.20 S&P 500 2,741.38 down 140.85
1) Monday markets opened in a steep downward spiral from sell offs, driven by the coronavirus fears, followed by the sharp drop in oil prices. The Dow dropped 2,000 points, with a massive sell off of both the S&P 500 and Nasdaq, which triggered a key market circuit breaker that halted trading for fifteen minutes. There are widespread fears over the economic impact of low oil prices, with some experts fearing oil prices down to $20 a barrel. Gold prices crossed the $1,700 dollar an ounce, hitting the highest since December 2012. The banks are hard pressed as the interest continues to sink, cutting into their margins.
2) Experts speculate that the Feds will cut the interest rate to zero in the next few months in an effort to forestall a downturn of the economy. The entire U.S. yield curve fell below 1% for the first time in history on expectations that the Federal Reserve will cut rates to zero in the next few months. Some speculate the Feds may adopt a negative rate just as some European countries have, such as Germany’s -1%.
3) While checkout-free with cashless supermarkets is now a novelty, Amazon expects this technology to spread to other retailers. Amazon has announced it plans to license its automated checkout technology to other retailers, telling of several other companies that have already signed up for the technology. The technology has been proven with cashless convenience stores across America and with Amazon’s new Go-supermarkets. The technology represents another significant step in retail automation.
4) Stock market closings for – 9 MAR 20: The stock market is like a rectal thermometer- it’s rude and crude, but surprisingly effective in showing a sick economy.
Dow 23,851.02 down 2013.76 Nasdaq 7,950.68 down 624.94 S&P 500 2,746.56 down 225.81
The Federal Open Market Committee, voted internally to raise interest rates (from 1.00%-1.25%). The Fed is trying to unwind the $4.5 trillion dollar balance sheet that is on the government books. The Fed will be reducing it treasuries and other securities, in order to reduce the Fed’s principal amount.
The reduction of the balance sheet will take time, but will eventually ease the debt that has accrued on the Fed’s watch. The reduction will affect the balance sheet of banks capital reserves The Federal Reserve balance sheet has risen dramatically, starting when much of the accrual happening during the 2008 financial crisis. -SB
Former Fed President of Richmond’s Federal Reserve Bank, Jeffrey Lacker has resigned today; effective immediately. Richmond’s Federal Reserve Bank had issued a statement about the resignation of Lacker. The head of Richmond’s Federal Reserve, Mr. Jeffrey Lacker had improper discussions with a financial analyst from Medley Global Advisors, on “confidential information” relating to Federal Reserve’s interest rate policy.
There was an ongoing investigation that the Federal Reserve Inspector General, Mark Bialek just concluded. No charges will be brought on Mr. Lacker, but he has lost his job as Richmond’s Federal Reserve point man. Mr. Bialek’s investigation started in 2012, when information of private Federal Reserve information had leaked.
Many members of the US Congress have been critical on the prudence of the US Federal Reserve, and this episode certainly adds fuel to the fire, members in Congress have stated on numerous occasions that there is a lack of transparency; within the Federal Reserve’s fiscal policies and initiatives. -SB
The Federal Reserve has raised important interest rates because the US economy has increased drastically. This is the second time the FED has raised interest rate benchmarks since 2008. The Fed indicated that next year in 2017, the interest rate will raise again also.
The benchmark had been 0.50%, now with the recent increase the benchmark will be 0.75%. When it comes to low rates, it helps the economy because it provides an environment for growth economically . This in turns allows businesses to borrow to finance deals, products, services, expansion, and leads toward enabling their businesses to take risk in growing their enterprises.
The interest rate being raised was on par to what many analysts and economists predicted, the economy improving as it is these days made sense for the interest rate to increase according to many experts. -SB
Wall Street looks ahead after the Thanksgiving holiday, as Chinese stocks headed lower Friday, a day after Thanksgiving. The Asian session saw a 5% retracement for the day, as major Chinese indices hovered lower.
Next week US Federal Reserve Chairwoman Janet Yellen, will be speaking about raising the interest rates in the middle of December 2015. She will hit her point home about why the time is good now to raise the rates, as she has been indicating for the past several months.
The ECB (European Central Bank) will be meeting next week to speak about their easing rates program.
OPEC (Organisation of Petroleum Exporting Countries) will also meet to discuss oil prices, and oil production measures.
Week after Thanksgiving looking to be a very busy and tumultuous week for the economy and in finance: Economy & Finance Report, no pun intended. LOL-SB