- USD on the defensive as Fed officials hint at Interest Rates cut
- Wall Street brokerages believe Netflix outlook still positive
- Strong candidates put off BoE role due to Brexit concerns
- Bitcoin stages huge intraday surge to move above $10K
The US Dollar was on the defensive on Friday after Federal Reserve officials bolstered expectations of an aggressive rate cut this month to address weakening price pressures. At a central banking conference on Thursday, New York Fed President John Williams argued for pre-emptive measures to avoid having to deal with too low inflation and interest rates. Although a New York Fed representative subsequently said Williams' comments were academic and not about immediate policy direction, investors still took his remarks along with separate comments from Fed Vice Chair Richard Clarida as a dovish signal from the central bank.
Oil prices extended gains on Thursday after Iran said it had seized a foreign tanker in the Persian Gulf, pushing geopolitical premiums higher after a brief lull. New York-traded West Texas Intermediate Crude futures rose 30 cents, or 0.5%, to $57.08 a barrel by 8:13 AM ET (12:13 GMT), while Brent Crude futures, the benchmark for oil prices outside the US, gained 48 cents, or 0.8%, to $64.14. Several media reports cited Iranian state TV as saying that Revolutionary Guards forces seized a foreign tanker with 12 crew members accused of smuggling oil.
Wall Street brokerages stuck to a positive outlook on Netflix Inc on Thursday, betting that a strong content slate for the rest of 2019 would reverse shock second-quarter losses in US subscribers that sank its stock price. Netflix shares fell about 11% on worries about its earnings report on Wednesday that showed lower-than-expected global growth and signs of trouble in its US base ahead of Walt Disney Co's much-awaited launch of a rival service later this year. Netflix, whose price-to-earnings ratio is by far the largest of the five big US tech companies making up the so-called FAANG group, has quadrupled in value since 2015 but at $321 per share is down $100 from 2018 peaks. The other FAANG companies are Facebook Inc, Amazon.com Inc, Apple Inc and Alphabet Inc.
Asian markets rose on Friday amid growing expectations for aggressive Federal Reserve easing following dovish comments from New York Federal Reserve President John Williams. China’s Shanghai Composite and the Shenzhen Component gained 1.1% and 1.3% respectively by 10:40 PM ET (02:40 GMT). Hong Kong’s Hang Seng Index also climbed 1.3%. Japan’s Nikkei 225 jumped 1.8%. Data showed today that the country’s core consumer price index rose 0.6% in June from a year earlier, in line with expectations.
Morgan Stanley reported a drop in quarterly profit Thursday, hit by lower market activity amid global trade tensions and expectations for US interest rate cuts. It was the last big US bank to report earnings in a quarter that exposed weaknesses in Wall Street's investment bank and trading businesses. But Morgan Stanley executives downplayed the toll rate cuts could have on profitability and highlighted growth in the bank's wealth management unit. The wealth business, which contributes 44% of Morgan Stanley's revenue, rose 1.9% to $4.40 billion from a year earlier. The unit benefited both from higher stock prices and more lending to customers. That more than offset the effects of lower interest rates.
The number of Americans filing applications for unemployment benefits increased moderately last week, pointing to still strong labour market conditions despite signs that economic activity was slowing. Other data on Thursday showed factory activity in the mid-Atlantic region rebounded sharply in July, reaching its highest level in a year. That added to recent surveys on manufacturing that have suggested the struggling sector was stabilizing.
The improvement in the regional factory surveys likely reflects a decision by President Donald Trump not to impose tariffs on Mexican goods after the two countries struck a deal on immigration. But manufacturing, which makes up about 12% of the economy, remains hamstrung by weaker business spending on equipment, an inventory glut, a bitter trade war between the United States and China, and softening global growth.
Japan's core inflation slowed to its weakest in about two years in June, data showed on Friday, underlining the nation's long battle to boost consumer prices and adding to speculation the Bank of Japan could deliver more stimulus later this month. With the global economy slowing and factory production faltering in the face of a bruising Sino-US trade war, BOJ officials have said they remain ready to expand stimulus, joining the US Federal Reserve in signaling an easing may be coming soon.
An overwhelming majority of Japanese firms see no need for the Bank of Japan to ease policy further this year, a Reuters survey showed, despite speculation the central bank may do so as early as this month as economic pressures mount. Expectations are growing that the BOJ could expand its massive stimulus this year to cushion the impact on Japan's export-reliant economy from the US-China trade war and weakening global demand. Rises in the Yen resulting from monetary easing by other major global central banks could also prompt the BOJ into additional easing, the survey showed.
Former US Federal Reserve chair Janet Yellen and Raghuram Rajan, former governor of the Indian central bank, have been deterred from applying for the job as the governor of the Bank of England because of the political turmoil caused by Brexit, the Financial Times reported on Thursday. The two, among the world’s leading central bankers, are not being considered for the role because they would not apply, the newspaper reported. A number of potential candidates the government had considered did not want to get embroiled in the politics of Brexit, the Financial Times said.
Bitcoin regained its footing Thursday, rising above the key $10,000 level after a sudden intraday surge higher. The surge was mirrored by other crypto currencies and came despite the murky backdrop for cryptos in the wake of recent criticism of Facebook’s plans for its Libra coin. Bitcoin rose 7.9% to $10,604, after hitting an intraday low of $9,390.