05, 2019 / 07:00PM / United Capital Research / Header Image
The prior week was an action-packed one for the global markets. From the continued influx of corporate earnings to a ‘not so surprising’ U.S Fed rate cut as well as the never-ending trade spat between the US & China. Hence, we observed a broad-based bearish bias among major equity indices.
In what turned out to be its first-rate cut action in over a decade, the U.S Federal Open Market Committee (FOMC) trimmed the Fed Fund Rate by 25bps to 2.0%-2.25% amid concerns around slowing global growth. Although, the action was largely expected, what stoked some surprise was commentaries that suggested the action is not the start of a cutting cycle. Hence the euphoria that trailed the rate cut dampened. Similarly, the Brazilian Monetary Policy Committee (MPC) also delivered a 50bps rate cut to 6.5% as it aims to spur growth in a sputtering economy. However, the Bank of England (BoE) which also met during the week, left its policy rate unchanged at 0.75% while cutting its growth outlook for the U.K. economy as well as reiterating that outlook remains hinged on the outcome of BREXIT.
President Trump unexpectedly announced plans to impose another 10% tariffs on $300 billion worth of Chinese imports from September. Although talks were set to resume later this month, expectations of striking a substantive deal this year remain quite low. As such, oil prices were not spared, shedding 1.9% w/w to $62.2/b. For July, average Brent prices rose 1.9% m/m to $64.2/b. Meanwhile, we expect a confluence of OPEC+ production cut agreement and geopolitical tensions to continue to provide a level of support for prices.