Market Watch I Kristal Weekly Feed I 5th August 2019
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Kristal Weekly Feed | 5th August 2019

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All you need to know, in under 1 minute.

Here’s a concise report on what made headlines in the global market last week.

Positives

  • Berkshire Hathaway posts profits; and a rising cash pile
  • U.S. crude bounces 3% despite Trump’s tariffs tweets
  • Gold holds steady after a small dip post Fed announcement

Negatives

  • Fed cut and Trump’s tariffs cause Dow and Treasury yield to nosedive

Now, for more detail.

 

Positives

1. Berkshire Hathaway posts profits; and a rising cash pile 

What You Should Know

Warren Buffet’s company Berkshire Hathaway announced a rise in second-quarter earnings due to unrealized investments. Berkshire’s net earnings for Q2 stand at $14 billion, or $8,608 per Class A share equivalent; growing from $12 billion, or $7,301 a share, for the same period last year. The brand also posted a growth in its cash pile; surging to a record high of $122 billion.

What You Should Lookout For

Buffet has been actively selling stocks this year, and some of the cash inflow is going to be used to finance a merger with Anadarko Petroleum Corp. While the company’s cash pile is a reflection of its business standing, it is also important to note that Berkshire Hathaway has not had any important deals, stock purchases, or buybacks recently. Berkshire’s Class A shares have remained unchanged, even as the S&P has grown by 17% this year, raising concerns over the best use of the cash pile and whether it should be returned to shareholders.

Suggested Reading:

Buffett Steers Clear of Buying Stocks; Berkshire’s Cash Pile Hits a Record

 

2. U.S. crude bounces 3% despite Trump’s tariffs tweets

What You Should Know

The revival of Trump’s war on China caused oil prices to drop 8% – the biggest daily drop in more than four years – but the U.S. crude benchmark then rallied by 3.2% to settle at $55.66 a barrel.

What You Should Lookout For

Any economic slowdown resulting from the fresh round of tariffs that Trump has imposed on China could hurt oil futures. This was also the fifth straight week in which U.S. energy firms reduced the number of operational oil rigs as independent players decided to reduce spending. Some analysts, however, are hopeful that the impact of the trade war on oil will be minimal, given that China had already slashed its American oil import last year.

Suggested Reading:

Oil just had its worst day in years—here’s how experts are playing energy stocks

 

3. Gold holds steady after a small dip post Fed announcement

What You Should Know

Gold dipped a bit after the Fed rate announcement, only to rise up again on Friday as the dollar retreated on the back of lacklustre jobs data. Spot gold has been holding steady at $1,442.46 per ounce, rallying after earlier declines of about 1%. The yellow metal has surged nearly 2% so far, while U.S. gold futures settled 1.8% higher at $1,457.50.

What You Should Lookout For

Gold rates have seen an upward trend as macroeconomic conditions continue to be volatile. However, gold prices have reached the $1,440-$1,450/oz mark before and have failed to push beyond, which is a cause for worry amongst investors. With the news of a September Fed cut doing the rounds, there is room for a higher swing in gold prices. At the same time, other metals like palladium and silver are faring badly because the demand here is mostly industrial, and the impact of a trade war is surely going to be detrimental on these metals.

Suggested Reading:

If you are worried about the Dollar, pick Silver over Gold!

 

Negatives

1. Fed cut and Trump’s tariffs cause Dow and Treasury yield to nosedive

What You Should Know

Wednesday, 31st July, marked the worst day of the year since May for the Dow which slipped 330 points after the Fed rate announcement. Even as the markets tried to rally on Thursday, Trump’s announcement of a 10% tariff on China caused the index to drop another 280 points. The S&P 500 closed the session with a 0.9% drop to settle at 2,953.56, even after rallying more than 1%. The NASDAQ Composite on the other hand, closed down 0.8% to settle at 8,111.12 after rallying to more than a 1.6% rise.

The same happened with the 10-Year Treasury Bond Yield which fell to 1.867% and hit its lowest level since November 2016. The 30-year bond rate slid to 2.406%.

What You Should Lookout For

This has been the worst week for U.S. stocks in 2019. The Fed cut will help ease policy in the event of a negative feedback into U.S. economy from the global trade war. So far, the markets have been resilient to Trump’s moods, but it bears to be seen how far he can push the tariffs on China before impacting the end consumer adversely.

Suggested Reading:

Stocks Suffer Worst Week of Year on Trade, Fed: Markets Wrap