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Kristal Weekly Feed I 6th January 2020
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Happy New Year! As is the case with all new beginnings, this week saw its share of ups and downs in the financial world too. If you have been having an extended New Year celebration, then here is a summary of some major global headlines over the last week.
Positives
- Chinese stocks close higher after the People’s Bank of China cuts RRR
Negatives
- Stocks in the US and Europe close lower after the airstrike on Iran by the US
- Rising oil prices keep the US markets on the edge fearing a recession
Now, for more detail.
Positives
1. Chinese stocks close higher after the People’s Bank of China cuts RRR
What You Should Know
This week, the People’s Bank of China (PBOC) declared that it would cut the RRR (Reserve Requirement Ratio) by 50 basis points from January 6, 2020. This means a release of approximately $115 billion into the financial system. This reassured the investors as they felt that the government was taking necessary action to ensure liquidity in a market that is slowing down. Last week, the Shanghai Composite Index closed 2.6 percent higher while the large-cap CSI 300 Index closed 3.1 percent higher.
What You Should Look Out For
With the initial phase of the trade agreement between China and the US scheduled to be signed this month, this PBOC announcement has managed to retain investor confidence despite the geopolitical tensions between Iran and the US. Going further, it will be important for investors to keep a close watch on the updates surrounding these events to ensure that they are on the right side of the line.
Negatives
1. Stocks in the US and Europe close lower after the airstrike on Iran by the US
What You Should Know
On Thursday, January 02, 2020, the US confirmed that it had killed the Iranian General Qasem Soleimani via an airstrike. As Iran vowed to retaliate against this attack, the stock markets which had experienced a good rally were in for a surprise on Friday. The DOW Industrial average dropped by 0.81 percent, S&P 500 dropped by 0.71 percent, and the Nasdaq Composite Index dropped by 0.79 percent. The spike in the geopolitical tensions due to this airstrike also impacted the European markets with the Stoxx 600 closing 0.4 percent lower.
What You Should Look Out For
With tensions escalating between Iran and the US, investors need to constantly monitor any news on the relations between the two countries. While the trade negotiations taking a positive turn last month, the airstrike has worked as a dampener to the positive investor spirit.
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2. Rising oil prices keep the US markets on the edge fearing a recession
What You Should Know
On Friday, crude prices shot up by up to 4.8 percent following the airstrike on the Iranian General Qasem Soleimani by the US. This led to increased worries about an escalation between Iran and the US. While the prices eased up as the day progressed, it was still trading around $63.18 per barrel (a jump of 3.3 percent), way higher than the $51 per barrel price in October. Historically, the last three recessions in the US came after sharp increases in crude oil prices. This sudden rise has created a fear of an impending recession among investors.
What You Should Look Out For
Since 2009, the S&P 500 Index has grown more than 370 percent. It is the longest bull-run in the history of the US markets. While investors braved the volatility surrounding the trade war between China and the US, the recent developments in the Middle East might derail the ‘bull’. Investors are still optimistic since the oil prices are not yet in the problematic zone. Once the start crossing $80 per barrel, markets will start getting affected. Investors will do well to remain vigilant over the next few weeks.
Disclaimer
The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.
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