February 5, 2018 Market Outlook

Fears of U.S. Inflation Rise Sparks Global Sell-Off

Stock markets across the globe suffered losses on Monday due to fears that both inflation and interest rates in the U.S. would rise earlier than expected. European indexes opened lower while bond yields climbed, raising the possibility that central banks would begin to tighten monetary policies.

Wall Street’s major benchmarks fell sharply last Friday and came at a time when the U.S. Labor Department reported that wages are growing at their fastest pace in more than eight years. The global sell-off from on February 2 continued today.

Powell Assumes Fed Chairmanship

Monday will mark the beginning of a new era at the U.S. Federal Reserve. Jerome Powell will officially assume and sit as the new Chairman in place of Janet Yellen. The 64-year old Powell will be the 16th Fed Chairman. Yellen was the first woman to lead the Fed in 2014. The unemployment rate then was 6.7% compared to the 4.1% today, which is the lowest in 17 years.

Powell served as Fed governor since 2012 and is a known centrist on monetary policy. He has extensive work experience in both the private and government sectors. However, the Feds are expected to implement multiple rate increases in 2018.

Feds’ Ban Stifle Wells Fargo’s Drive to Boost Revenues

The third-largest lender in the U.S. has been placed in a difficult situation after the Federal Reserve issued a surprise ban against the bank last Friday. Wells Fargo & Co.’s plan to ramp up their lending activities has been put on hold.

The rare sanction was handed down on Janet Yellen’s last day as Fed chairwoman. San Francisco-based Wells Fargo needs to show marked improvement in its governance and controls as a condition to the lifting of the ban. The bank was rocked by long-running sales practices scandal. Wells Fargo hold assets that grew past $1.95 trillion year-end level.

Broadcom Sweetens Offer to Qualcomm

Wireless chip giant Broadcom (AVGO) is persistent in bringing rival Qualcomm (QCOM) to the negotiating table. Reuters sources  claim that the former will not take the latter’s “no” for an answer. Broadcom is set to announce on February 5 that it is raising its takeover bid for Qualcomm to between $80 and $82 per share. That is a huge increase from the previous $70 per share offer. The deal is already a record of sorts and would now include a “higher-than-usual” breakup fee in case regulators nix the merger.

Tesla Set to Help Build Largest Virtual Power Plant

After successfully putting together the world’s biggest lithium battery in Australia, Tesla is set to build another record-setting project. At least 50,000 homes in the state of South Australia will be equipped with solar panels and Tesla’s (TSLA) battery storage units. All the homes will be connected to the electricity grid to form the world’s largest “virtual power plant.”

The state formally announced the plan and more than 6,500 homes have already signed up and expressed interest to participate in the project. South Australian Premier Jay Weatherill also tweeted the info on Monday.

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