Market Outlook – July 30, 2018

Global Markets Drift Lower

 

On Monday, Asian share markets drifted lower to start a busy week ahead. Technology and energy shares in Japan’s Nikkei slid 0.7% while tech shares in South Korea declined 0.1%. MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.5% and the Shenzhen Composite posted the biggest decline as it fell 1.4%. European markets also declined in early trading.

This week, more than 140 S&P 500 companies will be reporting quarterly earnings at Wall Street. Apple Inc. (AAPL) will lead all companies. Last Friday, investors’ sentiment was dampened by disappointing results from Intel Corp. (INTC). The sharp drop of Twitter Inc. (TWTR) ruined the mood on the Nasdaq.

Meanwhile, JPMorgan analysts cited relatively aggressive moves into “value” stocks, particularly banks. Their note read, “Tech really began cracking on Tuesday before the floodgates opened on Friday.”

FOMC Meeting is the Key Event This Week

 

Apart from the continuation of the earnings season, the key event this week is the Federal Open Market Committee (FOMC) meeting. The two-day meeting will commence on Tuesday. A statement will be released by the FOMC at 2 p.m. on Wednesday after the conclusion of the talks.

Investors will be watching closely the central bank’s statement and its view regarding the economy and interest rates. The Fed has intimated plans to raise interest rate twice this year and three times in 2019. Analysts are certain there will be no hike in rates at the meeting.

China Offers U.K. Post-Brexit Free Trade Deal

 

Britain has signified to China that it is fully open for business as it prepares to exit the European Union in 2019.  On Monday, Beijing reached out to the U.K. and offered to have talks on a post-Brexit free trade deal.

Because of the current trade dispute with the U.S., China wants to have allies to fight with the Trump administration. Britain’s Foreign Secretary Jeremy Hunt met with China’s top diplomat, State Councillor Wang Yi. They have agreed to step up trade with and investment in each other’s country.

 

U.K. Wants Stiff Fines on “Fake News”

 

A British parliamentary committee has recommended to the UK government to establish a “clear legal liability” for tech companies to act against content that is deemed “harmful and illegal” and are threats to democracy.

Likewise, the committee report said technology companies should be held responsible and liable for “fake news” and misinformation posted on their platforms. It was suggested that new taxes and fines be imposed on social media companies like Facebook Inc. (FB) and Twitter Inc. (TWTR).

The UK Parliament’s Digital, Media, Sports, and Culture committee has been in close contact with members of the U.S. Congress who are also investigating issues related to the spread of misinformation on social media. European countries are leading the way toward more regulation for tech companies.

BMW Raise Prices of American-made SUVs in China

 

The global trade tension has escalated as German automaker BMW announced an increase in prices of two popular sports utility vehicles (SUVs) that are made. in the U.S. On Monday, the prices of X5 and X6 models on the world’s biggest car market have increased by 4% and 7% respectively.

A BMW spokeswoman said the price changes were made because of “the increased import duty for US-made cars.” BMW is the second major automaker to raise prices in China. Tesla Inc. (TSLA) was the first.  BMW sold 560,000 cars in China last year which is more than the combined sales in the U.S. and Germany.

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