China Gets the Upper Hand in Trade War with the U.S.

Despite the powerful trade disputes that put China in a vulnerable position, Beijing has played their hand far better than the United States. Last weekend, the U.S. agreed to temporarily suspend tariffs up to $150 billion in Chinese imports. The strategic play by President Donald Trump has economic, political and strategic logic that his confrontations with Canada, Western Europe and Japan lack. However, China still appears to have a stronger hand as it successfully escaped the bulk of U.S. tariffs while giving up almost nothing of substance. With the temporary pause in the trade war, China agreed to buy more energy and agricultural products. This is not a disadvantage for the leading nation

Distortion in Emerging Markets as U.S. Dollar Trends Upwards

As the dollar starts to strengthen, investors unwind their long-held bets on emerging market stocks, currencies and bonds. The spark in the dollar has left developing countries in confusion and the ripple has spread. Hong Kong’s monetary officials took initiative to prop up their weakening currency while Indonesia raised rates for the first time in four years to arrest a drop in its currency. Currencies like the Turkish lira and Brazilian real are at its low against the U.S. dollar. Not only that, but the MSCI Emerging Markets Index and bond index have underperformed. Looking back at historical data, investors have flocked over emerging-market stocks over those in the developed world mainly

Oil Prices Rise as U.S. Withdraws from Iran Nuclear Deal

The oil market has recently seen an increase in prices as the U.S. pulls out of the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). In addition to petroleum trade, the sanctions will include restrictions on transactions with the Iranian central bank, shipping agencies and other insurance firms that have an impact in oil trading. While the removal from the plan can create potential unknowns for the future of oil prices, a definite reduction in Iranian supply will likely exacerbate market deficits thus further suggesting an upward pressure on oil pricing. As the overall oil market tightens, the near-term price is expected to rise towards $80 per barrel, whi

Utility Companies: Past and Future Strategies

Utility companies have seen unpredictable and rough execution in the previous years. An investigation of 50 noteworthy publicly traded utility companies from Asia, Europe, and North America indicated normal aggregate total return to investors of around 1 percent from July 2007 to July 2017, contrasting 55 percent for the MSCI World Index. A portion of the execution is owing to the fall of merchant conventional generation dissolving profits in Europe and the United States, and the development in different parts, for example, renewable energy sources (T&D), has not been sufficient to adjust lost profits in that area. Merchant generation is anguished from regulatory risk, and the development of

The European Central Bank’s Long-Term Challenges

Looking back into time, the European Central Bank’s (ECB) monetary policy decisions have been straightforward, but the time following 2020 could lead to some problems as the bank will face a more complex set of challenges in decision-making. The unemployment rate could fall, and economic growth could persist if the ECB tapers its asset purchase program to zero by the end of 2018 followed by a small increase in the deposit facility rate after the tapering. This will set the ECB up in a good position to raise interest rates by the end of 2019. As the current ECB president’s term comes to an end in October 2019, investors should stay tuned for the events leading up to policy changes and Mario D

US Consumer Oil Prices

Higher prices surprised the U.S Energy Information Administration which had to raise forecast for summer gasoline prices to $2.90 from the estimate of $2.73 two months ago. Oil prices are rising on outlooks of a tightening global oil market, despite the release of robust OPEC data regarding production. In the meanwhile, average U.S. retail gasoline prices are climbing toward $3 a gallon, roughly the highest price in three years. The national average was around $2.86 at the end of last week. Analyst believe that economic growth has boosted demand for oil. Yet, it is also conflicts the Middle East that could fuel higher prices. Especially given recent US involvement with the US embassy, conseq

Macroeconomic Trade and Bonds

The market responded positively to President Trump’s comments on Chinese ZTE Corp. Investors see the comments as a sign for easing U.S-China trade tensions. The president made a statement that he would help ZTE get “back into business fast", saying too many jobs in China were at risk. With concerns the high-level trade talks between the countries to resume with a potentially stronger tone after a tough stance on trade and tariffs, the chance of a potential trade war is being priced lower. Should negotiations break down, tariffs on tens of billions of dollars of products could appear before the end of next earnings season, with impact on earnings delayed but financial markets certainly instan

Investors Should Consider This New Action Plan

The stock market tumbled as the 10-year U.S. Treasury yield broke its 3% record in April 2018. This 3% number has spooked a lot of investors as they have been unable to successfully create a game plan for their respective portfolios. The yield has bounced back and forth from a high 2% level to 3%, which is just a readjustment from the market. Looking at historical patterns, the 10-year treasury rate has stabilized itself at its peak every time. The current federal funds rate has a range of 1.5-%-1.75% with an estimate of an increase by 55 basis points by the end of 2018. There will be no surprise if interest rates are lower than in previous rate-hiking cycles if global rates are also low. Co

U.S. to Loosen Bank Leverage Ratio

The Trump administration has been actively working on retooling the leverage ratio for big-banks moving forward. This will curb excessive borrowing and serve to provide more freedom for large lenders to expand in areas they once lacked. This does not mean that banks will be allowed to take on excessively risky projects, the capital rules and regulations from the past will still hold. This is great news for banks as the current leverage strategy discourages bankers from taking on many low-risk activities. The Federal Reserve and the Office of the Comptroller of the Currency have been closely working with the Trump administration to lower the leverage ratio. This will positively affect cash fl

Crude Oil Expectations Upgraded

Analysts have raised their expectations on the future of crude oil prices as inventories fall and geopolitical risk to global supply rises. The global benchmark more commonly known as the Brent crude is expected to average $63 per barrel in 2018. The U.S. standard indicator, West Texas Intermediate is set to close around $59 per barrel by the end of the year. The average growth expectations have been slowly increasing every month as 2018 is in full throttle. According to the past crude oil movements, crude prices could plateau before falling again. This will give investors a great opportunity to upgrade their decisions and sell at the right time. Looking back, crude oil prices have risen abo

Is the Fed Hawkish Again?

The Fed sent surprising signals to the market as it showed hawkish signs and a stronger desire to raise interest rates in the near future. As the final meeting winds down, the committee does not plan to raise rates until the June meeting, but it could instead upgrade its view on economic conditions and inflationary risk before June. Analysts claim, “They will be more hawkish. It’s going to be a pretty bullish, hawkish statement – with a good economy and a warming trend. You had 1.9 percent in core PCE, the highest since January 2017.” The PCE indicator further justifies the “core number” to be a little south of the Fed’s 2 percent target. As the Fed continues to make its statement, investors

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