Stock Market News Today 2018/08/25
US economy >>> Fed’s Powell sees few signs of US economy overheating.
The Federal Reserve does not see risks of the US economy overheating, chairman Jay Powell said, as he defended the central bank’s gradual approach to lifting interest rates against critics that have included President Donald Trump.
The Fed has signalled it will lift rates again next month, with a December move also widely expected. But prospects get murkier in 2019 as rates close in on current estimates of neutral rates — broadly defined as the interest rate that keeps the economy on an even keel.
Mr Powell, speaking at the annual Jackson Hole symposium for central bankers, did not directly refer to presidential criticism, instead focusing on the academic and historical justification for his cautious approach to rate rises. He said the Fed was attempting to navigate between twin risks — moving too quickly and needlessly shortening the economic expansion, and conversely lifting rates too slowly and risking a “destabilising overheating”.
“I see the current path of gradually raising interest rates as the [Fed’s] approach to taking seriously both of these risks,” Mr Powell said. “While inflation has recently moved up near 2 per cent, we have seen no clear sign of an acceleration above 2 per cent, and there does not seem to be an elevated risk of overheating.”
The chairman’s dovish tone prompted a sell-off in the dollar, as investors expressed relief that recent strong economic data would not deter Mr Powell from his go-slow approach. The dollar index, a measure of the greenback against a basket of other currencies, fell 0.6 per cent on the remarks.
Complicating Mr Powell’s deliberations are the Trump administration’s escalating disputes with the US’s largest trading partners and the turbulence in emerging markets. Mr Trump’s attacks on the Fed for lifting rates have also added to market unease.
Mr Powell’s address, his first as Fed chairman to the Kansas City Fed’s annual symposium, came just a week after Mr Trump said he was “not thrilled” with the Fed’s monetary tightening.
The Fed chair gave a broadly positive outlook for the US, saying that “with solid household and business confidence, healthy levels of job creation, rising incomes and fiscal stimulus arriving, there is good reason to expect that this strong performance will continue”.
But he said the Fed’s task was currently being made tricky by the difficulty in pinpointing variables such as the longer-run rate of unemployment or the neutral rate of interest.
UK equities >>> The London Report: Mining stocks climb back
The sectors that moved the FTSE 100 this week made an about-turn on Friday with housebuilders looking exposed after a wider rally while resources bounced back from heavy selling.
Residential developers dominated the list of biggest fallers. Berkeley Group led the sector lower, down 1.8 per cent, with Barratt Developments down 0.8 per cent and Persimmon weaker by 1.4 per cent.
The selling came after data showed a decline in the the number of mortgages approved in July, at just under 40,000.
Earlier in the week, half-year results from Persimmon, the biggest UK housebuilder, eased concern at the impact of rising UK interest rates on the sector. But the mood changed on Friday.
The resource sector rebounded, coming back into demand after a wider run lower. The selling, sparked by worries about the outlook for global growth and falling metals demand, looked to have gone too far.
Antofagasta, the Chilean copper miner, was among the biggest gainers on the FTSE, up 3.6 per cent. On the list of the top 10 risers, five were miners by mid-session. Following this trend was BHP Billiton, up 2.2 per cent.
Companies >>> Airbnb suing New York City over new host data disclosure law
Airbnb, the app for renting other peoples’ homes, is suing the city of New York, in response to a new law that requires the company to share hosts’ names and addresses with the authorities every month.
The company is contesting the rule, designed to help the city crackdown on illegal listings, by saying it violates the first and fourth amendments. Airbnb says the rules are an “extraordinary act of government over-reach”; breaking the first amendment because it requires Airbnb to communicate a message that it does not want to, and the fourth, because it improperly authorises the city to do an administrative search, violating hosts’ privacy.
New York, like many other cities popular with tourists, has been trying to find ways to curtail the influence of Airbnb on the housing market, where some landlords choose more lucrative short stay vacationers over long term local residents.
New York does not allow entire apartments to be rented out for less than 30 days.
Airbnb settled a similar lawsuit in San Francisco, where it now works with the city to register hosts.
Companies >>> Arconic considers selling itself after bid interest
Arconic is considering selling itself after the aluminium products company was approached by several private equity players interested in buying out the Alcoa-spin-off, people familiar with the matter said.
A consortium of Blackstone and Carlyle and another group of private equity groups including of KKR and Onex have expressed their interest in acquiring Arconic, those briefed on the approach said. They added that Apollo, another US private equity group, is also exploring a deal.
The talks are at an early stage and come weeks after the US company said it was planning to sell the building products unit that provided the external cladding applied to London’s doomed Grenfell Tower.
Arconic was initially opposed to selling itself but a person close to the company told the FT last month that it would be open to do a deal if somebody came forward with an offer too good to turn down.
If successful, the deal would represent one of the largest leveraged buyouts in a decade. Arconic has a market cap of about $10bn.
Blackstone, Carlyle, KKR, Onex and Apollo declined to comment. Arconic did not immediately respond to a request for comment.
Shares of Arconic rose nearly 5 per cent late on Friday after Reuters first reported that Arconic was discussing acquisition offers.
Arconic, makes aluminium components for planes, cars and industrial engines, and was formed in 2016 out of a spin-off of downstream assets from smelting giant Alcoa.
The spin-off group’s businesses have been overshadowed by the construction unit since the Grenfell disaster in June 2017, when 71 people were killed in a catastrophic inferno that engulfed the supposedly fireproof tower.
Arconic shares slumped after the company announced it would no longer supply high-rise buildings with flammable cladding.
If Arconic decides to sell all of itself or the construction business that supplied cladding to the doomed Grenfell Tower in London, it will try to cap liabilities related to ongoing shareholder litigation against the company that were launched in the aftermath of the tragic fire, a person close to the company said
Commodities >>> Oil Surges as Geopolitical Tensions Continue
Crude oil prices surged on Friday, as trade talks between the U.S. and China ended and upcoming sanctions against Iran weighed.
West Texas Crude oil futures rose 1.93% to $69.14 a barrel as of 10:58 AM ET (14:58 GMT). Meanwhile, Brent crude futures, the benchmark for oil prices outside the U.S., increased 1.95% to $76.19.
The U.S. and China moved ahead with 25% tariffs on $16 billion worth of goods, as trade talks between the two ended with no agreement. The two biggest economies in the world have been in a tit-for-tat trade war for months.
“We concluded two days of discussions with counterparts from China and exchanged views on how to achieve fairness, balance, and reciprocity in the economic relationship,” White House Spokeswoman Lindsay Walters said in a brief statement.
On Friday, China said that it would not be swayed by U.S. strongarm tactics on trade.
Oil prices have been driven higher in the past few months as demand for oil outsrips supply and upcoming U.S. sanctions against Iran have also supported prices. The financial sanctions against Iran will target the petroleum sector of Iran in November, when a drop of crude supply is expected.
Investors are also looking ahead to the weekly oil rig count from Baker Hughes this afternoon, which is a leading indicator of demand for oil products.
In other energy trading, gasoline RBOB futures rose 0.92% at $2.0800 a gallon, while heating oil was up 1.71% to $2.2126 a gallon. Natural gas futures fell 0.94% to $2.936 per million British thermal units.