This week, the financial market has been mixed with both positive and negative news rocking the market.
This week, the earnings season for the second quarter came to an end with the release of results by Apple. The company reported strong iPhone sales and increase in services. This led the company’s stock to soar, with the company achieving the milestone of being the first trillion-dollar company. This was a major achievement and one that only a few companies will ever reach. Other than Apple, another major release was Caterpillar, whose report was better than expected.
Apart from earnings, the focus among traders shifted to the issue of trade. Traders were excited on Tuesday when news emerged that the United States and China were restarting the talks on trade. This was a good move that traders hoped will avert a further escalation on this issue. However, these hopes were erased after the Trump administration announced that it would put a 25% tariff on Chinese goods worth $200 billion. This was a large number that threatens the trade between the two countries.
After the tariffs were announced, China announced that it would retaliate. However, China does not buy a lot of American goods, which means that it would retaliate in other ways. For example, it can stop or reduce buying US treasuries, a move that will punish the US and China. Nonetheless, it will send a clear message to Washington. Alternatively, it could move to target specific American companies like Apple, which have large stakes in China. The news of tariffs led to a sharp decline in global equities.
Central Banks were very important this week. Bank of Japan was the first bank to announce its decision on interest rates. The bank was expected to change the language of its statement after supporting the bonds market three times this week. However, the bank did not do that and instead, it announced that it would leave rates unchanged for a foreseeable future. This led the Japanese Yen to decline against major currencies apart from the dollar.
It was followed by the Federal Reserve. The bank was not expected to raise interest rates during the meeting. Traders were however looking ahead to the statement, which would give direction on future rate hikes. In the statement, the bank reiterated on the previous statements on the health of the economy. This pointed to two more rate hikes this year.
Finally, the Bank of England reported yesterday. The bank moved to raise interest rates. This was the second rate hike since the financial crisis. After the rate was hiked, the pound jumped but later declined after the governor removed chances of more hikes.
Another major development was from Turkey. The country’s central bank announced that the inflation was likely to continue to move higher this year. It boosted the inflation target from 8.6% to more than 13%. This will demand a rate hike to control the inflation rate. This will be against the policies that the country’s president campaigned on. In addition to this, the US released sanctions on two senior government officials as the relations between the two countries declined.