Weekly Review: Investors Focus on Fed, Trade, Brexit, Earnings, and Deutsche Bank

This week, the following were the biggest stories that moved the market.

Federal Reserve

On Wednesday, the Federal Reserve concluded its two-day monetary policy meeting. As expected, the bank did not change interest rates during the meeting. What moved the markets was the bank’s decision to hit pause on future interest rates. This year, the bank had
projected to two more interest rate hikes. The officials blamed the pause on tightening on the challenging global environment, which is facing the challenge of trade wars and sluggish growth.

Brexit

Investors continued to focus on Brexit. This week, a number of amendments were brought to the House of Commons.
Ultimately, the direction was that Theresa May should go back to Brussels to bring a bill that could pass parliament. However, Brussels responded fast and said that it will not offer the concessions on backstop that London is asking for. This leaves the region at a difficult place because a no-deal Brexit will be disastrous for the two sides. The silver lining is that a deal could be made because the two sides want to avoid the worst-case scenario.

Trade

This week, the trade negotiations between the United States and China continued. China’s Liu He attended a meeting in Washington where he met with Robert Lighthizer, Steve Mnuchin, and Donald Trump. While the details for the meetings were not made public, the two sides expressed optimism that a deal will be made. There are a few challenges that are ahead. First, China will likely not offer concessions on IP theft and forced technology transfer because these policies have been very successful for them. Second, in case of a deal, there is a challenge on where it will be announced.

Earnings

This week saw the release of earnings from most of the biggest companies in the world. More than 50% of all S&P 500 companies released their results. The biggest winners were companies like Apple, Facebook, Boeing, General Electric, and Royal Dutch Shell
while the biggest losers were companies like Microsoft, Amazon, DowDuPont, and Tesla.

Data

The data released this week was mixed. Manufacturing PMI data from China was weaker than expected and showed contraction. In Italy, the economy declined for two months consecutively, which means that the country is now in a recession. The weak data trend continued in other European countries as well. For example, Germany released weak economic numbers yesterday. A ray of hope was in the United States, where ADP announced better-than-expected jobs numbers. The housing numbers released too were good.
Today, traders will receive the official employment numbers from the Labor Department.

Deutsche Bank

This week, speculation increased that Deutsche Bank could be forced to merge with Commerzbank. Deutsche is the
largest German lender that has continued to face a myriad of challenges including lower profits and large fines. Speculations that the two will merge has been around for years. A report by Bloomberg this week said that the bank was considering merging if all else fails.

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