Here’s a brief update on this week’s stock market performance from LOM Financial : Read more:
Markets rallied strongly last week, with the MSCI World index gaining 2.86% and the S&P 500 gaining 2.95%.
The Brexit endgame is coming more into focus. Last week, the British Parliament passed the Spelman/Dromay amendment by a vote of 312 to 308. The amendment was a non-binding ruling to prevent a hard Brexit under any circumstances. Perhaps paradoxically, Prime Minister May whipped her party to vote against this amendment. Her rationale appears to have been to force the issue of the Parliament agreeing terms on the exit. While there is talk of putting the terms of an orderly exit up for another vote, it appears unlikely the vote would go through since the deal has not changed materially and there is less incentive for voters to change their position.
This brings us to the March 29th Brexit deadline. Britain is likely to request an extension to their exit as they attempt to come to an agreement on the exit terms with the EU. This would require the EU countries to unanimously agree to allow Britain to extend their membership, something Nigel Farage has been lobbying that they reject. If they were to reject an extension, Britain would default into a hard Brexit. The likelihood of that occurring are low but non-trivial. The more likely outcome would be an extension, which presents certain challenges since an extension beyond July 1st would mean Britain would be required to participate in the European Parliament election. At this point, it is unclear what a short extension would accomplish as Parliament is resolutely against the proposed terms. While the whole ordeal is rather taxing, the prospects of entering a hard Brexit have diminished (a good thing). JP Morgan was suggesting a 10% likelihood of a hard Brexit.
Boeing 737 Max
More headwinds facing Boeing as their 737 Max have been grounded in most developed countries. This is a major hit to the company, which was set to deliver over 5000 of the planes. A surprise move in which the FAA reversed an earlier position that the planes were airworthy, causing the company to continue to fall. Boeing is now facing an investigation by the Department of Transportation in to whether enough vetting had taken place prior to the 737 Max release.
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Check out the latest stock market performance from LOM Financial, today:
Markets ended the abbreviated week as a warning of a global slowdown was offset by strong earnings. The MSCI World Index ended the week up 0.07% while the S&P 500 lost -0.21%.
IMF Warns of a Global Slowdown
The International Monetary Fund cut 2019 global growth estimates by 0.2% to 3.5%, citing risks of a more significant downward correction was rising. In the US, the effects of fiscal stimulus are expected to unwind. Mexico experienced a significant downgrade to growth reflecting lower private investment. The high levels of public and private debt mean capital markets should be more sensitive to downturns than they have been historically.
The IMF report mirrors the World Bank January 2019 assessment (published on 1/8/19), which sees headwinds from the removal of accommodative policies that supported the protracted recovery along with more extreme weather events creating challenges in developed and developing countries. Lax credit markets have resulted in a growing number of developing countries holding questionable levels of debt.
Market Wrap Up
Earnings releases have been mixed but strong positive revenues and EPS surprises on Wednesday from Proctor and Gamble, Comcast, and United Tech Corp marked the turnaround that helped bring markets back to levels near the beginning of the week.
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LOM Financial has an update regarding the Brexit’s effect on the stock market’s performance lately:
A mixed week ended down on Friday. The MSCI World Index closed down -1.13% while the S&P 500 lost -1.22%. The generic 30-year index rose 0.10%.
May Survives No Confidence Vote
The pound rallied 1.42% on Wednesday following Theresa May successful defense against a no-confidence vote. Prime Minister May benched a vote on the Brexit terms noting that it would not pass an approval vote if it were to go to Parliament. The EU has been vocal in dismissing calls for a better deal being negotiable but affirmed that Britain could elect to remain part of the EU without approval from other EU members. While remaining would likely be better for the country, another Brexit vote seems unlikely given the challenges related to setting a precedent of voting until you get a desired outcome. If the UK were to enter a hard Brexit, Britain would default to the WTO rules of trade with higher tariffs and barriers to entry. We are now within 100 days of the March Brexit deadline.
Google Visits Washington DC
Google’s CEO, Sundar Pichai, went to Capitol Hill to address questions of political bias in their search engine. The discussion basically broke down to senators being concerned that searches for conservative topics tended to be less prevalent and more negatively biased. Pichai tried to explain that their algorithm uses user feedback to determine various factors like relevance, freshness, popularity and how other people are using it. Perhaps the surprising fact was that 15% of daily searches Google sees are have never been seen by the algorithm before.
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