The beginning of 2019 turned into a new large-scale drop in the U.S. stock market.
In particular, Apple shares fell by 10% — a record since 2013, and pulled a whole high-tech sector: Intel fell by 5.7%, United Technologies 4.5%, and the capitalization of the Nasdaq have fallen by 3.04%.
In the light of events, the largest company in the world Apple market capitalization exceeded $ 1 trillion, warned that for the first time in 11 years does not fulfill the quarterly forecast of revenue instead 89-93 billion sale will amount to 84 billion U.S. dollars.
The negative effects of the market strengthened, data on business activity in the manufacturing sector: the ISM Manufacturing in December fell from 59.3 to 54.1 points. The final value of the indicator was the lowest in 2 years, and the rate of fall is unprecedented since the crisis of 2008. The S & P500 index ended the day falling by 2.48% and the Dow Jones by 2.83%.
Disappointing forecast from Apple’s flagship us market and growing pessimism in industry added pessimistic forecasts for the global economy in 2019, as apart from USA the index of business activity decline in the Euro zone and in China.
The collapse of the us stock market, which destructive wave passed capital markets around the world and brought investors 16 trillion dollars in losses in a matter of months.
This condition of the market not left in the side of the Federal reserve system of the United States, despite previous statements that boiled down to the fact that the reaction threshold of the fed to such events is very high, first and foremost, the Central Bank does not want investors the impression that he would come to their aid in the event of a collapse of the shares.
But in early 2019, the U.S. Federal reserve is not so categorical and emphatic in its previous conclusions.
Increasing the rate 9 times in the last 4 years and squeezing the money supply to $ 550 billion, the us Central Bank is ready to slow down and look at the basic principles of monetary policy.
On Friday, the head of the fed Jerome Powell said: “the fed is closely monitoring the concern of the markets”, and this is a clear signal of a change in rhetoric.
The regulator “will exercise patience” and “flexibility” and “always ready to adjust monetary policy,” he said.
Although in 2015 the fed consistently increased the money conditions turning incentives started after the crisis of 2018, the pre-specified trajectory in the fed’s monetary policy is not the U.S., said Powell.
According to Jerome Powell, 2018 was “good for the economy” of the United States, whose growth was the highest in 4 years, which gave impetus to the creation of more than 2.5 million new jobs.
“Objective data suggests the momentum towards growth in 2019”, — he said.
However, the fed is ready to adjust policy rates, but also “if necessary to revise the program to reduce the balance,” said Powell.
Under this program, the fed dampens monthly bond balance in the amount of $ 50 billion, effectively withdrawing from the system dollar liquidity pumped during the years of quantitative easing policy.
It is worth noting that all these developments will likely force the fed to suspend the process of monetary tightening: the futures rate, the fed lay practically zero probability of a new increase in March and almost a 50% chance that the rate will be below current levels in 2020.
Despite the drop, the US economy produces an optimistic mood — industrial business activity index remains comfortably in the growth zone (above 50 points), unemployment remained below 4%, while the decline in energy prices will lead, according to expert estimates, American consumers of about $ 90 billion per year, which will support consumption.
Finally, we note that the suspension of interest rate hike, and cessation of panic in the stock markets, will determine the attractiveness and quality of the financial instruments as well as obligations of countries with emerging economies. The value of the financial instruments and commitments of emerging economies due to the relatively high yield instruments denominated not in US dollars.
The slower will be the process of raising rates, the flow of dollars in the developed countries and the withdrawal of dollars from the Federal reserve system, the lower becomes the degree of possible aggravation of the situation in the economies of countries with emerging markets, which include Ukraine. So, global trends 2019 start contribute to the stability of the currency market of Ukraine.