Fed’s market shock; Bank of England; Stock exchange deal

Posted at 3:02 AM, Aug 01, 2019
and last updated 2019-08-01 07:19:10-04

1. Market shock: The US Federal Reserve has sent a shiver through global markets.

The central bank just cut interest rates for the first time in more than a decade. But in failing to signal that more rate cuts are coming, Chair Jerome Powell has spooked investors, who had hoped the small cut would be just the start.

The Dow fell 334 points on Wednesday, or 1.2%. The S&P and Nasdaq each ended the day with losses of more than 1%. US stock futures have stabilized, but Powell’s language is reverberating globally.

Markets in Asia traded mostly lower Thursday. Hong Kong’s Hang Seng fell 0.7% and the Shanghai Composite dropped 0.8%. Japan’s Nikkei bucked the trend and rose 0.1%.

European stocks are mixed in early trading. Britain’s FTSE 100 fell 0.2% and Germany’s DAX dropped 0.1%, but France’s CAC 40 jumped 0.4%.

2. Bank of England: Now Bank of England Governor Mark Carney takes central bank center stage.

The Bank of England is expected to announce Thursday that it’s holding interest rates, with little clarity on what will happen in advance of the October 31 deadline for Britain to exit the European Union.

Attention will focus on what Carney has to say about the possibility of a hard Brexit, and how such an outcome could hit the UK economy.

Prime Minister Boris Johnson has used his first days in office to double down on his threat to leave the European Union on October 31 “no matter what,” driving up fears that Britain will quit the bloc without an agreement in place to protect trade.

Carney will almost certainly face questions about how the bank would react in that case, and the circumstances under which the bank would intervene to support the pound. Sterling is now at its lowest level against the dollar in more than two years.

3. LSE deal: The London Stock Exchange has agreed to buy financial data provider Refinitiv, creating a British rival to industry juggernaut Bloomberg.

Refinitiv shareholders will end up owning a 37% stake in the London Stock Exchange. The all-share deal values Refinitiv at $27 billion, including its debt.

The purchase comes less than a year after news and information provider Thomson Reuters sold a majority stake in Refinitiv to a group of investors led by private equity group Blackstone.

The London Stock Exchange and Refinitiv had combined revenue of £6 billion ($7.3 billion) in 2018. Together, the companies will be the world’s largest financial markets infrastructure provider.

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4. Coming this week:
Thursday — Bank of England rate decision; General Motors, Dunkin’ and Verizon earnings
Friday — US jobs report; Exxon, Chevron and Berkshire Hathaway report earnings