Meeting of the Central Bank and the fed will determine the movement of stock markets

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The Russian stock market opened on neutral territory. The main event last week was Friday’s decision by the Bank of Russia on raising the key rate to 7.75%. In fact, the rate hike will reduce the risk of inflation, which remained fairly high. Given the rise in inflation in the first half of 2019 within 6%, the rate increase now was needed. In the future there is a high probability of its increase at the next meeting of the Bank of Russia. Next, expect a resumption of the Central Banks ‘ buying of foreign currency in terms of the budget rules. But this should not greatly affect the exchange rate.
Oil prices are also trading neutral amid weak growth in major economies and concerns over excess supply. Constant growth of oil shale mining in the U.S. continued to weigh on oil prices, while some analysts doubt that the planned cuts in supply, led by the Organization of countries-exporters of oil will be enough to balance the markets. Meanwhile, production in US will increase.
Thus, the entire load will be on Saudi Arabia, which in any case is under severe pressure from trump, and is the de facto leader of OPEC. OPEC and its allies, led by Russia agreed to limit production from January, which will also be reviewed at the meeting in April. Until that time, investors will assess the oil market and consider whether countries comply with agreements on production cuts. The average price of Brent will vary from $61.50 per barrel.
Wall Street finished trading lower. Major U.S. stock indexes sank under the pressure in the health sector, the oil and gas industry and technologies. Investors look forward to the Christmas greeting from the Federal reserve next week, hoping for signs that the Central Bank can dampen the rise in interest rates next year and trigger a rally as Santa Claus. US stocks show the worst results for December for the last 16 years, as the S&P 500 index this month fell by 5%.
The continuing failure of the fed from the policy of “easy money” is a serious blow, and it is expected to raise rates at the end of its two day meeting on Wednesday. This is the fourth consecutive increase in December 2015, when it began gradually to raise them. The question in the minds of investors, could this be the last.
The market was under enormous pressure, worried that the fed is only going to go forward. The US markets were very sensitive to any hint that the fed is ready to slow down or even pause. From December 2015, the Central Bank raised rates eight times, seeking to restore them to normal levels, reducing borrowing costs to near zero to counter the financial crisis a decade ago. The actual companies that continue to analyze investors is the “Amazon” and “Netflix”.
Like “Amazon” and “Netflix” remains attractive to investors, given their history of leading results and the story of the destruction of the industry. Both companies also sell similar estimates and have comparable expected rates of growth, making them attractive for the same type of growing investor. However, the “Amazon” looks a safer bet than “Netflix”, given the current position of each company.
“Netflix” is taking on billions of debt every year to Fund its aggressive content strategy, but faces a new level of uncertainty and a test unlike any that he had ever seen, as “Disney” and “AT & T” launch competing services and remove content from its platform. Amazon, on the other hand, faces no immediate threat in e-Commerce and its division of cloud computing continues to demonstrate impressive growth. At the moment its set of competitive advantages looks stronger than “Netflix”.
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Gaidar Hasanov
Expert
“International financial center”