French GDP Shrank
European markets are feeling the pain of the French economic data, which confirmed that the country's economy has contracted. The number surprised the market with a negative print of -0.1% against the forecast of 0.2% while the previous reading was 0.3%. This has confused investors as the European Central Bank has been more optimistic about the Eurozone. With the US renewing threats of raising duties last week, and the UK leaving the EU, it is difficult to digest how the bank contemplates that the risk to the outlook is "less pronounced".
The appealing German retail sales number further added to the fuel, it reported a negative reading as well. The data came in at -3.3.% against the forecast of -0.5%. The GDP figures for the whole of Europe will be published later on and, if we see another negative surprise, it is likely to make the sell-off even worse for the equity markets.
9 National Airlines and 12 Provinces Cancelled Operations
Coronavirus has become a wild card for investors and there is no doubt that it is going to have a devastating impact on the global economy as nine airlines have canceled all of their flights to China. This is because the World Health Organization has declared a global health emergency and, the first human-to-human transmission of the virus was also confirmed in the US yesterday. The US has become the fifth country where the infection is now spreading through person-to-person contact. Nearly 12 provinces in China are not going to resume business until February. This deadline and the number of provinces are likely to increase.
Brexit: Lights off Or Lights On?
Boris Johnson, the UK's prime minister assured the public that a new era in the UK's history is more promising and, this new dawn is going to make the UK stronger. The UK is going to leave the EU today at 11.00 PM, and after this, it will have 11 months to forge a deal with its biggest trade partner. A task which is literally impossible to achieve. If it doesn't forge a deal in this time period, the UK will have to comply with WTO standard and that means paying tariffs.
According to our estimates, in a best-case scenario, the UK's economy is likely to shrink by 1% in terms of GDP and, this means that the average person would be worse off by 300 pounds. Under the worst-case scenario, the economy could plunge by 3% and, this means each individual would be setback by nearly 1000 pounds.
The Bank of England kept its bullets saved and left the interest rate unchanged yesterday. It surprised traders and bulls took charge. Sterling moved higher against the dollar and crossed 1.30. The currency is still holding its ground. This is despite the fact the bank lowered its view of the economy — the worst since the second world war.
Amazon Reported Smashing Quarter
Jeff Bezos, CEO of Amazon, saw his wealth soaring last night to $129 billion when Amazon reported another bumper quarterly earnings. The number exceeded Wall Street's expectation on all measures. Amazon shares exploded to the upside by over 10% in the after-hours trading session yesterday.
Basically, Amazon has become a special kind of machine gun that only fires silver bullets. The net income surged by 10 percent y/y, thanks to the expansion of its one-day shipping. It gained a record number of users during the holiday quarter despite its expensive $129-a-year prime subscription. Amazon's web services and cloud computing business soared 34% y/y with net sales of $9.95billion.
The fascinating element is that the company pleased its shareholders by surprising them on its capital investment. Amazon estimated the improvement in the delivery services to cost $1.5 billion, but the actual number was much lower. Jeff Bezos is committed to improving the delivery services, a factor which supported its holiday period, and confirmed that the company is anticipating to make another $1 billion investment in the coming quarter. Investors do not mind if their capital is deployed in improving the infrastructure of the company as long as the risk to reward ratio is attractive.
THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER