Market Report 5th October 2020
In this week’s roundup – The US Fed to allow high inflation; JP Morgan Chase receive record fine US$920 million; UK debt reaches £2.02 trillion; China’s Space Mining Bot to launch in November 2020 and more ….
Federal Reserve Chair, Jerome Powell, unveiled a new monetary framework announcing a flexible average inflation target (FAIT) strategy. The new regime implies that when inflation undershoots the target in a given period, the US Central Bank will try to push inflation above the target in the next period to compensate for the previous shortfalls. In other words, forget low inflation targets, the Fed will accept any inflation level to bring the yearly average target back to just over 2%. Powell also indicated there would be no interest rate rises to curb higher inflation.
This week banking giant JP Morgan Chase received a record fine of US$920 million for manipulating the markets. Between the period of 2009 – 2016 numerous traders at the bank took part in a practice known as spoofing. This is where traders place numerous large orders with the intent to cancel before completion. The large orders can mislead markets into seeing large buy or sell volumes being processed, artificially altering the impression of demand which causes prices to rise or fall depending on the trade. In 2018 Deutsche Bank received a fine of US$30 million and UBS US$15 million also for spoofing. The record fine for JP Morgan Chase indicates the seriousness of the manipulation that took place.
As the UK Government introduces more incentives to work from home, the UK Debt grew in August by another £35.9 Billion, pushing the total UK debt up to £2.023 Trillion, according to the Office for National Statistics. This sets the debt level to 101.9% of GDP.
A Chinese start-up is planning to launch its first space mining bot in November. Origin Space co-founder says the robot is not going to actually excavate resources but will be used for testing technologies. The goal is to verify and demonstrate multiple functions such as spacecraft orbital manoeuvres.
Two British billionaire brothers who built a business empire running petrol stations have become the new owners of Asda stores. The stores were bought from Walmart for £6.8 billion. In just 19 years the brothers have built a multi-billion pounds business empire through mergers and acquisitions with private equity backing.
The announcement that US President Trump has Covid-19 hit the already fragile share markets, with the FTSE 100 closing at 5902. However, news that Trump is out of danger and negative testing for election rival Joe Biden has seen the markets rebound in this morning’s trading.
Gold – was up 2.58% for the past week currently standing at US$1900.60 per troy ounce
Silver – was up 5.51% for the past week and currently stands at US$24.00
Gold:Silver Ratio – is currently 79.74 indicating Silver is still undervalued
Oil – markets which took a big nose dive last week are recovering slightly with WTI Crude up 2.73% to US$38.06; Brent Crude up 2.34% to US$40.19 and Natural Gas up 4.35% to US$2.54
Alternative Energy – Researchers at MIT have, they believe, achieved the goal of creating a hot burning plasma, fusion energy. They are currently working on the next-generation fusion research experiment called SPARC, as a precursor to a practical, emission-free power plant according to their research published in the Journal of Plasma Physics this week.