World Markets Fall & General Electric Loses its Spark

by | 6 Dec, 2017

Sentiment is Bearish this Wednesday

Losses Abound
Thanks to a range of factors from negative sentiment over Brexit negotiations to political worries in the US, European markets opened weaker today across the board, while in the FX market, the single currency has only made good gains against the Pound.

In Asia too we saw an even bleaker picture. Markets looked lacklustre, with Japans Nikkei 225 making headlines after falling by nearly 2% – its biggest drop in 8 months.

In India, key indices across domestic equity markets plunged after the Reserve Bank of India (RBI) belied investor expectations of a cut in lending rates. The bank instead chose to keep key rates unchanged and maintained a neutral policy stance.

Clearly the move was not popular with investors. The NIFTY50 was one of the hardest hit indices, falling back to near the 10,000 points mark. It’s one month chart is not a pretty picture.

US markets finished up lower yesterday too, after tech stocks took yet another battering across major indices. The only major upward mover in the investment world today was Bitcoin, whizzing through the $12,500 barrier.

Commodities Slip
Metal prices were on the back foot again this Wednesday. Shanghai copper prices fell by 3% on concerns that Chinese demand for the metal could slow next year, due to lower economic growth for the country and less infrastructure projects. This pulled down mining stocks across indices including the FTSE100 which saw Glencore, Antofagasta and Anglo American lose nearly 1% each.

Political Worries
Perceived geopolitical risks loom large, as President Trump is due to recognise Jerusalem as the capital of Israel later today, a move the Palestinians’ chief envoy to Great Britain said was “declaring war”.

Elsewhere in the US, tax reform plans are still firmly in the spotlight. Though the details of the Republican tax legislation have yet to be finalised, the plans are being met with scorn by Democrats and worry by others in the markets, with widespread skepticism over whether the bill will deliver growth. Many business leaders however sound bullish on the advantages.

BB&T CEO Kelly King told CNBC this week that the tax cut was “certainly good for banks but it’s mostly good for the overall economy.”

King said he’d spoken to hundreds of small business owners who haven’t invested in their businesses because of uncertainty over taxes and regulation, but this may change. He said, “Now they are going to have not only just lower absolute taxes, they are going to be able to expense the new equipment to replace the old. I believe they will rush to do it. That will be stimulative to the economy and it will be robust”.

Indeed, considering reports suggest that major companies like Apple will be see tens of billions slashed from their tax liabilities if Republicans push through their tax plan, cuts may be great news for shareholders too. Or they could end up failing to offset the potential sum of $1 trillion being added to the deficit and harm the US economy in the long term. Only time will tell.

Company Results
Later we receive financial results for Broadcom, the global semiconductor leader. Strong wireless growth is expected to accelerate Broadcom’s results for Q4.

GE Stock. A Good Buy While it’s Cheap?

General Electric Loses its Spark
In yet another depressing story concerning General Electric, the struggling firm is set to cut 4,500 jobs in Europe, including 670 roles in Britain.

GE’s stock price has waned throughout 2017, falling by over 35%. The maker of everything from jet engines to power plants has lost more than a quarter of its value (roughly $70 billion) so far this year.

What was once one of the most popular stocks for investors is now a husk of its former self. Last month, the current GE CEO John Flannery took the decision to slash the firms dividend by 50%, off the back of a terrible earnings report in October and a weak forecast for the future.

GE isn’t just the worst Dow stock this year, it’s the biggest loser since 2001, the year Jeff Immelt became CEO.

The company is now undergoing a major restructuring. All signs point to more difficulties in the near term for the business, but brave investors with a longer-term view may see the stock as a cheap buy with a nice potential upside, if the company manages to turn things around. GE stock trades at less than 17 times analyst estimates for earnings in 2018. You can find the stock in Invstr by searching #ge.

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ALL RIGHTS RESERVED © INVSTR LTD. 2017

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
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