The prospect of the US Federal Reserve keeping interest rates low for a longer time was all US investors needed this week to ignore the Greek crisis and the Chinese meltdown.
Even as Greece’s inability to strike a new bailout agreement with official creditors threatened eurozone stability, Wall Street was comfortable with the idea of more cheap dollars and steady US economic growth.
The 13 percent fall in Shanghai stocks over the week, half of it on Friday, also appeared to mean little.
While caution reigned on Friday — a quadruple witching day of settlement for four key futures and options contracts — the indices still finished the week strongly, with the NASDAQ setting a new record on Thursday.
For the week, all three key indices managed 1.01 percent gains. The Dow Jones Industrial Average finished at 18,015.95; the broad-market S&P 500 was at 2,109.99; and the NASDAQ Composite ended at 5,117, below its record close of 5,132.95 on Thursday.
The gains came for the market despite further signs of lower corporate profit growth and nothing new on the economy.
The big impetus was the dovish stance the Fed assumed coming out of its two-day policy meeting on Wednesday.
As expected, the Fed kept its benchmark interest rate unchanged at zero percent, but forecast a likely increase to 0.5 percent in two steps before the end of the year.
However, what pleased equities investors was that the central bank sounded less sure of the economy’s strength than a few months ago, and was now forecasting a much slower climb in rates over the next two years.
Chris Low of FTN Financial said that Fed Chair Janet Yellen’s tone revealed “a distinct lack of eagerness about tightening, which I think investors found quite convincing.”
Friday’s modest sell-off likely reflects some caution over going into the weekend with Greece and its official lenders still far apart over the conditions for the release of 7.2 billion euros (US$8.2 billion) in bailout financing for Athens, Charlie Bilello of Pension Partners said.
The country is under huge pressure to reach a deal before it has to pay 1.5 billion euros to the IMF by to the International Monetary Fund by June 30.
“Greece is obviously on everyone’s mind; it could be just positioning ahead of that potential for volatility on Monday,” he said. “Why take the risk over the weekend if you don’t have to?”
Even so, “the goings-on in the Chinese stock market and the goings that are off in Greece have not ruffled too many feathers here,” Patrick O’Hare of Briefing.com said, “The market is not trading in fear of a Greek debt default and eurozone exit.”
The prospect of more cheap money appeared to be fueling continued mergers and acquisitions action, with ConAgra Foods facing an activist challenge and lifestyle and home furnishings business Martha Stewart Living Omnimedia expected to be bought out.
The initial public offering (IPO) market also kept up speed, as Fitbit, which makes popular health-monitoring wearable devices, proved there was still power in new tech shares.
Its shares surged 48 percent in its market debut on Thursday following its US$732 million IPO, giving it a market value of US$4 billion.
Although the US market has paid only light attention to the Greek crisis, many analysts and economists were supplying detailed “what if?” reports to clients as the weekend approached, in case Greece heads for a massive debt default and exit from the eurozone.
Sam Stovall of S&P IQ said Greece would take center stage next week, with the emergency summit of the leaders of the 19 eurozone countries in Brussels scheduled tomorrow.
“I think the big driver will be what happens on Monday with Greece. The worry is whether the banks have to close down, will they have enough funds to keep operations going,” Stovall said.
“We had the post-Fed rally and now investors are just waiting to see if there is more upside potential, or if it will be derailed by what’s going on in Greece,” he said.
Gogoro Inc (睿能創意) yesterday launched its first electric bicycle, the Gogoro Eeyo 1, in Taiwan, after unveiling the bike in New York in late May and in France on Tuesday. The company said it would also introduce the series in other European countries such as Germany and the Netherlands. The “Eeyo project” is the fourth of Gogoro’s eight projects that concentrate on smart transportation, which includes Gogoro’s electric scooter, battery swap system and electric scooter sharing service, company founder and chief executive officer Horace Luke (陸學森) told a media briefing in Taipei. “There are various types of city commuters. We will not
EXPERIMENTAL DRUG: While news about a COVID-19 vaccine is more eye-catching, developing a treatment would be more viable, the Senhwa boss said Senhwa Biosciences Inc (生華科) aims to raise NT$1.5 billion (US$50.57 million) by issuing 15 million new common shares in the third quarter of this year to fund the research of new drugs, including the experimental drug Silmitasertib for the treatment of COVID-19, the company said on Monday. That would be the firm’s largest fundraising effort after it raised more than NT$1.4 billion from an initial public offering on the Taipei Exchange (TPEX) in April 2017, chief financial officer Sarah Chang (張小萍) told the Taipei Times by telephone. The price of the new shares would depend on the firm’s average share price
NOT A PANACEA: Offering 5G services would not solve the problem of declining telecom incomes, chairman Sheih Chi-mau said, expecting a flat 5G telecom revenue Chunghwa Telecom Co (中華電信) yesterday became the nation’s first telecom to debut its 5G services, offering tiered tariffs that include a threshold of NT$599 and flat rates, as it aims to switch half of its subscribers to the 5G network within three years. Subscribers would have unlimited data transmission for monthly fees starting at NT$1,399 — the same flat rate as when the company launched its 4G service in 2014 — and they can subscribe to the highest-rate plan for NT$2,699 per month for faster data transmission speeds and larger bandwidth, the company said. Data transmission speeds would be within the range
ROW: A probe would determine if the rights of shareholders who were not allowed to vote yesterday had been violated, while the stock exchange also wants answers The election of board directors yesterday at Tatung Co (大同) sparked controversy after the company blocked some institutional and individual shareholders from participating in the general shareholders’ meeting, prompting the Financial Supervisory Commission (FSC) to announce that the vote would be investigated. Lin Kuo Wen-yen (林郭文艷) was re-elected as chairwoman of the household-appliance maker’s nine-member board, but prior to the vote she announced that several shareholders would not have voting rights. They were being denied a vote because they had contravened the Business Mergers and Acquisitions Act (企業併購法), and the Act Governing Relations Between the People of the Taiwan Area and