Fed lost its patience
On June 19, the Fed kept the interest rates unchanged. However, the Fed dropped the word “patience” from its communication wordings. Fed Chair Jerome Powell also accepted that the case for an accommodative policy has strengthened. Although the Fed isn’t saying it, markets think that there will still be a rate cut next month. St. Louis Fed Chair James Bullard voted for a rate cut in a nine-to-one vote for keeping the rates unchanged.
The Fed also changed the adjective for economic growth from “solid” to “moderate.” While the Fed expects continued expansion in economic activity, it admitted that the uncertainties have increased. May’s PMI data also questions the growth hypothesis.
President Xi Jinping is in North Korea. Meeting Kim Jong Un before meeting President Trump next week might be a mind game.
China’s benchmark Shanghai Composite Index is having a good week. The index rose 2.4% on June 20 to an eight-week high. The index rose in the first half of the day and reached the day’s high. After lunch, the index traded sideways and maintained most of the lead. The tech-heavy Shenzhen Component also had a good day with a 2.34% gain.
On June 18, the iShares MSCI China ETF (MCHI) gained 1 percentage point. The KraneShares CSI China Internet ETF (KWEB) gained marginally. Alibaba (BABA), which derives a large part of its revenues from China, was flat on June 19. Alibaba rose 3.3% in pre-market trading at 6:13 AM ET on June 20. JD.com gained 1.4% on June 19. The stock rose 2.4% in pre-market trading at 6:17 AM ET on June 20. MCHI and KWEB hold Alibaba and JD.com. KWEB might show a strong upside on June 20.