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Powell as usual, Buffet in a new way
Wednesday’s trade in global markets expected the evening speech of the Fed president presenting the conclusions of the September FOMC meeting. Data released from the US economy on retail sales disappointed investors. The change at 0.6% MoM was significantly lower than the market consensus. The closing rates on European stock markets oscillated around the opening prices: DAX rose only 0.2%; CAC40 decreased by 0.7%; FTSE100 dropped only by 1 point (to the level of 6,078) and the WIG20 changed by -0.45%. In the Far East, it was similar – Nikkei225 moved its valuation up 0.16%, Kospi and Shanghai Composite fell 0.2%. In the United States, Wednesday’s trading also ended with declines in the main indices: the S&P500 lost 0.5% and the Nasdaq lost 1.3%.
The Jerome Powell conference confirmed market assumptions: the interest rate will remain close to 0 at least until the end of 2023. The FED has set itself two goals to achieve: real employment in the economy with inflation at the level of the Federal Reserve System target. One might ask, why such a reaction of the market to words that were only confirmation of the consensus? Investors reacted negatively to the statement regarding the future. The head of the FED is not one of the hurray optimists who predict a quick return to economic activity at the pre-pandemic level. In fact, Powell confirmed what the macro data showed earlier – retail sales fell, which may mean consumer uncertainty about the situation in the coming months.
As a curiosity, it can be mentioned that the legendary Warren Buffet recently broke two of his investment rules. The first was that he acquired Snowflake shares as part of an IPO. He has stressed many times in his life that he is not interested in acquiring shares under the original offer (the last time he acquired Ford shares in this way was in 1956). The second principle that Buffet adheres to is entering into a business that he himself understands. It is hard to assume whether a 90-year-old investor knows all the nuances of cloud-based technology (Snowflake offers data processing services in this cloud). It is worth emphasizing that the new acquisition of Berkshire Hathaway has not generated a dollar in profit so far. It does not change the fact that the technology giant’s Wednesday’s IPO can be considered very successful – it increased by 111.6% compared to the issue price. On that day alone, the Omaha vehicle made (on paper) $ 730 million! The Internet did not fail to refer to this situation.
On the currency market, we have observed a stable situation of the Zloty in the last two weeks. In pair of Euro, PLN moves in the corridor of 4.4260-4.4600. Currently, the rate EURPLN is 4.4560. The situation in USDPLN pair is similar – the rate ranges from 3.7320-3.7910 (3.7750 at the moment). We observed significant changes in pairs with the British Pound – the last two weeks the rate fluctuated in the corridor of 4.7900-4.9980. The volatility is a result of information about Brexit and the possibility that United Kingdom would leave the EU without a deal. The CHFPLN exchange rate fluctuates around the level of 4.1270.