Every week we round up the biggest stories in business, finance and currency. This week: record stock market highs, Britain and the ECB hold interest rates, Turkey’s lira hits a new low, Wells Fargo falters, JP Morgan steams ahead, more concerns that Canadian houses are overpriced, and fewer Canadians are traveling to the United States.
China’s growth slows, but stock markets soar
China has suffered its slowest first-quarter growth in six years, while exports fell 15% last month year on year. Despite slowing economic performance Chinese and Hong Kong stock markets are going from strength to strength, continuing to rally.
Britain’s flat growth
Britain’s inflation rate has now sat at 0% for the second month in a row in March. The Bank of England, despite economists predictions that Britain will fall into deflation, has maintained that it will not lower interest rates any further. This will likely keep the value of the pound high, especially relative to the euro, but may hurt the country’s manufacturing and export-centric sectors.
Low interest rate and low euro here to stay
The European Central Bank (ECB) has announced that it will keep its interest rate at 0.05% – a record low. Along with the ECB’s quantitative easing program, low interest rates have devalued the euro and boosted economic performance, particularly in export oriented European economies like Germany.
Ferdinand Piech. chairman of Volkswagen – Europe’s biggest car manufacturer – has resigned following a power struggle with chief executive Martin Winterkorn. Piech and the Porsche family own 51% of Volkswagen while Winterkorn has been tipped to become the next chairman of VW.
US Banks different fortunes
JP Morgan Chase enjoyed a 14% jump in profits year on year, while fellow American banking giant Wells Fargo’s profits fell for the first time in over five years.
Turkish Lira falls
Turkey’s lira has fallen 14% against the USD already this year, reaching a record low. Persistent fears that the country’s central bank will cut interest rates have frightened investors. Political uncertainty heading into June’s general election and the country’s precarious position bordering Syria will likely keep the currency down.
Carpooling giant BlaBlaCar has increased its number of users from 6 to 20 million after acquiring two smaller rival websites – carpooling.com and AutoHop.
Consumer goods giant Johnson and Johnson revealed a fall in profits to the tune of 8.6%. Analysts had predicted a larger drop in profits due to the continuing strength of the USD.
Fewer Canadians are travelling to the US thanks to the loonie’s woes. Same-day trips south of the border are at the lowest level in over 5 years. The loonie’s low value is not all bad news. Americans may be enticed to visit – and spend – in Canada. Canadian companies are also benefiting from lower exchange rates by increasing exports to the US.
Housing bubble in Canada?
The Economist magazine has recently suggested that Canadian housing prices are overpriced by as much as 35%. Everyone from the International Monetary Fund, to Stephen Poloz (of the Bank of Canada) to Maclean’s magazine have suggested that Canadian property prices are artificially inflated relative to Canadian incomes. Investing in property has been both popular and profitable but investors may be forced to look elsewhere before too long.
Nasdaq and S&P 500 record high
The Nasdaq and S&P 500 closed at record high levels surpassing those seen at the height of the dot-com bubble. Strong first quarter growth was seen from tech firms like Amazon, which is now valued at $206.7bn following a 14% increase in its share price. Microsoft shares also jumped 10%. Xerox, meanwhile, bucked the positive trend with a 6% drop in revenue leading to an 8.75% drop in share price.
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