Financial and Economic Brief - June 12, 2018by © Liberty Publishing, Inc.
New Rate Hikes Soon
The Federal Reserve is due to announce another rate hike this week amidst a “spat” between the U.S. and its Western allies over trade tariffs. The tensions are likely to be ignored by the Fed given the positive economic data in the U.S., according to Jim O’Sullivan, chief U.S. economist at High Frequency Economics, who noted that the Fed meeting “will almost certainly result in another rate hike, along with the message that continued tightening is likely.” However, experts warn a potential trade war carries risks for global growth and markets. “The biggest source of downside risk here … is a trade war mongering... It is disturbing the way this is developing,” O’Sullivan said.
Rolls-Royce Cutting Jobs
Britain’s Rolls-Royce said a compressor problem that had grounded Boeing planes had now been found on a “small number of high life Package B engines”, requiring an inspection of the B fleet and sending its shares down 1%. This is compounding pressures on the company that is due to cut more than 4,000 jobs this week as part of a major restructuring program designed to boost profitability. The job cuts, mostly in Britain, will affect support and management roles. The group is also expected to set out how it will make a return on the investment made in recent years and the expected drivers of cash flow beyond its medium-term horizon.
More Store Closings for Sears
Economists warn that trade fights, geopolitical tensions, rising oil prices and emerging market crises could be detrimental to economic growth. “The global economy started the year in relatively good shape. Unfortunately, the outlook [has] clouded,” said Chris Scicluna, head of economic research at Daiwa Capital Markets. For instance, President Trump has added tariffs on imports including steel, aluminum, washing machines and solar panels. Canada, Mexico, China and the European Union are retaliating. In fact, “A worldwide escalation of tariffs ... could lead to cumulative trade losses equivalent to those experienced during the global financial crisis,” the World Bank warned this week in a report.