The Motley Fool

The Week in Numbers: Fed Chairman Fuels Rate Cut Possibility

Federal Reserve Chairman Jerome Powell opened the possibility of a first US interest rate cut later this month at June’s rate-setting meeting. The Fed hiked rates four times last year and kept benchmark overnight interest rates at between 2.25% and 2.5% since December.

Higher tariffs announced against China in May have given rise to fears that the two largest economies might not be able to make a deal. Trump’s tariff threat against Mexico also increased fears that tariffs were here to stay, which might hamper investments and growth. At the Fed’s June policy meeting, eight of the 17 policymakers felt the need for at least one rate cut by the end of the year.

United Overseas Bank Ltd (SGX: U11) has priced S$750 million of 3.58% additional tier one perpetuities at an initial spread of 1.795% above the seven-year dollar swap offer rate (SOR). The issue price is on par with the principal amount and interest will be paid twice a year. The perpetual capital securities may be redeemed by UOB on July 17 2026, seven years after the expected issue date of July 17 2019, or on any distribution payment date after that.

Temasek’s net portfolio value hit a new high of S$313 billion as of March 31. However, one-year shareholder return fell to 1.49%, from 12.19% in the last financial year. Over the last 10 years, shareholder return was 9%.

Unlisted assets make up 42% of its portfolio, up from 33% in fiscal 2015. The investment company also remains anchored in Asia, with 66% exposure by underlying assets. Singapore and China each make up 26% of Temasek’s underlying portfolio exposure, with Europe and North America comprising 10 and 15% respectively.

In total, Temasek invested some S$24 billion in the past financial year, and divested S$28 billion worth of assets.

Meanwhile, Australia consumer confidence fell to a two-year low according to a survey by the Melbourne Institute and Westpac Bank index of consumer sentiment. The index was down 4.1% this month and 9% from a year ago.

In more positive news, Australian lawmakers approved A$158 billion (S$149 billion) worth of tax cuts over the next 10 years, which will offer a US$1,080 (S$1,470) rebate to low and middle-income earners.

Deutsche Bank began cutting 18,000 jobs globally this week. The German bank outlined a plan to cut costs by €7.4 billion (S$11.3 billion) and scale back its investment bank. Most of the job cuts are expected to be in Europe and the United States, but will also affect Sydney and Hong Kong. The bank had about 2,000 employees in Singapore as of January last year.

The bank used to be among the top 10 companies for equity capital market deals but has fallen to 17th last year. Deutsche Bank has been one of only a handful of European banks to maintain a significant presence in the United States following the 2008 financial crisis.

Amazon is nearing a US$1 trillion valuation again after surpassing that level in September. Seven consecutive days of gains boosted its market cap to US$993 billion. Microsoft Corp is currently the only company with a market cap above US$1 trillion. Apple Inc, once the largest company in the world, has a market value of US$935 billion.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended the shares of Amazon.com, United Overseas Bank Ltd and Apple Inc.