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The Week in Numbers: US Stocks Reach Record Highs

US Stocks reached an all-time high this week. The S&P 500 and Nasdaq Composite reached 3,019 and 8,321 respectively, lifted by strong corporate quarterly results and optimism that the United States will resolve its trade conflict with China.

The US corporate earnings season was off to a strong start with nearly 80% of 104 of the 500 companies topping earnings expectations so far in the second quarter.

Expectations that the Federal Reserve will cut interest rates at its policy-setting meeting this week have further fuelled the enthusiasm. Overall profits of S&P 500 companies are expected to rise by about 1% in the second quarter, according to Refinitiv, a provider of financial markets data.

Meanwhile, South Korea’s economy returned to growth in the second quarter. The economy grew 1.1% from the previous quarter and 2.1% from a year ago. This is rebound from the first-quarter contraction.

Last week, the central bank lowered its key interest rates and cut 2019 annual growth forecast to 2.2% from 2.5%. Japan has placed restrictions on exports to South Korea of three essential materials to semiconductor and display manufacturing. The dispute between Japan and South Korea could have a large impact on the economy as Japan accounts for about 32% or US$3.8 billion of South Korea’s chip manufacturing equipment imports.

Facebook profits fell 49% in the second quarter from a year ago due to the social media giant setting aside an extra US$2 billion to cover a settlement with US regulators on privacy and data protection.

In total, the settlement will amount to US$5 billion. Facebook will have to go through greater scrutiny and is required to conduct a privacy review of every new or modified product, service or practice before it is implemented. On a brighter note, Facebook revenue increased by 28% in the quarter to US$16.9 billion, while monthly active users grew 8% to 2.41 billion.

According to Colliers Research data, Grade A office rent in Singapore’s central business district hit a 10-year high of S$9.93 per square foot per month. Office rent has risen for eight straight months and is now up 12.6% from a year ago.

Office rents are projected to grow by 5% in 2020 and then continue to moderate from the 15% year-on-year growth recorded in 2018.

Boris Johnson has won the race to be the new Prime Minister of the UK. The 55-year old has pledged to break the political deadlock regarding Brexit negotiations.

Johnson was chosen to be the leader of the governing Conservative party by its members and was confirmed prime minister in a meeting with Queen Elizabeth II. However, his election with fewer than 100,000 votes from Conservative party members and his 31% approval rating leaves him vulnerable. Opposition Labour leader, Jeremy Corbyn has already challenged him to call an election.

Singapore looks likely to see more delistings down the road. So far this year, the Singapore stock market has seen an average of two companies a month delist. Privatising listed firms have been a key trend in the past as Singapore’s stock market has seen persistently low valuations. The Straits Times Index is trading at a one-year forward price-to-book ratio of 1.13 compared with 1.71 for the MSCI ASEAN Index.

According to a report by DBS Group Holdings Ltd (SGX: D05) this month, 14 companies are undergoing privatisation or are in the process of being bought out.

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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 owns shares in DBS Group Holdings Ltd and Facebook Inc. The Motley Fool Singapore has recommended shares of DBS Group Holdings Ltd and Facebook Inc.