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The Week in Numbers: US Fed Cuts Rates

As many expected, the US Federal Reserve cut interest rates for the first time in 11 years. The Fed reduced its benchmark rate by 25 basis points to a range of 2 to 2.25%. It is the first time since the great financial crisis that the Fed has cut rates. Back then the Fed slashed rates to zero and kept it there until 2015.

However, Fed Chairman Jay Powell poured cold water on the prospects of more rate cuts in the future saying, “It’s not the beginning of a long series of rate cuts.”

Stocks slid on the dampened hopes of further rate cuts. The Dow Jones Industrial Average and the Nasdaq lost 1.2% each on the day of the news.

Spot gold also made a two-week trough on Thursday, falling to the $1,399.75.

Meanwhile, Apple’s stock surged this week as Apple reported a 1% increase in revenue to US$53.8 billion and a 7% drop in earnings per share to US$2.18. This compares favourably against the consensus estimate of US$53.39 and US$2.10 respectively.

iPhone sales dropped 12% to US$25.99 billion. The reporting quarter also marked the first time that iPhone sales made up less than half of Apple’s total revenue.

Apple said it returned more than US$21 billion to shareholders in the last quarter, via US$17 billion in share buybacks and by declaring a dividend of 77 cents per share. 

The US economy grew by 2.1% in the last quarter, topping economic forecasts of 1.8%. Consumer spending, the biggest part of the economy expanded by 4.3%, while government spending increased 5%.

Exports dropped 5.2% while imports rose 0.1%, which is partially due to the effects of the trade war.

Separately, Hong Kong protests continued for the seventh week. Forty-four protestors were charged with rioting and released on bail earlier this week. Property owners in Hong Kong have felt the knock-on effects of the unrest, as private home prices fell for the first time in six months.

Prices fell 0.8% in June compared to a 1.3% increase in May.

Hong Kong’s residential sales volume fell 43.6% in June from May. Real estate services group, Knight Frank estimates a 5% drop in the second half of 2019. Over the past decade, extremely low-interest rates, limited housing supply, and Chinese investors have pushed housing prices up by more than 200%.

Lastly, Britain is expected to spend an additional £2.1 billion (S$3.5 billion) on Brexit. The extra money will fund a nationwide advertising campaign, help Britons living abroad, ensure the supply of medicine and improve infrastructure around ports.

In total, the government has allocated £6.3 billion for Brexit, including £4.2 billion for this financial year. The money spent will hopefully better prepare the UK for a no-deal Brexit.

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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 Apple Inc.