New York - Washington letter, week beginning Mar. 14
- What happened last week?
Apple e-book price fixing
On Monday, the U.S. Supreme Court overturned Apple's appeal against rulings that held the global tech giant liable for conspiring to increase e-book prices. In 2012, the U.S. Justice Department and around thirty U.S. states brought civil claims against Apple and alleging that the tech giant conspired with five of the biggest U.S. publishers to fix e-book prices in 2010. Apple is set to pay $400 million to consumers who overpaid, and another $50 million to cover legal fees.
Fed’s economy outlook
The U.S. Federal Reserve (Fed) Vice Chairman Stanley Fischer and Fed's Board of Governors member Lael Brainard remarked on the outlook of the U.S. economy on Monday. Fischer said the link between strong employment and inflation has never been strong, but it exists.
"We may well at present be seeing the first stirrings of an increase in the inflation rate — something that we would like to happen," he said. Meanwhile, Brainard said the Fed "should be cautious in assessing that a tightening labor market will soon move inflation back to two percent."
On Tuesday, the global benchmark Brent crude oil reached its highest level of the year with $41.48 a barrel. However, it later lost 2.9 percent during the day, while the American oil benchmark West Texas Intermediate declined 3.7 percent. With falling oil prices, the U.S. stock market closed lower, which ended the five-day rising trend of Dow Jones and S&P 500 indexes.
On Wednesday, oil prices increased. Brent rose 3.6 percent, while WTI climbed 5.3 percent, mostly due to falling weekly gasoline inventories in the U.S. This pushed the U.S. stock market higher, while the top-3 highest daily stock gains came from energy companies in the country.
Unemployment figures, U.S. Stock market
On Thursday, the weekly initial jobless claims in the U.S. fell to its lowest level in the last five months with 259 thousand. The U.S. stock market closed mixed after the European Central Bank (ECB) trimmed its main interest rate to zero percent in order to help the Eurozone's weakening economy. The interest rate on overnight lending facilities was also slashed to 0.25 percent, while the level it charges on excess deposits was shaved to minus 0.40 percent.
Apple and San Bernardino case
The U.S. Justice Department called on Thursday Apple's rhetoric "false" and "corrosive" in the San Bernardino case in which the tech giant was ordered to assist the FBI to unlock an iPhone. In its filing in a district court in California, the government wrote that the company wore away “the very institutions that are best able to safeguard our liberty and our rights," and added "Apple deliberately raised technological barriers that now stand between a lawful warrant and an iPhone containing evidence related to the terrorist mass murder of 14 Americans."
On Friday, West Texas Intermediate (WTI) reached its highest level of the year with $39.02 per barrel as the number of oil rigs in the U.S. fell for the twelfth consecutive week. With rising oil prices, the U.S. stocks rallied to close at their highest level of the year, and indexes recorded their fourth week in a row to close with gains.
Fitch and Moody’s Ratings
The global credit rating agency Fitch Ratings announced Friday that it downgraded Finland's long-term foreign and local currency Issuer Default Ratings (IDRs) rating, while affirming Greece's. Meanwhile, global rating agency Moody's Investors Service announced that it changed Hong Kong's outlook to "negative" from "stable".
- New week ahead
Oil market and impending oil producers’ meeting
The oil market and crude prices will be watched closely as the much anticipated meeting looms between Saudi Arabia, Russia, Venezuela and Qatar in Moscow on March 20. The four producing nations agreed last month to freeze their output at January levels, and they are expected to take additional steps, and could be joined by other oil producing countries. Any successful cooperation between OPEC and non-OPEC could push prices higher, and also help some U.S. oil producers return to the market.
U.S. retail sales
On Tuesday, the U.S. retail sales for the month of February will be announced. The market expects a fall of 0.1 percent, compared to the previous month. In addition, Producer Price Index for February will be announced. The market expectation is a 0.2 percent decrease from January.
Consumer Price Index, weekly crude oil inventories and manf. production
On Wednesday, Consumer Price Index for the month of February will be announced. The market expects a fall of 0.2 percent, compared to January. In addition, industrial and manufacturing production levels for February, and weekly crude oil inventories in the U.S. will be announced.
Fed’s interest rate decision
But, the biggest news of the week will be the Federal Reserves' (Fed) interest rate decision late Wednesday. Although the Fed is expected to keep the interest rate unchanged at 0.5 percent. The Federal Open Market Committee's (FOMC) statement and projections, and the Fed Chair Janet Yellen's speech will be watched closely and could strongly affect the stock market the next day.
Jobless figures, consumer sentiment, oil and gas rig inventories
On Thursday, the initial jobless claims in the U.S. during the past week will be watched, and on Friday Michigan Consumer Sentiment, as well as the weekly change in number of oil and gas rigs in the country will be followed.