Fed’s First Cut in a Decade | Crown – Rating Downgrade

1 August 2019

Global markets sold off overnight as the US Federal Reserve ​lowered its benchmark interest rate by 0.25%, the first rate​​ in the US since the 2008 financial crisis. ​In other news, Apple released a solid quarterly profit result. ​

​The Fed has acted following mounting concerns about the state of the global economy and after a sustained period of demands by President Donald Trump for looser monetary policy.​ I​nvestors are looking beyond the 25-basis-point cut and questioning whether this might be an insurance cut or a shift in monetary policy​. The US market was down as much as -1.8% but closed down -1.1%, as the market was hoping for a more dovish Fed. Fed Chair Jerome Powell said the cut was a “mid-term policy adjustment”, denting hopes by some that we will have a full cycle of rate reductions. We will continue to watch developments given the importance of interest rates in terms of driving global markets at the current juncture.

Stock in Focus: Crown Resort (CWN:ASX)

​​​​​​​​​​​​​​​​​​​​​CWN fell following a report in The Age and The Sydney Morning Herald newspapers over the weekend that alleged links between organised crime (including money laundering & sex trafficking) and the junket operators that bring Chinese gamblers to Crown’s Australian casinos.
Crown have denied these accusations and stressed that it is not in breach of Chinese law and advised that it has not been charged with an offence in China. Soon after attorney general Christian Porter announced it will spark a federal investigation between Crown and government agencies, and given the above allegations warranted the possibility of further investigation. It is too early and difficult to determine what the possible outcome is, creating a cloud of uncertainty over Crown’s share price at the moment, especially if the above allegations are validated. If anything, it does put a spotlight on Crown’s VIP business which may limit their turnaround opportunity.
Assuming CWN makes it out relatively unscathed we see Crown’s core business as a beneficiary of Australia’s growing tourism industry – albeit at more moderating level, especially with their Sydney project. However, given the recent events we downgrade our recommendation on CWN due to the uncertainty surrounding the government investigation and seriousness of allegations.
We have downgraded our rating on Crown to HOLD.


Australia & New Zealand Market Movers

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​The Australian market retraced from an all-time high yesterday (ASX 200 index -0.47%). Both major Aussie market indexes soared to record highs in July and for the first time since 1955 the market has ended each of the first seven months of the year in the green. Interest rate, and tax cuts are providing optimism in the market. In stock news, cement maker Adelaide Brighton ditched plans for an interim dividend and downgraded earnings due to deteriorating conditions in residential and civil construction.
The New Zealand market was a touch lower on Wednesday (NZX 50 index -0.19%) as a gloomy local construction sector and warnings about the state of building conditions in Australia weighed on Fletcher Building. The ANZ Business Outlook survey showed another deterioration in business confidence, with the construction sector the most downbeat about the current environment. Local steel products companies bucked the trend after Steel & Tube Holdings said earnings met its recent guidance, which saw its share price jump.

3 Things Markets Will be Watching this Week

  1. ​​​​​ ​US Corporate earnings season continues this week with ​major companies such as Apple set to report earnings numbers.​
  2. The big event for the week will be the US Federal Reserve's interest rate decision on Thursday morning (AU/NZ time).
  3. Important monthly US manufacturing data and employment figures are released at the end of the week. 

Have a Great Day,


Global markets sold off overnight as the US Federal Reserve ​lowered its benchmark interest rate by 0.25%, the first rate​​ in the US since the 2008 financial crisis

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