🐯 They’re grrrr-rate

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Hi Rhimou, here's the news you need to know for June 15th. Reading time is 2:47 minutes.

☕  Finimized over a cappuccino at Caffe Mariuccia, Porotfino, Italy.

Hiking Growth Expectations

#ECB #interest rates
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What’s Going On Here?

The US Federal Reserve (a.k.a. the Fed) increased interest rates by 0.25% on Wednesday in response to the US economy marching on – but the prices of stocks and bonds fell in response.

What Does This Mean?

The Fed said that it’s seeing US economic growth “rising at a solid rate” – a cheerier outlook than in recent statements. It’s raising interest rates to help manage how much people spend, hoping to avoid high inflation – which could make the cost of living too high and stop the economy from firing on all cylinders.

The Fed’s also raised its forecasts for both economic growth and inflation this year – and it expects to make two more rate hikes before the end of the year (taking it to four in total for 2018).

Why Should I Care?

For markets: Buying stocks and bonds looks less attractive.
After the announcement, the US stocks fell and so did the prices of bonds (so their yields went up). An interest rate hike means that you’ll get more bang for your buck from cash sitting in the bank – which may drive some investors to take money out of riskier assets like stocks and bonds and put it into safer options, similar to a savings account.

The bigger picture: Interest rate rises are on the horizon in Europe, too.
The European Central Bank (ECB) announced on Thursday that it’ll be ending its record $2.8 trillion buyback of government bonds (a.k.a. quantitative easing) by the end of the year, as the European economy is looking much perkier. But with the prospect of global trade wars reducing near-term growth, the ECB’s decided to delay rate rises until at least next summer.

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Heads Are Roll(s-Royce)ing

#Aerospace #Manufacturing
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What’s Going On Here?

Rolls-Royce – one of the UK’s manufacturing darlings – announced 4,600 job cuts and a plan targeting over $500 million in cost savings on Thursday, sending its shares cruising up by 6%.

What Does This Mean?

Rolls-Royce is a company that’s bloated with costs. Despite being a manufacturer, it has over 30,000 non-manufacturing jobs – which explains why it’s on a warpath to reduce its non-essential spending and create a leaner organisation.

Since his appointment in 2015, Rolls’s CEO has made almost 10,000 heads roll through job cuts. This latest round hits back and middle office roles (like admin, risk management and IT), that are just under 10% of all Rolls-Royce's jobs globally.

Why Should I Care?

For markets: Rolls-Royce’s investors breathed a sigh of relief.
Rolls-Royce is one of the largest companies in the UK. It’s also part of a group of the biggest companies on the UK stock market, whose stocks investors can buy and sell together (a.k.a. an index). Investors buying Rolls’s stock likely hope the cost-cutting plan clears a path for Rolls-Royce to become more profitable in the future. It’s probably a welcome relief following a share price decline of 8% over the past year – and news earlier this week that the company has had to delay faulty engine repairs (another reason to keep those factory workers in place).

The bigger picture: The UK’s outlook is uncertain – especially in manufacturing.
Data released on Monday showed the UK’s manufacturing sector is at its weakest in five years as manufacturing output declined by 1.4% in April, compared to the previous month. Growth in the UK has been slowing – and it’s unlikely to be helped by Brexit or 3,000 of Rolls’s jobs being cut in the UK.

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#Finimize quote

"I would much rather have men ask why I have no statue than why I have one."

- Cato the Elder (Roman senator and historian)

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Q & A

RE: Good Things Come In Small Packages

"Why do small cap indices Russell 2000 and S&P 600 contain different stocks?" - Heather

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"The S&P 600 contains stocks with values ranging from $400 million to $1.8 billion, whereas the average value of a company in the Russell 2000 index is $2.4 billion. The difference in the stocks included offers flexibility for investors choosing to buy groups of small cap stocks – S&P’s index offers access to smaller companies, while Russell’s allows investors to own shares in a broader range of companies, including those that some might consider to be on the larger side of small cap valuations."

✈️ Plans for this summer? Hop on a free trip to Sri Lanka for 14 days! Enter here 😎 Relax on pristine beaches, enjoy local flavors, and learn about the heritage of this amazing island on the Indian Ocean.

What We're Reading

A Stonehenge for the modern age (Wired). Netflix and Alphabet as ISPs? (Techcrunch). Yes, we are getting dumber... (Inc.).

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