Investors hate risk
By Peter Rosenstreich
Signs of risk aversion are everywhere. With a mixed read from Asia equities, FX and bonds mirror investors’ worries. CNY and TRY lost ground against the safe haven USD, thanks to trade concerns. China’s service sectors expanded in July, yet pessimistic trading focused on Beijing’s threat to retaliate should Washington raise tariffs to 25% from 10% on $200 billion on Chinese imports. European peripheral yields spiralled higher, while GBP was damaged by Brexit uncertainty and a dovish Bank of England rate hike. Apple closing above USD 1 trillion market cap and Tesla’s rally has supported stocks prices. All told: global growth remains solid; risk off trading should be transitory. But investors dislike volatility.
US job growth has consequences
By Peter Rosenstreich
If the USD needs any more evidence of economic acceleration, it should come today. US payrolls are expected to increase by 193,000 for July, unemployment will fall to 3.9% from 4.0% and, potentially most important, average hourly earnings are expected to advance 2.7%. That said, US labour markets have run so hot for so long with the economy at full capacity, the prospect of a breakout in wages is high. Risk of US inflation has risen, drawing threat of an interest hike. Strong labour markets provide President Trump a base from which to aggressively negotiate on trade: so short China.
Trillion-dollar Apple
By Vincent-Frédéric Mivelaz
At the verge of bankruptcy in 1997, Apple succeeded in overcoming financial difficulties, with the help of Steve Jobs, its visionary entrepreneur and co-founder, who had been dismissed twelve years earlier. Now the company has surpassed customer and analyst expectations, becoming the first US company to reach the USD trillion valuation, the second company worldwide, after PetroChina back in 2007.
With 3Q revenues of $53.3 billion, up 17% compared to year-ago quarter, net income of $11.5 billion, EPS of $2.34 (+40%) and increasing demand in wearables (i.e. Apple Watch, AirPods and Beats), passion for Apple products and services is not falling. The number of paid subscriptions across Apple Services (incl. subscriptions paid through own and third-party apps) reached 300 million, an increase of 60% annually (Apple Music: 43 million subscriptions). Total sales grew 17.3%, driven by iPhone and Apple Services revenue of 56% and 18% of total sales respectively, a good start since the upcoming September iPhone launch cycle is nearing. Wearables revenues continue to strengthen, systematically outreaching $10 billion since Q1 and annual revenue up 60%. Apple is paving the way for a favourable future!