May 21, 2019
Asian equities reverse as trade tensions ease slightly
Most of the shares in Asia recovered at the end of the session on Tuesday, May 21. A temporary suspension of U.S.-China trade tensions provides a slight respite.
China's shares rose in the afternoon, after the United States said it would grant a 90-day extension of sanctions on Huawei and its subsidiaries.
Japan's Nikkei 225 remained virtually unchanged in the end after its previous fall. In South Korea, the Kospi rose slightly, with Samsung Electronics shares rising more than 4% after news that Google was suspending business with Huawei. Australia's ASX 200 was marginally up.
US indices fell on Monday, May 20, when US pressure against Huawei also put pressure on the rest of the technology sector. Global equities have been affected this week by falling chip prices.
On the other hand, the chairman of the Federal Reserve has said that it is premature to determine the real impact of tariffs on the trajectory of monetary policy and on the level of supply.
The dollar remained stable, reaching 2.5 week highs. It has been driven by rising U.S. bonds, their safe-haven status, and growing concerns that the trade war between China and the U.S. could worsen. The rebound in ten-year Treasury yields is a supportive factor for the dollar and may continue for a while.
The EUR remained stable after falling the day before to its lowest level since May 3. The single currency is expected to remain volatile during the May 23-26 European parliamentary elections. The Australian dollar fell after Reserve Bank of Australia Governor Philip Lowe said the central bank will consider lowering interest rates at its June monetary policy meeting.
Oil prices rose on Tuesday due to escalating tensions between the United States and Iran and signs that the OPEC producers' club will continue to withhold supply this year. Iran said on Tuesday that it would resist pressure from the United States and would reject new talks under the current circumstances. The rises are offset by concerns that a prolonged trade war between China and the United States could lead to a global economic slowdown.
Gold fell on Tuesday, after touching a minimum of more than two weeks in the previous session. The bet that the Federal Reserve will not cut interest rates this year drives the dollar, which replaces gold as a safe haven.
European markets are expected to open lower on Tuesday.
Huawei drags technology sector
American shares plummet as Huawei drags technology sector forward.
U.S. indices fell on Monday, May 20, when U.S. pressure against Huawei also put pressure on the rest of the technology sector.
Google has suspended business with Huawei. This business involves the transfer of hardware, software and other technical services. The American search giant's decision comes after Huawei has been included on a list that requires U.S. companies to obtain a license to do business with the Chinese company.
Other companies such as Intel, Qualcomm and Broadcom will not supply components to Huawei either until further notice. Huawei has its tentacles in many parts of the technology sector, so this is not a one-day event.
Other manufacturers such as Chipmaker, Nvidia, Advanced Micro Devices and Lam Research dropped more than 1.5%.
Micron Technology's shares fell 3% and Qualcomm's 4.7%.
Telecom provider Lumentum Holdings fell more than 1% after cutting its quarterly forecasts.
Apple added to the decline, dropping more than 3% after HSBC lowered its target price.
European equities close down due to technology downturn
European markets closed down on Monday 20 May, while US repression against Chinese telecommunications giant Huawei weighed heavily on the technology sector.
The pan-European Stoxx 600 closed around 1.2% down, while technology stocks led losses with a drop of almost 3%.
In Germany, Infineon suspended shipments to Huawei, which led to the sale of shares in major European chip manufacturers. AMS was the biggest loser among semiconductor stocks in Europe, with a 13% drop.
Travel and leisure stocks were down 1.5% as a result of Ryanair's disappointing results. Europe's largest low-cost airline recorded its lowest annual profit for four years. It announces that profits could fall further next year because of overcapacity, Brexit and delays in the delivery of the Boeing 737 Max.
Deutsche Bank shares fell after the New York Times reported that anti-money laundering specialists recommended in 2016 and 2017 that Deutsche Bank transactions involving President Trump and his son-in-law be reported to a federal financial crime watchdog.
The Chinese currency is sending an alarm signal
The Chinese currency has been an important barometer of progress in U.S.-China trade talks. Right now it is indicating that things are not going well.
The question is whether Chinese officials will intervene to prevent the yuan from reaching a key psychological minimum of 7 yuan per dollar. That level has become a line for markets around the world and, if broken, could trigger a negative reaction globally in risk markets.
Since Trump first announced the new tariffs on May 5, the yuan has lost 2.7% against the dollar and now falls to a psychological level that, if reached, could cause turbulence in global financial markets.
Japan's GDP grows in the first quarter
Japan's gross domestic product grew by 2.1% between January and March, compared to the same quarter last year.
In the first quarter of the year, the world's third largest economy expanded by 0.5% compared to the October-December 2018 period.
Progress was driven by a strong increase in public spending of 6.2%, which offset the 9.4% drop in exports and reversals in household spending and corporate capital investment.
The fall in exports was mitigated by an even greater decline in imports, which left a positive net contribution to GDP.
This positive data contrasts with worrying symptoms that foreshadowed a slowdown. The current context of concern about trade tensions and, above all, the slowdown in China, Japan's main trading partner.
The fall in global demand is a worrying trend for the Japanese economy, which is highly dependent on the industrial sector and its foreign sales.
OECD warns of cut in forecasts
Uncertainty over trade tensions between the United States and China, and the contagion effect on other economies, have transformed the recovery of the global economy into a generalized slowdown.
The Organization for Economic Cooperation and Development cuts its global GDP growth forecast to 3.1%.
Trade disputes not only stifle the recovery, they also slow it down. In addition, the potential for greater damage is present.
Uncertainty is the greatest enemy of growth. There is currently a very bad scenario, accompanied by high doses of investor concern.
Apple is not innovating despite its spending on R&D and patents
Apple's research and development spending has increased from $1 billion in 2009 to $13 billion this year. Stock-based compensation is not included here.
The amount of money spent on R&D at Cupertino shows that Apple is spending more and more. It intends to defend itself against new technologies, as they could threaten its dominance in smartphones and tablets.
It is currently getting involved in new product categories such as apparel, fitness and health.
Apparel patents suggest that Apple may be targeting AirPods with biometric sensors, Apple Watch with UV monitoring, gesture recognition for AR/VR applications, machine learning projects to enable autonomous driving and the integration of various existing devices in cars.
Apple had 2,160 patents granted in 2018, 3% less than in 2017. Eight companies had more patents granted during that year, including Samsung, Qualcomm, Microsoft and IBM, which topped the table with 9,100 patents granted in 2018.
[image] The exchange rate is always given for a currency pair. A currency by itself is worthless if it is not compared to another currency or other reference, such as gold. Therefore, whether in a flexible exchange rate or fixed exchange rate...
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