US-China trade talks
The US-China trade talks are set to resume next week. The two sides have held four rounds of trade talks since President Trump and President Xi Jinping agreed to a 90-day truce last year. While China is pushing for the United States (SPY)(IVV) to lift all its tariffs as part of the deal, the United States seems to be in no hurry to make concessions until it’s convinced China won’t go back on its promises. Apart from the trade deficit, intellectual property rights and a forceful technology transfer by US firms have been the main sticking points in the negotiations so far.
As we highlighted in Could China’s Foreign Investment Law Appease Trump? China’s National People’s Congress endorsed a law that addresses concerns of foreign companies doing business in China. Many foreign firms and experts see this law as a rushed attempt to appease Trump and get a trade deal.
Trade deal uncertainty
Under such circumstances, if Trump decides to leave the tariffs on China for a “substantial period of time,” the uncertainty in the markets would only increase. Due to this uncertainty, businesses have also been shying away from big-ticket investments. Moreover, China might not agree on a deal, which would retain tariffs on its products. A complete breakdown of the US-China trade talks could be catastrophic for the markets. As we discussed in the previous part of this series, the rally this year has been partially due to optimism about a possible agreement.
US companies’ and China’s slowdown
Increasingly, many companies including FedEx (FDX), BMW (BAMXF), and UBS have been warning about the slowing global economy and China in particular. US companies Apple (AAPL) and NVIDIA (NVDA) have warned that China’s slowdown is hurting their earnings while Advanced Micro Devices (AMD), Micron (MU), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG) have also been affected by the world’s two largest economies’ trade tensions.
In China’s Slowdown Overtakes Trade War as Biggest tail Risk, we discussed how investors are increasingly concerned about China’s slowdown and its impact on businesses worldwide.
On March 21, Apple (AAPL) received ratings upgrade from two firms. In the previous part of this series, we looked at one of these upgrades from Needham & Company, which raised its price target to $ 225 from $180.
Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.
The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.
Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.
Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.
As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.
Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.