X Factor
When Apple (US:AAPL) launched its flagship iPhone X with a price tag at the thick end of £1,000, many observers wondered if the tech giant might just be pushing its acolytes one step too far. But results issued on Tuesday evening illustrated how well the strategy has worked. Third-quarter revenues rose by 17 per cent to $53.3bn (£40.6bn) and profits by almost a third to $11.5bn as iPhone unit sales only crept up by 1 per cent but revenues from iPhone sales jumped 20 per cent to $29.9bn. Meanwhile, the company also saw a boost from rising sales of services as more customers get hooked into the Apple ‘ecosystem’, and good sales of wearables including the Apple watch and AirPod earphones.
Makers concern
India, China slow
The threat, whether real or perceived, of a global trade war appears to be seeping into the global economy, with signs that economic activity is slowing across many regions in response. The world’s two biggest emerging markets, China and India, both reported receding manufacturing activity this week. India’s manufacturing index dropped but remains in expansionary mode, while the effect of new tariffs on China by the US appears to have had a more dramatic influence on Chinese manufacturing, with growth slipping to an eight-month low, according to a measure of small and private companies and new export orders at a two-year low.
Faangs lose their bite
Tech trashed
After driving equity markets northwards for a prolonged period, especially in the US, when the sell-off in technology stocks came it was always likely to be swift and brutal. And so it was when, following stumbles by Netflix in mid-July, Facebook last week and disappointing figures from Twitter this week the Nasdaq-centric FANG+ index fell sharply – at one point it had shed 10 per cent of its value in a couple of weeks. But the divergence is becoming clearer between the service-based tech stocks such as Facebook and Twitter and the likes of Amazon and Apple that sell tangible products and in the past week have issued solid results which have kept both companies on track to break through the historic $1 trillion market capitalisation level in the near future.
Euroslow
Economic activity dips
The second quarter of the year saw eurozone economic growth slow to a crawl. GDP in the economic bloc expanded by just 0.3 per cent, slower than modest forecasts of 0.4 per cent growth, and well down on the 0.7 per cent recorded in the last quarter of 2017. Meanwhile, in a further worrying development, inflation in the eurozone came in at 2.1 per cent for July, strongly influenced by an inflation rate of 2.1 per cent in Germany and 2.6 per cent in France. What effect this is likely to have on plans by the European Central Bank to begin to ease off the monetary taps later this year remains to be seen, although most commentators think the ECB will push ahead with its plans unless economic figures show a more dramatic deterioration.
Turbo charged
US surge
In contrast to weakening economic activity in the eurozone, the US economy stormed ahead in the second quarter, with GDP growing by 4.1 per cent, fuelled by tax cuts and claimed as his own doing by President Trump. Indeed, Mr Trump said the growth was "very sustainable" despite some economists claiming this could be the peak in the cycle. Meanwhile, a surprise uptick in consumer confidence announced this week would have fed into Mr Trump’s growing optimism around the US economy and followed on from a 4 per cent uplift in consumer spending during the second quarter, suggesting the US consumer is returning to form.
Stalled progress
Auto concerns
A slowing economy, consumer caution and worries about Brexit are adding up to a potent cocktail for the UK’s car industry. UK automotive production went further into reverse in June, with the production of cars shrinking by 5.5 per cent and sales into the UK market falling by almost half, prompting the Society of Motor Manufacturers and Traders to warn that the export-led nature of the UK market – 90 per cent of cars made are exported with over half of them sold into the EU – means clarity on Brexit is required as soon as possible.
Consumer crisis?
Confidence dips
A summer heatwave normally results in an uptick in consumer spending, but it seems that the driest and hottest summer since the 1970s has failed to lift the downbeat mood of the UK consumer. The latest consumer confidence survey from GfK showed confidence falling across all five categories that go to make up the overall confidence score, which itself remains mired in negative territory. This particular consumer confidence index has now been in negative territory every month for 30 consecutive months despite low unemployment and continued low interest rates. Meanwhile, outside of the categories that make up the consumer confidence index, the savings index rose and is strongly higher than last year, suggesting consumers are preparing for potential rainy days ahead, both literally and figuratively.
