Market Outlook – August 6, 2018

European Stocks Reel from Trade Conflict


On Monday, European stocks struggled as fears of the escalating U.S.-China trade conflict continue to dampen investor sentiments. The disappointing corporate earnings in the European banking sector also added to the restrained start this week.

China castigated U.S. President Donald Trump’s trade policies. The state media said Trump’s trade “extortion” would not work. After an initial rise, Asian shares rose initially but later submitted to selling pressure. Chinese shares slid into negative territory.

Meanwhile, European shares were mixed. The pan-European share index dropped 0.06% while Germany’s DAX fell 0.34%. France’s CAC 40 was nearly flat, down 0.02%.  German stocks were most affected as industrial orders experienced the biggest plunge in nearly 18-months.

Demand for Trade Consultancy Services is Increasing


Companies affected by the U.S.- China trade war are seeking the services of trade advisory and consultancy firms. Since the trade tensions between the world’s two largest economies are escalating, firms need external expertise on how to handle the fallout. The demand for consultants from management to logistics has been soaring.

The top two firms that have been giving advice to corporate clients are Deringer which is based in the U.S. and ETCN in China. Clients are turning to them to provide alternative sources of supply and on how to legally re-classify products to avoid tariffs.

Amy Magnus, customs affairs and compliance director at Deringer, said their firm’s consulting services business is increasing, particularly in the area of tariff engineering. Clients need to structure the production process to legally sidestep tariffs.

CVS and AETNA Merger Hangs in the Balance


The $69 billion deal between CVS Health Corp. (CVS) and Aetna Inc. (AET) suddenly hangs in the balance. The California Insurance Commissioner wants the Justice Department to block the purchase of the insurer by the drugstore chain citing concerns that prices will go up and competition will decrease.

CVS has not made any comment about the claims of the California Insurance Commissioner. It can be recalled that the shareholders of CVS and AETNA have already approved the deal. CVS is scheduled to release its quarterly earnings on Wednesday this week.

Another insurer, Cigna Corp. (CI), is hoping to acquire pharmacy benefits manager Express Scripts Holdings Corp. (ESRX) for $67 billion. But recently, Carl Icahn has taken a stake in Cigna. The activist investor wants to convince shareholders to vote against the merger with Express Scripts on August 24.

Softbank Reports 49% Increase in Q1 Operating Profit


Following the sale of its stake in Indian e-commerce firm Flipkart, Japan’s SoftBank Group Corp. reported on Monday reported a 49% rise in first-quarter operating profit. The said sale was the first public divestment by Softbank’s Vision Fund.

The technology firm plans an initial public offering (IPO) for its domestic telecoms unit. They also sold the majority of chip designer ARM Holding’s Chinese operations to a local consortium.

Both transactions are indicative of SoftBank’s ability to monetize its investments. That has been a key concern for investors. Billions of dollars are invested in into tech companies globally but with little profit-taking. SoftBank’s Saudi-Arabian backed Vision Fund, the world’s largest private equity fund, has invested $27.1 billion in 29 companies at the end of June.

Apple Cracks Down on Right-Wing Media Platform


The podcasts of American conspiracy theorist Alex Jones from his right-wing media platform Infowars have been removed from Apple Inc.’s (AAPL) iTunes and podcast apps. The media news website BuzzFeed quoted the tech giant’s company spokesman on Sunday.

Facebook Inc. (FB)  has recently implemented a crackdown on the programs of Jones. But the move by Apple is the most sweeping of any crackdown. Jones’s conspiracy-driven content also face suspension if not removal from other online sites.

Apple confirmed to media news website BuzzFeed that it has removed the entire library for five of Jones’s six Infowars podcasts including the shows “War Room” and the daily “The Alex Jones Show”.

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