Market Outlook – May 14, 2018

U.S. Stock Futures Point to a Good Start


The U.S. stock futures are pointing higher on Monday which is good for Wall Street. If it’s any indication, the market could expect a good start this week. The Dow Jones Industrial Average can extend its seven-day winning streak from Friday’s 0.4% gain. That’s the longest stretch of consecutive daily gains since November for the blue-chip index.

Trump Changes Stand on ZTE


U.S. President Donald Trump had a change of heart on China’s ZTE Corp. when he announced on Sunday that he is working to give the sanctioned Chinese equipment maker “a way to get back into business, fast.”

Trump’s announcement was unexpected although it was seen as a conciliatory gesture prior to the start of the second round of trade talks with China set for Tuesday this week.

NAFTA Talk Faces More Challenge


The Trump administration’s insistence on pushing auto jobs back to the United States might not be viable after all. In the ongoing NAFTA trade negotiations, three concerns remain unresolved. First, how to determine what qualifies as vehicle content. Second, what limits apply to allow tariff-free auto imports. Lastly, how long would companies have to comply under a new NAFTA agreement.

Industry executives and supply chain experts are not sure of the benefits to Detroit automakers. No automaker is ready to uproot billions of dollars of investments in plants and supply chains. For those that can’t comply with standards for passenger cars, paying tariffs (around $800 to $900) per vehicle and buying low-cost parts from Asia to offset the cost are the only recourse.

Mark Wakefield, the head of the North American automotive practice for consultancy AlixPartners said, “Broadly speaking the (tariff) increase isn’t big enough to make a wholesale change.” He further added, “No one is likely to shut down an active factory in Mexico and build a new one to replace that in the U.S.”

Xerox Drops Fujifilm Deal to Team Up with Activist Investors


Xerox  Corp. (XRX) released a statement late Sunday saying they are walking away from Japan’s Fujifilm’s takeover bid. The U.S. printer and copier company are pulling out of the multi-billion dollar deal after reaching a new agreement with Carl Icahn and Darwin Deason. The two activist investors had bitterly opposed the Fujifilm deal.

Meanwhile, the Japanese company was dismayed and said it disagrees with Xerox’s “unilateral decision” and doesn’t believe the American company has the legal right to nullity the deal. Fujifilm shares were trading higher in the Tokyo exchange.

HSBC and ING Bank Goes Crypto

Multinational banks HSBC and ING Bank announced on Sunday that they have conducted their first trade transaction using blockchain technology. The two major foreign banks used the blockchain technology Corda. The said technology was developed specifically for business. In particular, it can finance a shipment of soya beans from Argentina to Malaysia for Cargill which is a global commodities trader.

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