Market Outlook – September 24, 2018

Dow Jones Futures Drop

 

Although it might not translate into actual trading when the market opens, the Dow Jones futures fell -0.3% early Monday morning. The S&P 500 futures and the Nasdaq 100 futures lost -0.25% and -0.5% respectively.

Investors are looking on the underperformance of the Nasdaq Composite Index last week as the notable high-flyers like Apple Inc. (AAPL), Alphabet Inc. (GOOGL), Amazon.com Inc. (AMZN), Facebook Inc. (FB), and Netflix Inc. (NFLX) appears to be pulling back.

Crude oil futures rebounded on Sunday as OPEC ministers gave an indifferent response to the demands of U.S. President Donald Trump to increase oil output. Crude futures fell last Friday on news that OPEC might boost output amid Trump’s verbal pressure.

New Tariffs from Both Sides Take Effect

 

Just after midnight Monday, the new Trump tariffs on Chinese imports went into effect. The new round of tariffs start at a 10% rate but will rise to 25% on January 1st next year if there’s no U.S.-China trade deal. Trump is also threatening to impose tariffs on all remaining goods from China.

Meanwhile, Beijing has to cancel the upcoming U.S.-China trade talks over the weekend as it prepares to retaliate. Beijing is slapping tariffs on $60 billion of U.S. products. No resolution is in sight in the coming weeks. But Wall Street has been shrugging off the trade tensions lately despite some near-term trembles.

High-Profile Consumer Tech Items Escape Tariffs

 

Many high-profile consumer technology items such as “smart” watches and speakers were not hit by the new U.S. tariffs that took effect Monday. But the less ostentatious products like home modems, routers and internet gateways are included in the $200 billion worth of Chinese goods.

The U.S. Customs and Border Protection agency together with consumer tech industry officials say they expect that products for home use will be subject to 10% taxes.

The newly activated tariffs will result in a two-tiered structure for consumer internet. Apple Inc.’s (AAPL) watches, Amazon.com Inc.’s (AMZN) Echo smart speakers, and Fitbit’s (FIT) fitness trackers are exempt. Routers and internet gateways from Arris International (ARRS), D-Link (2332.TW), and Netgear (NTGR) among others will cost more due to the tariffs. But the classification and sub-categories has to be made clear to avoid further confusion.

According to Jim Brennan, Arris’ senior vice president of supply chain, quality and operations, “We’re operating under the assumption that the tens of millions of devices that deliver high-speed internet into consumers’ homes will be impacted by these tariffs,” He told Reuters, “It feels anti-consumer because our devices are what enables the core of consumer tech.”

World’s Biggest Gold Miner Emerges

 

Barrick Gold Corp. (ABX) becomes the new gold industry king giant after acquiring Randgold Resources Ltd. (GOLD). The two companies formally announced their all-share deal on Monday. The acquisition creates a mining giant with a major presence in the United States and Africa.

The market value of the massive merger is $18.3 billion. Barrick shareholders will own 67% while Randgold shareholders will own 33%. John Thornton of Barrick will sit as executive chairman. Randgold CEO Mark Bristow will be the president and chief executive of the new company.

Most notable is that the new company will control five of the world’s top ten gold mines. Also, they would have the largest gold ‎reserves amongst senior gold peers.

Sky Shares Jump in London

 

In the aftermath of Comcast Corp.’s (CMCSA) big win in the auction for the European broadcaster last Saturday, shares of Sky jumped 9% to 17.22 pounds in London on Monday.

Rupert Murdoch’s Twenty-First Century Fox (FOX A), with backer Walt Disney Co. (DIS), lost to the U.S. cable giant’s $40 billion knockout bid for Europe’s biggest pay-TV group. Fox, which owns 39% of Sky, is unsure now as to what it will do next. Walt Disney is set to acquire some assets of Fox in a separate deal.

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