Asian stock markets in negative territory on Monday

  • Most major indexes in Asia lose value on Monday
  • An inverted yield curve raised fears of a US recession on Friday
  • With both Nasdaq and S&P futures down, Wall Street could follow downtrend today 

Share prices took a nosedive in Asia earlier today following widespread drops on Wall Street last week. Thailand’s stock exchange reported mild losses after a general election that seems likely to keep the current prime minister in power.

Oxford Economics’ Sian Fenner warned that the transition might be a rough ride, adding: “It is unlikely that any party will win a clear majority and potential friction between political parties and the military could lead to economic activity being significantly disrupted.”

Hong Kong’s Hang Seng fell by nearly 2%, and the Shanghai Composite Index lost 1.4% of its value. In Japan, the Nikkei traded 3.1% lower, and the South Korea Kospi retreated by 1.8%.

The S&P ASX 200 reported a drop of 1.1%. 

As far as individual stocks are concerned, Softbank shares dropped by 5.01% in Tokyo, while Toyota and Fast Retailing shares were down 2.12% and 2.43%, respectively. In Hong Kong, Tencent’s stock price fell by 3.07%, while AIA Group and CNOOC dropped by 2.2% and 4.11%, respectively. In Korea, shares of SK Hynix dropped by 4.2%, while Samsung was 2.26% lower than it was on Friday. Meanwhile, in Australia, BHP traded 1.28% lower and Beach Energy BPT fell by 5.58%.

On Friday, an inverted yield curve in the US sent international bonds plummeting, and downbeat economic data from Europe didn’t help much. Investors will closely watch this week’s resumed trade talks between the US and China.

Wall Street, which reported losses of nearly 2% on Friday, seems set for more losses today. Dow futures are more than 100 points lower so far, while Nasdaq and S&P 500 futures are also losing value.

Apple shares up ahead of anticipated launch event next week

  • Citigroup, Needham analysts and Wedbush all give Apple a boost
  • Share hike follows positive endorsements
  • Next week’s launch event eagerly awaited amid rumors of video streaming service

Three different analysts have upgraded Apple ahead of next week’s anticipated launch event in Cupertino. Shares in the world’s biggest tech company traded higher on Thursday after Citigroup, Needham analysts and Wedbush all lodged upgrades.

Citigroup boosted Apple’s price target by $50 to $220 per share as analyst Jim Suva said he expected a dividend increase to go with a $100 billion rise in the firm’s share buyback plans next month when the tech giant reports its second-quarter earnings.

Needham analysts upgraded the company’s stock to “strong buy”, and Laura Martin said the company is “most likely to prevail in a direct competition between FAANG ecosystems.”

Meanwhile, Wedbush raised its price target from $200 to $215, citing expectations of the launch of a video streaming service from Apple that will present a direct challenge to offerings from Netflix and Amazon. 

The only investment bank to show skepticism was JPMorgan, with analyst Samik Chatterjee giving an Overweight rating and a $228 price target, citing that the event might not prove to be as significant as others are predicting.

Shares in the tech giant were marked 3.5% higher in the late morning in New York, which extended the year-to-date gains above 23.3% and gives Apple a market capitalization value of just over $900 million.

Apple has already launched a new version of its AirPods earphones and upgraded the iPad Mini and iMac computer. It also revealed a new 10.5-inch iPad Air tablet. All of these products were announced well ahead of next week’s event, which is due to take place on March 25 at the Apple campus in California.

$11B investment sees Ford make electric vehicles in Michigan

  • Second North American plant to be based in southeast Michigan
  • Investment in global electric vehicles worth $11 billion
  • 900 incremental direct new jobs expected

Ford plans to increase its production capacity for making next-generation electric vehicles when it begins to manufacture them at a second North American plant based in southeast Michigan.

The company announced the plans yesterday, and they form part of the already-revealed investment in global electric vehicles worth $11 billion.

The Michigan-based company will create 900 incremental direct new jobs through 2023 thanks to the $900 million investment into its southeast Michigan operations.

Ford President of Global Operations Joe Hinrichs said: “We’ve taken a fresh look at the growth rates of electrified vehicles and know we need to protect additional production capacity given our accelerated plans for fully electric vehicles.” 

“This is good news for the future of southeast Michigan, delivering more good-paying manufacturing jobs,” Hinrichs added.

The company said that its plans for the area also include a new autonomous vehicle manufacturing facility that will be built by workers starting in 2021.

Hinrichs explained that Ford would be ramping up AV production and the new plan would allow the car maker to adjust its investment spending strategy to accommodate the expected pace of growth of the new technology.

“This new plan combines our core strength in mass manufacturing with the agility and leanness we’ve shown with our modification centers for specialty manufacturing,” he explained.

The new investment in domestic production from the company comes after rival General Motors and its CEO Mary Barra were criticized by President Donald Trump on Twitter last week for building their own new production facilities overseas.

Dow up ahead of Fed meeting

  • Jerome Powell appears likely to argue against new rate hike
  • US inflation remains low
  • Dow Jones Industrial Average up almost half a percent

Stocks rose on Tuesday as investors looked to the start of the two-day Federal Reserve meeting. Fed Chairman Jerome Powell appears likely to argue against a new interest rate hike and instead opt to make no changes to the central bank’s current strategy after four increases last year

CMC Markets UK Market Analyst David Madden commented: “Some traders are expecting the Federal Reserve to not only keep rates on hold, they will issue a neutral outlook.” 

“The US central bank has rowed back on the previous hawkish commentary and have now adopted a more middle-of-the-road stance, and that is likely to boost investment sentiment,” he added.

The US is still the world’s biggest economy, and with inflationary pressures low, there is no urgency for the Fed to change tack and introduce another rate rise. The current situation is quite different from that of six months ago, when many onlookers expected the hikes to continue into this year

In the run-up to the latest Fed meeting, the Dow Jones Industrial Average saw a rise of 0.48% to 26,038. The S&P 500 gained 0.41%, and the Nasdaq increased by 0.39%.

Some stocks were troubled as Boeing continued to battle the fallout from the recent fatal crash of one of its new 737 MAX planes. Air Canada is the latest company to move against the aircraft, suspending new deliveries.

Air Canada Chief Commercial Officer Lucie Guillemette explained that her company was revising its schedule until July and has subsequently taken steps to continue delivering “substantially all” of the planned capacity through their global network.

Boeing shares have dropped by 16% this month. 

Facebook shares downgraded, stock falls over 2%

  • Mass shooting live stream raises concerns
  • Analyst downgrades stock
  • Executive exodus continues

Facebook faces two big challenges as more executive departures and difficulties in policing disturbing content raise investor concerns.

Last week, Product Chief Chris Cox announced he was departing from Facebook, along with WhatsApp Head Chris Daniels. The social network’s problems with footage from the mass shooting in New Zealand last week is also an issue, according to Needham and Co.

Needham and Co. Analyst Laura Martin downgraded Facebook from Buy to Hold, writing in a note to investors on Monday morning: “Silicon Valley is a competitive place for top talent and losing these senior executives from FB may cause them to land at a company that competes with FB.”

Subsequently, shares in the company dropped 2.67% to $161.55. However, they remain up 24% this year.

Martin believes that more high-profile departures could be in the pipeline following the company’s failure to quickly deal with the issue of the worrying live streaming of the mass shooting at a New Zealand mosque.

Martin placed “horrific images uploaded to FB (like the recent New Zealand events) that are technologically difficult to block at the 100% level and which hurt FB’s brand” at the top of her list of concerns facing the company.

“Together, we believe these risks are causing a Negative Network Effect, as evidenced by senior management departures,” she said. 

The Network Effect refers to the concept of each employee who has a particular belief contributing to another one adopting the same view. If Cox and Daniels have left the company due to disagreements over broad strategy, this may mean that others agree with them and will follow.Even though she downgraded the stock, Martin left the price target steady at $169, which is around 4% higher than the stock’s current level.

Funding plan for Amazon HQ2 meets resistance

  • Northern Virginia residents raise HQ plan concerns
  • $51m in public benefits to be made available after vote
  • Hundreds of millions of dollars in tax revenue expected to be generated 

Amazon recently halted plans to build a new headquarters in Long Island City after public officials criticized the idea, and now the company’s plans are meeting resistance from northern Virginia residents.

On Saturday afternoon, a county board meeting in Arlington saw town officials vote on an incentive package that could be worth $51m in public benefits. The opposition to the deal suggested that the same type of backlash that occurred in New York could follow.

The event, which was live-streamed, saw people at the meeting objecting to the plans and chants of “shame” could be heard after each board member voted in favor of providing the funding.

Amazon said 25,000 jobs could be created, paying an average salary of $150,000 a year. Arlington could expect to receive taxes totaling hundreds of millions of dollars over 16 years.

Supporters of the deal said diversity would be added to the local economy, which currently relies on the federal government. Opponents raised questions about giving a private company cash from the county.

Katie Crystol said: “Redeveloping Crystal City is good for this community,” and added that Amazon’s move would be followed by other corporate investment.

The $51m figure would include $23m as a pay-for-performance package, giving Amazon up to 15% of net new hotel tax revenues “associated with increased business travel to Arlington related to the Amazon headquarters” over 15 years.The Arlington government will be setting aside up to $28m over the next ten years that would be derived from future tax revenue from the Crystal City, Potomac Yard and Pentagon City Tax Increment Financing Area, which are situated around the new headquarters.

Downbeat General Electric profit forecast, but shares rise

  • Earnings guidance missed forecasts
  • Shares 2.84% higher
  • Performance in 2020 and 2021 expected to improve

New 2019 earnings guidance issued by General Electric on Thursday missed forecasts from analysts, but shares were marked 2.84% higher following the release.

The latest stock movement extended the year-to-date gain to value the company at an estimated $90 billion.

General Electric also confirmed that it will use up to $2bn cash in its industrial division as part of a “reset”. Consequently, the first quarter of this year will be the weakest for the company, CEO Larry Culp warned.

“GE’s challenges in 2019 are complex but clear. We are facing them head-on as we execute on our strategic priorities to improve our financial position and strengthen our businesses,” Culp said.

He added that GE expected performance in 2020 and 2021 to be significantly better, with financial results benefiting from operational improvements. Culp also said that actions would be taken to reduce downside risk and create long-term value for shareholders.

GE’s CEO previously vowed that this year would be one of change for the group, which has been struggling recently. A renewed focus on developing the company’s critical power business and finding debt reductions via asset sales and spin-offs would be part of the plan.

Earlier this year, Culp explained: “Simply put, we have too much debt and we need to reduce it thoughtfully and soon.”

The company’s dividend was cut back to one penny last year after a mix of profit warnings and asset write-downs that hurt investor confidence. 

AT&T CFO comments on earnings as shares slide

  • AT&T shares trade near the bottom of the S&P 500
  • Stock marked 1.11% lower
  • $85.4bn merger with Time Warner still having effects

AT&T shares traded close to the bottom of the S&P 500 on Wednesday in the wake of news about a significant refurbishment of the streaming application, DirecTV Now, and cautious comments from Chief Financial Officer John Stephens.

At the Media, Internet and Telecom Conference, hosted by the Deutsche Bank at Palm Beach, Florida, Stephens reaffirmed the group’s earnings guidance and said that figures will fluctuate in the short term because of WarnerMedia’s inclusion. This is a result of the $85.4bn union with Time Warner which took place last year.

Stephens said that he expected WarnerMedia stock to be accretive throughout the year and pointed out that they had previously been in the fourth quarter at 10 cents a share. However, he added the caveat: “But I will tell you that historically WarnerMedia’s first and second quarter, because their NCAA and NBA contracts are followed by their two strongest quarters which are third and fourth.”

The CFO also referenced the sturdy fourth quarter for the company’s mobility sector, citing the release of the iPhone in the third quarter and how this had a positive impact on the company’s sales figures, stating that “We had a lot of sales in the phone in the third quarter.”

Stephens went on to say that as a launch quarter, the fourth quarter had a modest number of phone sales and that there had been a large service revenue growth for two consecutive quarters and that growth was within margins.

Late-morning Wednesday trading in New York saw AT&T shares marked 1.11% lower, while the broader S&P 500 gained 1.08%. The move means that the stock’s gains so far in 2019 now stand at roughly 2.5%.

Morgan Stanley Cuts Tesla Price Target

  • Analysts lower price target from $283 to $260
  • Tesla shares fall 1.5%
  • Cuts to first-quarter loss also predicted

Morgan Stanley analysts lowered their price target on Tesla shares from $283 to $260, and the electric carmaker’s stock fell on Tuesday as a consequence. The analysts said that they were uncertain about the company’s ability to generate and maintain the current impetus of its sales.

Tesla shares fell 1.5% after an analyst for Morgan Stanley, Adam Jonas, lowered his price target “to reflect higher free-cash-flow burn and a modestly lower long-term trajectory of volume.”

Writing to his clients, Jonas and his team said that although the firm had made some moves to cut their costs and prices in an effort to stimulate orders, they saw Tesla “hitting an air pocket in demand that is coming earlier than we expected.”

The Morgan Stanley team also revised expectations of a first-quarter loss down from $32m to $31.1m and reduced Tesla’s expected deliveries in the first quarter to 48,000 units, a significant reduction of 23%. According to their forecasts, a drop in average transaction prices in the range of $1,000 to $2,000 per unit will also come from cost cuts to the Model S and X cars.

The day before Morgan Stanley’s note, Tesla CEO Elon Musk formally countered the Securities and Exchange Commission regarding accusations that he had breached the terms of his previous settlement. Musk argued in a federal court in New York that the February 19 tweet at the center of the row “only repeated publicly-disclosed information, and was a reflection of my pride in Tesla’s success and its future.” Musk stated in firm terms that he did not believe the tweet contained any information of substantial value to Tesla and company shareholders.

$6.2 billion valuation in market return sought by Levi’s

  • IPO expected to raise $587m
  • 36.7 million shares at $14 to $16 per share
  • Annual net revenue of $5.6bn in 2018

Levi Strauss & Co said yesterday that it expects to raise $587m through an initial public offering (IPO). This would bring the value of the iconic jeans maker up to $6.17bn and see it return to the market after 30 years. 

The company has 385.5 million shares outstanding and expects to offer 36.7 million shares at a price ranging between $14 and $16 per share. 

Eric Schiffer, the Chief Executive Officer of private equity firm Patriarch Organization, commented: “The valuation is fair and as expected. It is also a good time for Levi’s to go public due to the resurgence of ‘80s blue jeans fashion.” 

Denim is surging in demand as new styles, including high-waist and pinstriped jeans, drive strong results posted by smaller rivals such as American Eagle Outfitters and Abercrombie & Fitch.

Known for inventing blue jeans, the 165-year-old company said that it wants to evolve into a fully-fledged global lifestyle leader for men and women.

An expansion of its tailor shop and print bar, which allows consumers to customize their own designs onto the company’s branded jeans and T-shirts, is aimed at attracting more young customers.

In addition to its denim jeans, Levi Strauss also sells footwear, belts and wallets. The company reported annual net revenue of $5.6bn in 2018.The IPO filing sees Levi’s join a number of other high-profile companies that intend to go public this year. These include Uber Technologies, Pinterest and Airbnb.