What I think I learned last week #51
The Eurozone economy looks to be in free-fall as the latest purchasing manager’s composite output data dropped to its lowest level in four years while the manufacturing output index hit a 65-month low. It was also reported that European business leaders met privately with ECB officials to voice concern over the economy’s health. Despite the weakness, Mario Draghi has insisted that the European Central Bank still plans to halt its €2.6tn stimulus program at the end of this year.
After the worst Thanksgiving week for US stocks since 2011, last week gave us the best week for the S&P 500 since December 2011 by rising 4.8%. The stock market rally was boosted when Jay Powell, Fed chair, in a speech described policy as being “just below” neutral, and that there was no “preset policy path” of rate hikes, indicating that a pause in Fed tightening may be on the agenda.
November turned out to be the best month for emerging market stocks and emerging market currencies since January, with the MSCI EM index up 4% for the month.
We are starting to see companies cutting jobs to cut costs. First up is German pharmaceutical and chemical company Bayer. They announced plans to cut 12,000 out of 118,200 jobs worldwide.
With plunging car sales in North America, General Motors has also gone into cost savings mode. Announcing a program to save $6 billion in costs, GM is going to stop production at seven factories next year. I think this is just beginning of troubles for automobile manufacturers.
There is even more bad news for auto makers. In case you have not been paying attention, China has stopped buying cars. October saw vehicle sales drop 11.7% year-over-year. This followed September’s drop of 11.6% year-over-year, August’s drop of 3.8%, and July’s decline of 4%. This matters because China is the world’s largest auto market and it might be headed for its first yearly decline in sales since the early 1990s.
Oil continued to slide, as crude prices dropped below $50 a barrel for the first time since October 2017, as data from the EIA showed US crude stockpiles increasing for the tenth consecutive week. Oil dropped 20% for the month of November, its biggest loss in a decade.
Even as oil dropped, it was a good week for the gas industry. The tear gas industry, that is. First, the US Border Patrol agents used tear gas to disperse hundreds of Central American migrants in the Mexican city of Tijuana who made a rush for the border fence. Meanwhile, French police used tear gas on the Champs-Elysées on some ill-behaved vandals. For the following Saturday, the government announced that the Champs-Élysées, Paris’s famous shopping street, would be closed to traffic and pedestrians will have to undergo security checks as the government prepared for the next round of rioting in the streets.
While tear gas was on a roll, the gun industry was not celebrating. The FBI said background checks were down 10% on this year’s Black Friday compared to a year ago. There were only 182,093 firearms checks on Black Friday, as compared to 203,086 in 2017, indicating fewer guns under the Christmas tree this year.
Cyber Monday pulled in a record $7.9 billion in online sales this year, an increase of 19.3% from a year ago. This follows a strong Black Friday, which saw sales leap 24% from a year ago to $6.22 billion. Not surprisingly, Amazon announced that Cyber Monday was once again the single biggest shopping day in the company’s history.
Apple has finally been passed by Microsoft for the title of world’s most valuable company. On Monday and Tuesday last week, Microsoft briefly passed Apple in intraday trading before Microsoft finally closed the deal on Friday. Apple has been the most valuable company in the world since 2011, when it passed ExxonMobil. The last time Microsoft was the world’s most valuable company was 2002.
Meanwhile, another former most valuable company, GE, which last topped the list as the world’s most valuable company in 2005, on Friday hit its lowest stock price since March 2009. GE has dropped 57% so far in 2018.
Yes, tired of planet earth, Amazon is now looking to disrupt space. Amazon’s AWS is launching a satellite connection service, marking the company’s first public move into space-related hardware. Amazon is further expanding its footprint into health, reportedly starting to sell software that mines patient medical records.
No vacation for shareholders of Britain’s Thomas Cook, the world’s oldest travel company, as shares tumbled 30% on poor profits and as the company canceled its dividend.
They did not light the lamp: Tiffany’s had its biggest fall in four year on weaker than expected same-store sales growth blamed on weak Chinese tourist spending.
Meanwhile, Hong Kong jeweler Luk Fook fell 10% as they said their same-store sales growth had started to decline since October as sales in mainland China had slumped at a double-digit rate.
Disunited Technologies: United Technologies announced that it was splitting into three.
And with that, it is time for me to split. Be back at you next week with some more stuff that I think I learned.