1) Trading Cards On The Table?
What’s Going On Here?
US stock markets fell on Friday, as more new jobs were added than predicted in October and the US said it wasn’t as close to a trade deal with China as was previously suggested.
What Does This Mean?
Better-than-expected job figures and rising wages point to an economy going from strength to strength, following third-quarter growth that was surprisingly high – but could also mean higher interest rates to come, slowing down future economic growth (tweet this).
Trade negotiations between the US and China have been long and largely fruitless. The US introduced import taxes (a.k.a. tariffs) on Chinese goods earlier this year in an attempt to even out its “trade deficit” – last year, the US spent $376 billion more on Chinese products than China did on American stuff – and several rounds of counter-tariffs followed. In what might be a show of good faith, China appeared happy to acquiesce to new US sanctions on Iran – but the US hasn’t done much in response.
Why Should I Care?
For you personally: Hold onto your cash – you may need it.
In the absence of a deal, the US is planning to raise existing tariffs on $200 billion of products from 10% to 25% – and is sizing up new tariffs on the rest of the country’s Chinese imports, worth $257 billion. Products bought directly by consumers have – for the most part – been protected from previous rounds of tariffs. But that may now change, and the prices of some of America’s favorite Chinese-origin products, from playing cards to kids’ tricycles, will probably rise.
For markets: Cool heads may prevail.
When it’s more expensive to import items, companies face lower profits – or fewer sales if they raise prices and put off customers. Last quarter, Caterpillar and UPS – bellwethers of the US economy – complained tariffs were pushing up their costs and disrupting their customers, making sales harder to come by. Any trade deal should, therefore, be positive for stocks.
Full -> Trading Cards On The Table?
2) Alibaba’s Arabian Night
What’s Going On Here?
On Friday, Alibaba – China’s $400 billion answer to Amazon – copycatted some other tech giants: it delivered a higher-than-expected quarterly profit but a lower-than-expected sales forecast.
What Does This Mean?
Alibaba grew its revenue by 54% more than the same time last year, which was below forecasts, but profit growth of 13% was higher than investors’ predictions. Cloud computing was a big deal – quarterly revenue from up there almost doubled compared to last year.
But forty thieves stole from Alibaba’s annual sales forecast: the company lowered its expectations for the year by 5%, blaming China’s uncertain economy (brought on by its US trade tussles) making it harder for the company to charge the fees it wants.
Why Should I Care?
For markets: With great potential comes great competition.
Alibaba’s got over 600 million customers and believes that’s just the beginning. The Chinese middle class is expected to grow to 850 million people by 2030 (from 300 million today) – so Alibaba’s hoping to pick up much more yuan in services ranging from e-commerce to food delivery. But a growing population attracts competition: from Meituan Dianping in food to the Chinese government’s banks (up against Alibaba’s aptly named Alipay). Investors might worry that any slowdown ahead on Alibaba’s front might benefit its rivals, perhaps leading them to sell off the company’s shares – they fell by 2%.
The bigger picture: Meet the Chinese tech company, same as the American tech company.
Amazon and Apple, for example, have gotten used to bumper revenues from Black Friday and Cyber Monday (discounted sales periods in the US that have gone global). In China, November’s sales festival is Singles’ Day – which, last year, pulled in $25 billion for Alibaba. Given its lower sales forecast, the day could make or break Alibaba’s year – so its stock price might move markedly on any news related to the US-China trade war/negotiations (take your pick 😉) since it might have an effect on customers’ willingness to splurge.
Full -> Alibaba’s Arabian Night
(Courtesy of Finimize.com)
Submitted November 05, 2018 at 05:13AM by mattpate https://ift.tt/2DkYULx
