2nd September 2023 – 8th September 2023 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 4,457.49 | 13,761.53 | 13.84 | 34,576.59 | 2,443.12 | 15,878.99 |
| -1.29% | -1.93% | 5.73% | -0.75% | -1.33% | -1.32% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 19,819.95 | $1,942.60 | $23.20 | $90.44 | 82.94 | 88.77 |
| 1.98% | -1.20% | -5.50% | 1.63% | 0.27% | -0.43% |
Source: MarketWatch
Hello Saturday,
This week, China’s customs data reveals a slowing economy, Google tentatively settles its antitrust suit, and India preps to host the G20 summit in New Delhi over the weekend.
- China’s exports fall for a fourth consecutive month in August –– worsening fears of looming financial crisis
- Apple faces the threat of weakening smartphone sales in China, its third-biggest market, as the central government asks its employees to stop using iPhones at work
- Google reaches a tentative settlement with US states over its Play Store anti-trust case, while it’s yet to go on trial for allegedly squashing search engine competition.
- Irish paper and packaging company Smurfit Kappa in merger talks with US’s WestRock to form a $20 billion global giant
- G20 summit to be held in New Delhi this weekend, where global leaders will discuss and endorse deliverables on cryptocurrency regulation, debt reforms, climate finance, and more
Taking stock | Dragon’s dismay | Huaweight | Monopolice | Paper mache | Two-thirds of the world meet | Invest wisely
Taking stock
All major US indices booked losses this week as investors await August’s inflation data next week. The S&P 500 fell 1.29%, the Dow shed 0.75%, and the Nasdaq dropped 1.93%.
Dragon’s dismay
Customs data this Thursday showed that China’s exports dropped for a fourth month straight, falling by 8.8% in August year-over-year, while imports fell by 7.3%. This isn’t good news for the country’s manufacturing sector, known as the “world’s factory”. But why is this happening?
When China ended its zero-COVID-19 policy in January this year, it expected to see a rapid economic recovery. Instead, China has been struggling with a range of post-pandemic issues.
Last month, a WSJ report revealed signs of financial stress at one of China’s large asset managers, Zhongrong International Trust, sparking fears of a Lehman-like contagion spreading from the country’s property market crisis. Add to this weakening consumer demand, record youth unemployment, a weakening currency, and low foreign investment, and you get a slowing economy.
The country’s ongoing trade dispute with the US and tensions with other countries like India do not help either. China’s share of US goods imports has fallen to the lowest level since 2006 in the 12 months through July, revealed a report by the US Census Bureau this week. For this period, the share of goods imported from China stood at 14.6%, down from the March 2018 peak of 21.8%.
Huaweight
This week, Apple shares saw a selloff after news that Beijing ordered central government employees to stop using iPhones at work. This comes at a time of heightened US-China trade tensions and growing competition from Huawei. Hence, investors fear that Apple and its suppliers could be taking a potential hit going forward.
About four years ago, the US placed Huwaei on a trade blacklist due to national security concerns. US suppliers could not ship goods to Huawei without obtaining a special license first. These sanctions on tech exports to Huawei almost destroyed its smartphone business. Over the next few years, Huawei’s market share in China kept plunging as Apple’s kept increasing.
Smartphone market share in China over recent years:
Source: Reuters
But now, Huawei is making a comeback –– a threat to Apple, whose third-largest smartphone market is China. In late August, Huawei unveiled two new smartphones, Mate 60 and Mate 60 Pro and now the company has launched two more — the foldable Mate X5 and Mate 60 Pro +. These smartphones have attracted global attention for their high-speed features and other advanced capabilities. Experts believe that Huawei’s Mate 60 series will help the company establish itself as Apple’s rival once again.
Monopolice
This Tuesday, Google reached a tentative settlement with US states over its Google Play Store antitrust class action suit, scheduled for trial on November 6. In 2021, the suit was filed by over 30 states, representing 21 million consumers, accusing Google of monopolistic practices.
The lawsuit alleged that Google inflated prices for paid apps, imposed technical barriers on third-party app developers, and forced apps and users to use Google’s payment tools with fees as high as 30% a transaction. This has not only reduced the options for users in the Android app market but also increased the amount they pay for apps.
This settlement is subject to the court’s approval. Its details have not yet been publicly disclosed and are yet to be finalised. But this is not the end of the tech giant’s antitrust woes. It’s set to go on a pivotal trial this month against the Department of Justice (DOJ) and a group of states — this lawsuit alleges that Google became the leading search engine by illegally killing competition and paying companies like Apple to make it the default search engine.
Paper mache
Smurfit Kappa, Europe’s largest paper and packing company, and WestRock, the second-largest packaging company in the US, are in talks for a tie-up. While the financial terms of this M&A deal have not been disclosed, the deal would create a $20 billion global paper and packaging giant. The combined entity would be named Smurfit WestRock, headquartered in Dublin, and listed on the New York Stock Exchange (NYSE).
Smurfit operates not only in 22 countries in Europe but also in 13 countries across North, South, and Central America. The proposed merger has significant operational merits and could help bring down costs. While the paper and packaging industry saw business skyrocket during COVID-19, there’s been a slowdown in the post-pandemic world. Hence, this merger could also help boost business. For the 12 months through June, the combined revenue of the companies was $34 billion.
Two-thirds of the world meet
This weekend, the G20 Heads of State and Government Summit is being held in New Delhi, where powerful leaders from the 19 member countries and the EU will discuss crucial economic, financial, and regulatory matters.
G20’s member countries, including India, China, Russia, the US, the UK, Canada, Japan, China, South Korea, the EU, South Africa, and Brazil, represent roughly 85% of the world’s GDP, more than 75% of global trade, and around two-thirds of the world population. Hence, the G20 serves as an important forum for international economic cooperation and governance.
This year, with India’s presidency of the G20 summit, some of the topics on the agenda include strengthening multilateral finances, building a regulatory framework for virtual digital assets like crypto, financial inclusion, tackling the debt vulnerability of countries given the global macroeconomic conditions, and building a climate action plan. The main objective of this weekend’s summit is for the world leaders to indulge in discussions on these topics and commit to about ten substantial deliverables.
Invest wisely
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Warm regards,
Another week
in the markets
