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Week in review: A big bite

Week in review: A big bite

This week: Apple reaches a trillion dollars, Netflix faces increased competition and China warns against U.S. blackmail.

Apple became the first trillion dollar company in history this week. The tech giant reported strong results for its fiscal third quarter, driven by sales of is latest, top-of-the-range iPhone X model. The numbers were impressive. Revenues rose by 17% in the quarter to $ 53.3 billion while profits surged by 32% to $11.5 billion. In fact, iPhone unit sales only increased by a modest 1% to 41.3 million units, but revenues and profits were boosted by considerably more because of the famously aggressively pricing of the most popular X model, which pushed up the average iPhone sale price by 20% to $724 per unit.

A real turn off

Apple’s performance contrasted sharply with that of fellow U.S. tech heavyweight, Netflix, whose share price fell by a further 5% on Monday to add to the 10% decline seen in the preceding two weeks. The latest decline was in response to a Wall Street Journal article, which claimed that U.S. retail giant Walmart was considering launching a video streaming service of its own that would compete head-to-head with Netflix as well as Amazon’s Prime Video offering.

Given that the article failed to pin down any firm dates for the Walmart venture, it probably falls in the camp of “speculation” for the time being. But this is something that Netflix has become more vulnerable to having reported disappointing subscriber numbers earlier in July.

Netflix’s poor performance of late somewhat mirrors that of fellow U.S. tech giant and FAANG stock, Facebook, whose share price has declined by over a fifth since mid-July. However, it is probably too early to make any broad extrapolations from this and also worth remembering the bigger picture. Since the start of 2016, the shares of Facebook and Netflix are both still up by 50% and 180% respectively.

Take a hike

In a move that was widely expected, the Bank of England (BOE) increased interest rates on Thursday by a quarter of a percent to 0.75% - the highest level in almost a decade. The minutes of the Bank’s monetary policy meeting showed that members of the Monetary Policy Committee (MPC) feel the UK economy is more vulnerable to higher inflation given the backdrop of reduced spare capacity, low productivity and reduced net migration in the post-Brexit environment.

In terms of the outlook, MPC members predicted strong labour market conditions would continue to push wage growth up, thereby likely requiring further rate hikes in order to bring inflation back to the Bank’s 2% target rate. At the same time, the Bank was also keen to stress that rate rises will proceed in a measured and controlled manner – taking all this on board, the latest financial market expectations are for one, or perhaps two, further rate rises of 0.25% before 2020.

China warns against U.S. “blackmail”

Chinese officials reacted with predictable forthrightness to revelations on Wednesday that U.S. President Donald Trump had asked his advisors to consider imposing tariffs on an additional $200 billion of Chinese imports. A foreign ministry spokesman in Beijing advised the U.S. to “correct its attitude and not to try to engage in blackmail,” while China’s commerce ministry threatened “countermeasures to defend the country’s dignity and the interests of the Chinese people.” In turn, the threat of an escalating U.S./China trade war hit global investor sentiment leading to losses in some Asian markets.

Overall, the S&P 500 index finished the week to the close on Thursday up by 0.3%, though most other global markets ended lower.

Overall, the S&P 500 index finished the week to the close on Thursday up by 0.3%, though most other global markets ended lower. The FTSE 100 index declined by 1.6% and the FTSE World Europe (ex-UK) fell by 1.1%.

And finally…

To fin-ish this week in review, a stranger-than-fiction story from San Antonio, Texas. A man visiting an aquarium in the UK was caught on CCTV camera snatching a shark from a tank and smuggling it out in a pram. Thankfully, the 16-inch female grey horn shark, called Miss Helen, was soon recovered and returned to her usual abode. There was no serious damage was inflicted to Miss Helen, barring the indignity of being dressed like a three-year old child. The culprit’s suspected motivation in stealing the shark? To replace a similar model in his private collection, which had passed away.

Important Information

Companies mentioned for illustrative purposes only and should not be taken as a recommendation to buy or sell any security. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list.

Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.

Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.

Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), call (some bonds allow the issuer to call a bond for redemption before it matures), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).

ID: US-030818-69733-1