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WEEKLY MARKET ROUND-UP – 31/01/20

2020 vision

The 2020s are starting with record low interest rates, continual technological advances and seismic shifts in demographics and climate change. Attitudes to investing have therefore clearly evolved from a decade ago, with more of a focus on equality, automation, and corporate governance.

UK defies Trump over Huawei

The Chinese telecoms firm Huawei is to be allowed to help build the UK’s 5G network despite warnings from the US over security concerns.

Huawei is already part of the UK’s 4G network and leads the way in 5G technology, but the US had called for a ban over fears it may be used for Chinese espionage. US Secretary of State Mike Pompeo also warned allowing Huawei access could hamper intelligence sharing between the UK and US.

However, the UK said Huawei’s role would be restricted to non-sensitive areas of the network and would be excluded from areas near military bases and nuclear sites.

The decision was a key test for Boris Johnson as he faced pressure from both the US and China, with China warning of “substantial” repercussions if Huawei was banned.

Apple: walking on Air

After gaining over 100% in the last year, shares in technology giant Apple added another 3% in after-hours trading on Tuesday (28 January) after it reported better than expected fourth quarter sales.

In a reversal of recent fortunes where iPhone sales have slipped, Apple recorded an 8% increase in sales in the final three months of the year to $91.8bn (£70.5bn), while net profits tipped $22bn.

While iPhone sales, including the iPhone 11 and 11 Pro increased 8% in the quarter, the wearables division such as AirPods and watches saw a 44% jump in sales, with Apple claiming high demand was creating shortages.

The performance of the company’s services business, including its new streaming service Apple TV+, slightly missed revenue expectations.

Copper bottom

Shares in the giant US copper miner Freeport-McMoRan tanked almost 8% on Monday (27 January) as investors took fright at the spectacle of a major viral outbreak in China.

Vale, the troubled Brazilian iron ore major, was another casualty; it fell closer to 7% while Mexico’s biggest copper smelter, Grupo Mexico, took a similar hit late last week.

As Quilter Investors head of dealing, Maz Alamouti, explains, “The commodities complex is tremendously sensitive to change in the outlook for China. With the coronavirus raging on the mainland and currently radiating in all directions, major commodity players have taken a hit this week.

“European mining indices were down close to 5% on Monday while the China A-share market retreated almost 6% after a weekend when the situation in Wuhan went from bad to worse.”

AMD hit by weaker console demand

Chip maker Advanced Micro Devices (AMD) saw its shares slip 4% after-hours on Tuesday (28 January) as it faces pressure from the console market.

AMD has been one of the top gainers in US equities, with its shares surging 150% in the past 12 months. In its fourth quarter results it recorded a 50% increase in revenue to $2.13bn and strong growth in its computing and graphics business.

However, sales in its enterprise and embedded and semi-custom segment, which includes chips used in games consoles, grew just 7% to $465m compared to analyst expectations of $603.5m. AMD’s total revenue forecast for the next quarter of $1.8bn also fell below estimates, as the console business slows down ahead of new launches from Sony and Microsoft later this year.

Tesla: first among equals

The accolades keep coming for Elon Musk. Just last week, President Trump likened Tesla’s CEO to Thomas Edison, and the shares rallied away again to be up more than 120% since October.

They jumped again on Wednesday (29 January), putting on more than 11% in after-hours trading, following the announcement of the company’s fourth quarter numbers.

Another set of blockbuster results saw Tesla beat analysts’ expectations once more, netting profits of $105m on revenue that jumped 17%, to $7.4bn, from the previous quarter. It also delivered over 112,000 vehicles in the quarter, setting a new record.

Last week, Tesla became the world’s second largest automaker by market capitalisation, behind Toyota. Meanwhile, another quarter of profits, and promises of more to come from Musk, takes Tesla ever closer to that elusive listing on the S&P index.

Chart of the week

Small change? Britain got a new 50 pence piece on 31 January to commemorate leaving the European Union. However, Brexit has cost the country very nearly as much in lost growth as its 47 years of EU budget contributions.

If any article in this market update has an effect on your finances and you would like professional advice, then please get in touch.

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