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WEEKLY MARKET ROUND-UP – 7/06/19

WEEK ENDING 7 JUNE 2019

Rise of 5G

EE has become the first mobile operator to launch 5G in the UK. This is the latest evolution of the technology that lies at the heart of the US trade spat with China.

US lawmakers lock horns with ‘FAANGs’

This week, US antitrust officials from the Federal Trade Commission (FTC) and the Department of Justice (DOJ) announced they were converging on the ‘FAANGs’. The news sent shares plunging: Alphabet (Google) dropped more than 6%, Amazon fell 4.6% and Facebook tumbled 7.5%. Meanwhile, Apple shares fell 1%.

As portfolio manager Hinesh Patel observes, “The news brings to mind Saturday’s shock defeat of Anthony Joshua at the hands of a tubby unknown. After a decade of untrammelled expansion that has seen the FAANGs sail through the ‘taper tantrum’, the value/growth rotation sparked when Trump took office, a bitter trade war and slumping chip prices, the US tech elite have finally been laid low by a surprise blow that came from their own side.”

Infineon indicates ambitions with Cypress bid

Infineon has agreed to acquire its US peer Cypress Semiconductor for $9.4bn as the ground shifts underfoot in the chip sector, thanks to the arrival of 5G.
The move will heighten Infineon’s grip on next- generation electric vehicles and internet chips, both of which are expected to proliferate in the years ahead.
However, the 46% premium to Cypress’ recent share price was met with dismay from its investors with its shares falling 9% on Monday.
The deal has yet to receive regulatory approval and could still fall foul of the US takeover panel on national security grounds.

Trump opens two new fronts in his trade war

President Trump surprised both sides of the political aisle in the US last week by declaring that it would impose a 5% tariff on all Mexican goods starting on Monday and rising 5% each month unless it stops all illegal migration into the United States.

The news has so unnerved Congress that it may once more vote against Mr Trump’s February declaration of a national emergency at the southern border. This would prevent the President from using his executive powers to circumvent Congress (and de-rail his
border-wall agenda to boot).
The news was followed by the announcement that the US is ending India’s developing country status that exempts billions of its exports from US tariffs.

Amazon ‘pops up’ on the high street

UK suffers worst retail sales slump on record

UK high street sales fell by 2.7% in May, the biggest slump in more than two decades driven by political and economic uncertainty.

The British Retail Consortium (BRC) said the figures were the worst since it began compiling data in January 1995, and that they could signal further job losses and store closures.
The BRC acknowledged the fall should be seen in the context of an unusually strong rise in May 2018 of 4.1%, when sales were boosted by warmer weather and a royal wedding. However, chief executive Helen Dickinson warned: “With retail conditions the toughest they have been for a decade, politicians must act to support the successful reinvention of our high streets and local communities.”
The BRC argued that business rates remain a key barrier to high street retail investment.

After a decade of untrammelled expansion…the US tech elite have finally been laid low by a surprise blow that came from their own side.

 

Hinesh Patel, portfolio manager, Quilter Investors.

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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