American officials due in Beijing for talks on trade battle

07 January, 2019, 06:15 | Author: Sally Reid
  • The new iPhone models that aren't being taken up

"Trade wars are not easy to win".

Apple, under severe pressure after cutting revenue guidance, could eventually bottom out at $120 per share, CNBC's Jim Cramer predicts.

The Labor Department said hiring ramped up in December, which could allay fears about an economic slowdown in the U.S. Those worries, along with a weak revenue forecast from Apple, contributed to steep losses Thursday.

"Trade tensions between the USA and China could take an increasing toll on companies in both nations", UBS strategists Christopher Swann and Kiran Ganesh wrote in a note to clients on Thursday.

Even Trump officials are warning of more China trouble ahead for Corporate America.

But White House economist Kevin Hassett said Apple was not alone, telling CNN there were "a heck of a lot of United States companies" exposed to the Chinese market that were likely to see earnings downgraded until Washington and Beijing resolved their differences on trade.

"That is having an impact on earnings and it's not going to be just Apple", White House Chairman of the Council of Economic Advisers Kevin Hassett said in an interview with CNN.

"The question for investors will be the extent to which Apple's aggressive pricing has exacerbated this situation and what this means for the company's longer-term pricing power within its iPhone franchise", James Cordwell, an analyst at Atlantic Equities, told Reuters. Juckes said it also supports "soft" manufacturing numbers out of China in recent days showing activity has contracted.

Investors are retreating to the safety government bonds, sending yields plunging.

Trump added that he had encouraged Apple CEO Tim Cook to build plants and more products in the US. US stocks have tumbled over the last three months as investors anxious that the economy might slow down dramatically because of a variety of challenges including the trade dispute and rising interest rates. He said this trade uncertainty "appeared to reach consumers", with customer traffic in China declining.

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Apple was down as much as almost 10% on the news.

As Bloomberg columnist Shira Ovide noted in a piece titled "Apple's iPhone Warning Comes Years Too Late", Apple has also tried to ignore the bigger reality about smartphones.

"The global market for +$700 phones has clearly topped out", Nicholas Colas, co-founder of DataTrek Research, wrote to clients on Thursday. In some cases, those rivals beat Apple to innovations like under-screen fingerprint scanning. "Apple can be used as a proxy to China's growth".

Even Warren Buffett's Berkshire Hathaway (BRKB) got caught up in the storm. The shares closed at $148.26 on January 4, down about 5.1 percent for the week.

While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be.

Delta plunged 8.9 per cent, United Continental 5 per cent and American Airlines 7.5 per cent.

Investors failed to find much solace in better news elsewhere. And Bristol-Myers Squibb (BMY) showed strong confidence by shelling out $74 billion in a blockbuster deal to acquire drug maker Celgene (CELG). Apple Inc. partially recovered its 10 per cent loss on Thursday by closing up 4.2 per cent. Stocks started 2019 with a tumble at Wednesday's opening bell before reversing course and closing solidly higher.

The makeup of the USA team was announced Friday by the trade representative's office.

Another 33 percent of companies said they plan to move out of China in the next six to 12 months, according to the UBS report. On the other hand, stronger-than-expected payroll growth could remind investors that a slowdown is not the same thing as a recession.

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