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Thursday, 3 January 2019

What we’re tracking on 03 January 2019

News is slow this morning as more than a handful of members of the community are either “bridging” until after Coptic Christmas or simply taking it a bit easy. That makes Apple’s rare warning that it will fall short of its sales forecast the story of the day. And as we suggested yesterday, what news there is dominated by the government.

Apple shocked Wall Street late yesterday with an extremely rare revenue warning, saying revenue in this first quarter of its fiscal year would fall as much as 10% short of guidance. Why? The company blamed weakness in the Chinese economy and a slower-than-expected pace of iPhone upgrades in advanced economies. The news has rattled Asia-Pacific forex markets and the speculation now is whether this means the “iPhone is losing its lustre,” the Financial Times says. The news leads the FT, Wall Street Journal, CNBC, Bloomberg and Reuters this morning.

It’s looking a bit ugly as we wait for the opening bell this morning: Apple shares are down 7% in after-hours trading and Dow futures are off more than 300 points as tech shares take it on the chin, CNBC warns. Expect that Apple’s sales warning will stoke the “slowdown fears” that are “stalking global markets,” with Reuters flat-out saying that the warning is a “bad omen for Wall Street bulls.”

EM shares didn’t exactly start the new year on the best note, with the closely watched MSCI EM index falling around 1.8% yesterday, according to the Financial Times. The slump was driven mostly by weak trading in “a closely watched gauge of Chinese manufacturing,” indicating that the US-China trade war is taking a toll on the latter’s economy. Most EM currencies also weakened against the USD, save for the Brazilian real, which has been bolstered by “optimism over newly sworn in president Jair Bolsonaro’s reform plans.”

Across the pond, the Dow Jones Industrial Average made up just 19 points yesterday of its 400-point loss last month, says the Wall Street Journal. The index is still reeling from significant volatility in the market, which investors expect to persist for a while longer. US President Donald Trump seems unfazed, calling the US stock market’s performance last month — its worst December since the Great Depression — a “little glitch” that will be glossed over once trade agreements with China and other countries are sealed, according to Bloomberg.

The EGX30 rose 1.3% yesterday, supported by a 1.9% jump in the shares of index heavyweight CIB.

Oil fared better on the first day of trading in 2019, with Brent crude closing up 2.1%, Bloomberg reports. The price recovery comes after “skepticism about OPEC’s ability to prevent a surplus this year had helped drive prices to an almost 40 percent decline to end 2018.”

Lower oil prices have been a godsend for Egypt, but they spell disaster for Iraq’s postwar recovery, particularly as the country relies on oil exports for around 95% of its revenues, the Associated Press notes.

So what should you expect of oil prices in 2019? Bloomberg put the question to the CEO of ConoccoPhillips, a portfolio manager at Pimco, strategist at JPMorgan and the head of oil markets at the International Energy Agency.

Also worth knowing this morning:

  • Saudi bank mega-merger: The National Commercial Bank and Riyad Bank are reportedly seeking advisors for a tie-up that would create the Gulf’s third-largest lender. (Bloomberg)
  • Brexit clarity? UK Prime Minister Theresa May will press European Union leaders this week as she looks for any advantage ahead of a vote in parliament next week on her Brexit agreement. (Financial Times)
  • Survey says: Fed’s gonna go slow: “Investors increasingly believe the Federal Reserve won’t raise interest rates in 2019, a sign of fading confidence that the U.S. economic expansion will continue at the stable pace the central bank foresaw just two weeks ago.” (Wall Street Journal)
  • Mifid what? The FT looks at how Mifid II has changed the relationship between fund managers and analysts a year on.

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