1. Trade Deal In Sight?
It would seem both sides are finally ready to talk turkey with some conclusive trade talks to come this week. US Treasury Secretary Mnuchin announced that sufficient concessions from China could bring about the end of the bitter tit-for-tat tariff spat. Finally!
Last night Mnuchin said that “everything is on the table” in his meetings today with some of China’s top brass as they discuss structural changes to China’s economic model and more balanced terms of trade.
The tariffs and global slowdown have taken a serious toll on the Chinese economy which has received immense flack for many poor earnings results this season. With China’s domestic growth at its weakest level since 2009, its negotiation position is severely weakened and the scales are definitely tipped in the US’s favour.
However, both sides will hope for a resolution in the crisis as markets remain in an extremely fragile state. A collapse in talks would hurt the chances of forming a lasting truce between two of the most important trading nations, further rattling investor confidence.
Positive developments by the end of the week could send investors flooding back into emerging market assets and quell some of the skepticism about global growth that has been creeping into markets this week. We wait in hope!
2. Apple Haters ‘Out Of Ammo’
Mad Money presenter, Jim Kramer, explained Apple’s 5.5% stock price rise after its disappointing earnings as a lack of ammunition left to keep beating Apple down. The appreciation buoyed the tech sector late in the session, setting up an intriguing platform for a host of big name earnings today.
The resounding negativity ahead of Apple’s earnings was silenced when its earnings were not as awful as everyone expected. Kramer argued that the vicious criticism has already played itself out, and with a potential trade deal on the horizon, the stock has nothing but upside.
This sets the scene for an important earnings day which includes, Alibaba, Microsoft, Facebook, Qualcomm and Tesla. Similar to Apple, all of these stocks fell out of favour in October and have faced vicious criticism ever since. But have the tech bears lost their oomph?
Less horrible than expected earnings today could yield equally surprising outcomes for these tech giants who have mostly retreated from their Friday highs over the last two days. Positive results across the board could generate much-needed gains in sagging levels of investor confidence on Wall Street. However, if the tech bears find their oomph again, the sea of red may just get deeper.
Today we are watching…
1. Microsoft (#msft)
The world’s second largest company is poised to be one of the more interesting earnings announcements today. Microsoft’s strong cloud computing business, subscription model and software division could be the X-factors contributing to a positive earnings publication today. Each sector has grown between 33%-76% year on year and looks set for more gains in 2019. The consensus EPS estimate is $1.09% (+13.5%) on revenue of $32.49bn. Let’s see what comes out in the wash!
2. Tesla (#tesla)
Tesla’s earnings report comes amid a cascading share price thanks to extensive layoffs and a number of other red flags. Even though the company is set to post a quarterly profit, expiring tax credits, a possible capital raise and a $920 million mountain of debt are looming over the company. Analysts remain mixed on Tesla which is prone to considerable price swings. So keep your wits about you when taking it on today. The consensus EPS estimate is $2.19 (+172%) on revenue of $7.12bn (116.4%).