Global equity markets were mixed for the week but considering we are now officially in a trade war not a bad result. Local investors given a nice boost last week with a markedly weaker Australian dollar. Still it was a roller coaster week. All three major indexes closed with deep losses on Monday (the S&P 500 fell 2.4%, its biggest one-day loss since January) after China said it would impose 25% tariffs on $60 billion of U.S. goods, in retaliation for increased U.S. tariffs last week. Markets then proceeded to recover nicely with a three day rally during the week and if not for a late sell off on Friday afternoon (sparked by CNBC reporting that trade talks between China and the U.S. have stalled) would have finished the week only marginally lower.
Trade continues to dominate international headlines, although on a more positive note, the U.S. announced plans to lift steel and aluminum tariffs on Canada and Mexico, paving the way for Congress’ approval of the new North American trade deal. Elsewhere, U.S. officials announced they would delay the decision to implement tariffs on auto-related imports from the European Union and Japan by 180 days. News of the delay buoyed European stocks, which managed to close the week firmly in positive territory.
Weekly returns to 17 May 2019
(AUD 5-day return far right- hand column)
Notable company news
Corporate earnings update
A large number of U.S-listed companies reported quarterly earnings last week. A summary for companies we've included in our thematic share portfolios (Vues) can be found here.
Walt Disney (NYSE: DIS)
On Tuesday it was announced that Walt Disney Co. is getting full control of Hulu in a deal with co-owner Comcast. This is a strategic shift by Disney who is now betting on continued rapid growth for streaming services. Hulu has had a number of original hits such as “The Handmaid’s Tale.” The deal involves Comcast being guaranteed a $5.8 billion windfall by early 2024, when the company can sell its stake to Disney. The value of the streaming site, created in 2007, has soared sevenfold in seven years. Certainly, Hulu will be a key weapon in Disney’s growing online fight with Netflix Inc., and the deal gives the service access to programming from Comcast’s NBCUniversal division for at least three more years. Disney is projecting Hulu will have as many as 60 million subscribers by fiscal 2024, up from 25 million last year.
Disney is held in Macrovue’s Entertainment thematic portfolio.
Xilinx (NASDAQ: XLNX)
At its annual meeting with analysts late Tuesday, Xilinx gave guidance that its revenue for the fiscal year ending in March 2020 should be in the range of $3.45 billion to $3.6 billion—up 15% from the year. Growth in the company’s data-center business is expected to pace well ahead of that, as its programmable chips are becoming popular for uses including boosting the performance of artificial-intelligence systems as well as 5G networks. Xilinx revenue was up 24% last year, so this would represent the best consecutive two-year expansion the company has seen in more than a decade.
Xilinx is held in Macrovue’s 5G thematic portfolio.
- 10-Year Treasury yield: -9 basis points to 2.47%
- Gold: -0.7% to $1,277.4/oz
- WTI crude oil: +1.7% to $62.73/bbl
- AUD/USD: -1.09% to 68.68
The week ahead
The economic calendar is very light this week. New home sales and durable goods are worth a look. FOMC minutes of interest but probably no surprises in store.
Chart of the week
The State of global trade deficits and surpluses are fascinating!