A senior Foxconn executive says that the company could move production of all iPhones destined for the US out of China if the current trade war demands it. In comments reported by Bloombergand The Wall Street Journal, the head of Foxconn’s semiconductor business group, Young Liu, said, “25 percent of our production capacity is outside of China and we can help Apple respond to its needs in the U.S. market.”
“We have enough capacity to meet Apple’s demand,” Liu said at an investors’ conference. Apple has yet to instruct Foxconn to move production out of China according to Liu.
Apple might need to rethink manufacturing after tariffs up to 25 percent come into effect at the end of June. The new tariff is expected to apply to the wholesale cost of devices like phones, laptops, and tablets imported from China to the USA, the market where a third of Apple’s iPhone revenue comes from. It would be up to Apple to decide how much of the extra cost to pass on to US consumers. Analysts quoted by Bloomberg suggest that passing the cost of the tariffs on in their entirety could result in price increases of between nine and 16 percent, resulting in a drop in demand of anywhere between 10 and 40 percent. Alternatively, absorbing the cost entirely could hit Apple’s earnings per share by six to seven percent.
Foxconn has a big incentive to help Apple since the company is said to be responsible for as much as half of Foxconn’s revenue. A drop in demand for iPhones would lead to a drop in manufacturing demand from Foxconn. The manufacturer is already preparing to shift some iPhone production to India in an attempt to avoid India’s 20 percent import duties.
However, with China planning to retaliate to the Trump administration with a tariff increase of its own, it will be difficult for Apple to escape the impact of the trade war entirely.
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LONDON (Reuters) - European shares gained ground on Tuesday, with Germany's carmakers outperforming, as risk appetite held firm after the United States stepped back from imposing tariffs on Mexico.
The pan-European climbed 0.62%, on course for a sixth day of gains in the last seven, with Frankfurt's racing up 1.2% as German investors returned from a one-day holiday.
There, BMW, Daimler and VW - seen as sensitive to trade tariffs - all gained between 1.8%-2%, mirroring a 1.9% gain for the auto sector.
Investors have breathed easier this week after the United States and Mexico reached a deal on Friday to avert tariffs threatened by U.S. President Donald Trump if steps were not taken to curb the flow of mostly Central American migrants.
That eased - for now at least - fears that the United States would find itself in a trade war with another of its largest commercial partners, adding to the dispute with China.
Trump said on Monday he may impose more tariffs on Chinese imports if he cannot make progress in talks with President Xi Jingping at a Group of 20 summit in Japan later this month.
Market participants said that investors would have to wait until the G20 summit, scheduled for June 28-29, for clear signs of how the spat would play out.
In the meantime, stocks are likely to be buoyed by expectations of a cut in rates by the U.S. Federal Reserve. Markets have priced in a cut by July.
"It looks like we will have to wait to see at the end of the month, to see what the next move will be," said David Madden, an analyst at CMC Markets. "In that time, if nothing is said, stocks could press on higher – the belief that the Fed will all of a sudden become dovish is really driving markets."
The MSCI world equity index, which tracks shares in 47 countries, advanced 0.24%. Wall Street futures were also seen opening higher, with S&P500 mini futures up 0.26%.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.9%, with Shanghai's bourse climbing 2% after China tweaked policy on major investment projects in an attempt to support its slowing economy.
Bourses in Australia, South Korea and Japan also gained.
FED EXPECTATIONS
The dollar held steady above a 2-1/2 month low against a basket of currencies, with rising expectations for a Fed rate cut tempered by a reluctance to close positions before the G20.
The nudged down 0.03% to 96.747 after advancing 0.2% on Monday.
"The markets are pricing in a 25-basis-point rate cut in July," said Peter Schaffrik, head of European rates strategy at RBC Capital Markets, adding that expectations of looser policy would likely continue.
"When you see the narrative that the market is painting, that it is all down to the negative implications from the trade war and the reduction of global trade," he said. "It's difficult to see how any one data point will change the entire picture."
Amid the cautious optimism, a rally in longer-dated euro zone government bonds stalled as the pick-up in risk sentiment globally sparked a sell-off in the bloc.
Germany's 10-year bond yield, seen as a benchmark for government debt, was up 3 basis points at minus 0.23% - still a smidgeon away from last week's record lows.
Thirty-year bond yields in Germany and France were up as much as 8 basis points in early trade.
In commodities, oil prices rose, bolstered by firmer financial markets and expectations that producer group OPEC and its allies will keep withholding supply. futures were at $62.67 at 0741 GMT, up 0.4%.
Here’s an interesting by-product the news today that Salesforce would be acquiring Tableau for $15.7 billion: the company is going to make Seattle, Washington (home of Tableau) the official second headquarters of San Francisco-based Salesforce, putting the company directly in the face of tech giants and Salesforce frenemies Microsoft and Amazon.
“An HQ2, if you will,” Salesforce CEO Marc Benioff quipped right after he dropped the news during the press and analyst call.
HQ2, of course, is a reference to Amazon and its year-long, massively publicised, often criticised, and ultimately botched search (it eventually cancelled plans to build an HQ in NYC, but kept Arlington) for its own second headquarters, which it also branded “HQ2.”
If real estate sends a message — and if you’ve ever seen Salesforce Tower in San Francisco, you know it does for this company — Salesforce is sending one here. And that message is: Hello, Microsoft and Amazon, we’re coming at you.
As we pointed out earlier today, there is a clear rivalry between Microsoft and Salesforce that first began to simmer in the area of CRM but has over time expanded to a wider array of products and services that cater to the needs of enterprise knowledge workers.
The most well-known of these was the tug-of-war between the two to acquire LinkedIn, a struggle that Microsoft ultimately won. Over the years, as both have continued to diversify their products to bring in a wider swathe of enterprise users, and across a wider range of use cases, that competition has become a little more pointed. (Indeed, here’s some perfect timing: just today, Microsoft expanded its business analytics tools.)
I’d argue that the competitive threat of Amazon is a little more remote. At the moment, in fact, the two work very closely: specifically in September last year, Amazon and Salesforce extended an already years-long deal to integrate AWS and Salesforce products to aid in enterprise “digital transformation” (one of Salesforce’s catch phrases).
Placing Salesforce physically closer to Amazon could even underscore how the two might work even closer together in the future — not least because cloud storage is now a notably missing jewel in Salesforce’s enterprise IT crown as it squares up to Microsoft, which has Azure. (And it’s not just a Seattle thing. Google, which has Google Cloud Platform, acquired Tableau competitor Looker last week.)
On the other hand, you have to wonder about the longer-term trajectory for Salesforce and its ambitions. The Tableau deal takes it firmly into a new area of business that up to now has been more of a side-gig: data and analytics. Coming from two different directions — infrastructure for AWS and customer management for Salesforce — enterprise data has been a remote battleground for both companies for years already, and it will be interesting to see how the two sides approach it.
Notably, this is not Salesforce’s first efforts to lay down roots in the city. It established an engineering office in the city in 2017 and as Benioff pointed out today, putting deeper roots into what he described as a “unique market with tremendous talent” will open up the company to tapping it even more.
President Donald Trump on Monday said he has concerns that a merger between United Technologies and Raytheon would harm competition and make it more difficult for the U.S. government to negotiate defense contracts.
"I'm a little concerned about United Technologies and Raytheon," Trump said in an exclusive interview with CNBC. Aerospace companies have "all merged in so it's hard to negotiate" with them, he added, suggesting the defense industry could be heading in the same direction.
Asked whether he would have problems with the merger, Trump replied, "Only if they have the same products. That would be the thing that bothers me most."
United Technologies and Raytheon announced on Sunday that they had struck deal to combine, which would bring together a booming aerospace business with a giant government defense contractor. That tie-up could rattle suppliers, customers and competitors. The new company, with an estimated $74 billion in sales, would become the second-largest aerospace-and-defense company in the U.S. after Boeing.
Executives from the two companies dismissed Trump's concerns about a possible reduction in competition, saying they have very little overlap that would generally spark concern among anti-trust regulators.
"We are complementary, not competitive," Raytheon CEO Tom Kennedy told CNBC in an interview. "I don't know the last time we competed against United Technologies."
Greg Hayes, United Technologies' CEO and chairman who is slated to be CEO of the new company, once the merger closes, said he looked forward "to talking to the president later today," about potential job growth under the deal.
Still, the president repeatedly expressed concerns about dwindling competition in aerospace.
"When I hear United and I hear Raytheon, when I hear they're merging, does that make it less competitive? It's already not competitive," Trump said.
"I just want to see competition. They're two great companies, I love them both. But I want to see that we don't hurt our competition."
The proposed deal would create a giant, one-stop shop with products that range from Tomahawk missiles and radar systems to jet engines that power passenger planes and the seats that fill them.
Raytheon and United Technologies have a combined market value of close to $166 billion. The stock price of each has gained more than 21% this year, far outpacing the broader market, as they've reaped the benefits of strong defense spending and record orders for passenger planes around the world. Still, they have lagged some of their competitors.
United Technologies is in the process of spinning out its Carrier air conditioning unit and its Otis elevator business. The company expects those transactions and the newly announced deal with Raytheon to close by early 2020.
Everything is falling apart for Renault-Nissan, more tariff threats, more Brexit fallout, more alleged corruption in the Trump administration, and bad reviews for Elon Musk as a boss. All this and more in The Morning Shift for Friday, June 10, 2019.
1st Gear: Renault-Nissan Tensions Get Even Tenser
As you may be aware, Nissan’s former chairman and CEO Carlos Ghosn is currently awaiting trial in Tokyo for a slew of corruption-related charges. One of the major issues brought to light by Ghosn’s arrest has been how Nissan’s corporate structure enabled his alleged malfeasance. At the very least, it’s clear there are, ahem, problems with Nissan’s corporate structure that allowed one person to wield so much power.
Which brings us to this weekend, when Renault, which had previously been supportive of Nissan’s internal reform efforts, notified the Japanese automaker that they will not, in fact, be voting for the governance reforms on the table, both Bloomberg and Reuters reported. This is a very big problem for Nissan, because such a move requires two-thirds of shareholders to vote in favor, and Renault owns 43 percent of Nissan. Without Renault’s support, the measure cannot pass.
What is Renault’s problem? They don’t think they have enough influence in the new governance structure, of course. From Reuters:
A Renault source said Senard’s letter was motivated by concern about Renault’s under-representation on the new Nissan board committees being introduced following the arrest of Ghosn, who is now awaiting trial and denies the financial misconduct charges against him.
“It’s not a final abstention, and Renault’s position can still change,” the source said. “As things stand, Renault has not been assured of appropriate committee representation as Nissan’s main shareholder.”
Renault had yet to receive specific details on the proposed composition of each of the committees, another source with knowledge of the issue told Reuters.
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This is a lot of boring corporate governance stuff that will, if I had to guess, get sorted in the coming days and weeks. But the bigger picture here is Nissan was at the very least neutral and at the very worst did not support Renault’s proposed merger with FCA. Both Renault and FCA officially blamed the French government, which owns 15 percent of Renault, for the merger falling apart, but Nissan didn’t exactly help.
Bloomberg summarized the rift as such:
Nissan has long complained that the partnership with Renault is unbalanced, and that the French government’s outsize role at Renault, with board representation and extra voting rights, gives the state undue influence over the Japanese carmaker. Nissan owns a 15% stake in Renault, but with no voting rights, and has been seeking more power in the partnership rather than the “closer ties” sought openly by the French state and pursued first by Ghosn and later by Senard.
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In short, even though their fates are all largely intertwined, nobody in this alliance thinks they have enough influence over anyone else.
2nd Gear: Trump Threatens Mexico With Tariffs Shortly After Cancelling Tariffs
President Donald Trump said on Monday the United States had signed another portion of an immigration and security deal with Mexico that would need to be ratified by Mexican lawmakers.
He did not provide details but threatened tariffs if Mexico’s Congress did not approve the plan.
As we wrote regarding fuel efficiency standards, big businesses care not so much about what regulations are, but that they are consistent. Especially in the context of multinational automakers with manufacturing plans extending years into the future, predictability is paramount. Whatever you think of Trump’s tariff threats and massive swings in federal regulatory standards, it is not predictable, and that’s bad for automakers.
3rd Gear: UK Car Production Is Tanking Thanks to Brexit
Earlier in the year, several automakers, including Mini, Rolls Royce, Vauxhall, and Land Rover, announced plans to temporarily shut down plants in Britain in anticipation of trade disruptions due to the country leaving the E.U. by March. That “British Exit,” if you will, got pushed back to October, but the plant closures were already in motion. Which resulted in this:
Car production in April fell 24% on the month, the biggest drop since records began in 1995, and the broader category of “transport equipment” showed its largest drop since 1974.
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Is that bad?
4th Gear: DOT Secretary Awarding Projects to Help Husband’s Re-Election
The U.S. Department of Transportation head, Elaine Chao, is married to Senate majority leader Mitch McConnell. As it happens, Chao has created a “special path” for DOT projects in McConnell’s state of Kentucky to get funding, according to a POLITICO investigation:
The Transportation Department under Secretary Elaine Chao designated a special liaison to help with grant applications and other priorities from her husband Mitch McConnell’s state of Kentucky, paving the way for grants totaling at least $78 million for favored projects as McConnell prepared to campaign for reelection.
Chao’s aide Todd Inman, who stated in an email to McConnell’s Senate office that Chao had personally asked him to serve as an intermediary, helped advise the senator and local Kentucky officials on grants with special significance for McConnell — including a highway-improvement project in a McConnell political stronghold that had been twice rejected for previous grant applications.
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This comes a week after the New York Times investigation detailed how Chao has used her cabinet position to elevate the standing of her family’s shipping company, which has donated millions of dollars to her husband’s campaign.
Surely there is someone else more qualified to run the country’s Department of Transportation who isn’t married to the Senate majority leader or the heiress to a massive shipping company, which is of course regulated by said Department of Transportation. Perhaps the better question: is there anyone less qualified?
5th Gear: Job Ratings Websites Are Souring on Tesla Too
Would I rely on a website like Glassdoor when considering a new employer? Probably not; its ratings are entirely anonymous and the site takes no measures to ensure the reviewer actually worked for—or indeed has any familiarity with—that company.
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That being said, this Reuters article is still funny, because they found a new angle rather than the usual bearish market analysts or automotive safety experts to pile on Tesla:
At jobs site Glassdoor, Tesla’s overall company rating fell to 3.2 out of 5.0 stars based on reviews written in the first quarter from a high of 3.6 in 2017, according to historical data compiled by Glassdoor at Reuters’ request. The average rating of the nearly 1 million employers reviewed on the site is 3.4.
Like I said, I wouldn’t take any of this too seriously, at least out of the context of what we already know about working for Tesla, which is that it’s a highly volatile but potentially fulfilling work environment with a healthy dose of hero worship and cult-like atmosphere baked in.
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Although, about that hero worship:
In the first quarter, Elon Musk’s CEO approval rating dropped to 52% from 90% in 2017.
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Yikes.
Reverse: Trail of Doughnuts
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Neutral: What’s the Renault-Nissan Endgame?
Does the latest news alter how you see this quarrel unfolding?
Investing.com - Stocks in focus in premarket trade Monday:
• United Technologies (NYSE:) stock and Raytheon (NYSE:) stock gained 2.4% and 8.7%, respectively, by 7:55 AM ET (11:55 GMT) after the two companies that would create an aerospace and defense giant worth about $121 billion.
• Tableau Software (NYSE:) stock skyrocketed 33.6% after in a deal valued at $15.7 billion. Salesforce stock (NYSE:) fell 4.9%.
• Tilray (NASDAQ:) stock jumped 17.8% after the company signed a letter of intent with its largest stockholder Privateer Holdings to extend the lock-up on 75 million of the company’s shares representing 77% of total stock outstanding.
• Shutterfly (NASDAQ:) stock traded up 6.2% on reports that in a deal that would value the digital imaging company at about $2 billion.
• Fiat Chrysler (NYSE:) stock rose 1.9% on a report that the company had with Renault (PA:). Sources cited by Reuters said the deal would most likely involve a reduction in the French automaker’s stake in Nissan (T:) in an attempt to secure the Japanese company’s approval.
• Insys Therapeutics (NASDAQ:) stock plunged 61.8% after the company filed for Chapter 11 bankruptcy.
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