Week of June 28 2019 Weekly Recap & The Week Ahead
“Don’t look for the needle in the haystack. Just buy the haystack.” — John Bogle, founder of Vanguard
1. U.S. Weighs Ban on China-Made 5G Equipment — the Trump administration is examining whether to require that next-generation 5G cellular equipment used in the U.S. be designed and manufactured outside China, WSJ reports. The proposals could force telecom equipment giants Ericsson (NASDAQ:ERIC) and Nokia (NYSE:NOK) to reshuffle their production locations, with Citi analysts estimating that China represented 45% and 10% of their manufacturing-facility area in 2018. Washington has already essentially banned telecom equipment from Chinese companies, especially industry leader Huawei, over cybersecurity concerns.
2. China to Insist U.S. Lift Huawei Ban as Part of Trade Truce — ahead of their G20 meeting in Osaka, President Xi plans to present President Trump with a set of terms the U.S. should meet before China is ready to settle their market-rattling trade confrontation, WSJ reports. Among the preconditions, Beijing is insisting that Washington remove its ban on the sale of American technology to Huawei and also wants the U.S. to lift all punitive tariffs. The nation additionally wants the Trump administration to drop efforts to get China to buy even more U.S. exports than Beijing said it would when the two leaders last met in December.
3. FAA Identifies New Potential Risk on Boeing 737 MAX — following a Reuters report stating the FAA had found a new “potential risk” the company must fix before the 737 MAX can return to service. The risk was discovered during a simulator test last week, which likely will prevent BA from running a certification test flight until at least July 8. In an SEC filing, Boeing said the FAA has asked it to address a specific condition of flight not covered by planned software changes.
4. AbbVie Looks to Acquire Allergan for more than $60B –– bbVie’s (NYSE:ABBV) announced $63B deal for Allergan (NYSE:AGN), with the two drugmakers betting a combination will deliver new sources of growth. Buying Allergan would result in a major position in the $8B+ market for Botox and other beauty drugs, as well as a number of popular eye treatments, as AbbVie braces for the end of patent protection for the world’s top-selling drug, Humira.
5. U.S. Unveils “hard-hitting” Iran Sanctions — crude prices are on watch as the Trump administration ordered new sanctions against the assets of Ayatollah Ali Khamenei and several Iranian military commanders, as well as plans to target Foreign Minister Javad Zarif later this week. The penalties effectively freeze the business operations of the Supreme Leader’s office, which controls a global network of private companies that some experts estimate is worth between $100B-$200B. Tensions already worsened in May, when Washington ordered all countries to halt imports of Iranian oil, and then escalated following a series of apparent Iranian-backed skirmishes in the Middle East. “Imposing useless sanctions is the permanent closure of the path of diplomacy,” Foreign Ministry spokesman Abbas Mousavi wrote on Twitter.
6. AAII Weekly Sentiment Survey — while S&P 500 moved up towards an all-time closing high, bullish sentiment levels were relatively muted in spite of this price action. The percentage of investors reporting as bullish rose only 0.08% to 29.59%. Bullish sentiment saw a similar sized move only one month ago when it had risen from 24.71% to 24.79% in the final week of May. Given these readings, bullish sentiment remains at the lower end of its normal range sitting over 8.5 percentage points from the historical mean.
Bearish sentiment perfectly mirrored bullish sentiment this week as the percentage of pessimistic investors fell by just 0.08% to 32.05% and still above the historical average of 30.32%.
The week ahead — Economic data from Econoday.com:
