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A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

Apple’s first profit warning in 20 years and its negative effects on equity index futures is the big story this morning and the details can be found elsewhere on the Report on Business site.

The big issue for investors is whether Apple’s weak China sales – the main reason for the warning – is a one-off, fixable issue related to U.S./China trade tensions, or whether it’s an indication of a rapidly weakening Chinese economy. Apple competitor Huawei recently reported solid quarterly results so that’s good news in that it suggests the Chinese economy is not cratering. On the other hand, Bloomberg and CNBC noted that Apple is not the first company with significant revenue from China to reduce guidance.

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Bloomberg’s Liam Denning suggested a link between Apple results to China’s oil demand,

“@liamdenning China = 26% (OPEC) or 32% (IEA) of projected oil demand growth in 2019 #OOTT” – Twitter

“ ‘This wasn’t a stunning development for Apple,’ says Bloomberg Intelligence’s John Butler” – Bloomberg TV

“ Goldman says Apple will have to cut 2019 numbers even further, compares iPhone maker to Nokia” – CNBC

“Apple bombshell sends investors to safe havens; 'flash crash' jolts currencies” – Reuters

“ Apple isn't the first multinational to warn about China in the past several weeks.” – Bloomberg

“Companies from Apple to Ford are flashing warning signs about the Chinese economy” – CNBC

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***

There was an overnight ‘flash crash’ in the U.S. dollar/yen exchange rate which makes me uneasy. There is an unknowably large amount of yen that’s been borrowed at low interest rates by speculative investors, exchanged into greenbacks, and used to buy U.S. stocks and bonds. The sharp jump in the yen overnight indicates at least some degree of panic – an unwinding of U.S. long positions and the repayment of yen loans,

“ ‘For the Aussie dollar it was a flash crash this morning; for the yen, it’s been the opposite,’ said Robert Carnell, chief economist and head of Asia-Pacific research at ING… While analysts pointed to other problems with the iPhone in addition to China as a cause for its weakening sales, Apple’s warning underscores concerns that the world’s second-largest economy is decelerating, rattling investors and exacerbating fears of a broader global economic slowdown… ‘I think the yen’s rise against the dollar was due to continuing global risk aversion pushing up the Japanese currency’s haven appeal, triggering more algorithmic yen buy orders which escalated the move,’ said Koon Chow, macroeconomic and foreign exchange strategist at UBP.”

“Flash crash’ moves hit currencies as yen spikes on Apple and China” – Financial Times (paywall)

***

BBC News detailed the increasing signs of a sharp global economic slowdown,

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“Three months into the year, the tariffs that his administration has already imposed on a wide array of Chinese goods are due to increase from 10 per cent to 25 per cent. China can be expected to retaliate as it did to the first round of tariffs… Europe also has its own problems. The economic data for the third quarter of the year showed a marked slowdown in growth in the eurozone… China also has things to worry about – in the shape of a rising burden of public and private-sector debt, which could yet undermine financial stability. Surveys of business showed that new orders for manufacturers declined in December, for the first time in two years.”

“Clouds gathering over global economy” – BBC

“Top Wall Street economist warns global economic growth ‘now in free fall’” – Barlow, Globe Investor

***

Tweet of the Day: “@CNBC Will the market start to stabilize in 2019? UBS' Art Cashin said yesterday to expect as much volatility this year as in 2018. “It looks like we’re not going to be able to catch up on our sleep for a while.” cnb.cx/2CJVC2F “ – (Video) Twitter

Diversion: 2019 is expected to be a big year for launching rockets,

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“Get ready for these rocket milestones in 2019” – M.I.T. Technology Review

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