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(Bloomberg Opinion) -- Encouraging trends in emerging markets belie their volatility since the taper tantrum of 2013, when the Federal Reserve signaled it was pulling back on quantitative easing. Further turbulence is likely, despite the improving outlook for advanced economies, easing trade tensions and accommodative monetary policy.The International Monetary Fund estimates that growth in developing countries fell to 3.7% last year, the slowest pace since 2009 and well below the IMF’s July 2019 forecast of 4.1%. An expected rebound to 4.4% this year assumes highly uncertain recoveries in stressed economies such as Argentina, Iran and Turkey, as well as in countries where growth has slowed significantly — China, Brazil, India, Russia and South Africa among them.Rising friction in the Middle East, if sustained, could result in higher energy prices and supply disruptions for developing countries. India, which recently downgraded growth for the 2020-21 fiscal year to 5%, the slowest pace in a decade, imports more than 70% of its oil needs. A price rise of $10 per barrel widens the current account deficit by 0.4 % of gross domestic product. Every increase of 10% adds 0.2% to the rate of inflation, which is already above the Reserve Bank of India’s 4% target.Higher borrowing costs and a stronger U.S. currency due to haven demand would hurt developing countries. Between 2010 and 2018, low exchange-rate volatility and high interest-rate differentials caused non-bank financial institutions in emerging markets to double their U.S. dollar-denominated debt to $3.7 trillion. Much of this is unhedged.Further geopolitical risks include North Korea’s missile-rattling, challenges in Hong Kong and Taiwan to Beijing’s assertions of authority, and China’s territorial maritime disputes with its neighbors. Japan and South Korea are contesting matters arising from World War II. India’s proposed changes to citizenship laws and the status of Kashmir is fomenting domestic unrest and tensions with predominantly Muslim Pakistan and Bangladesh.Meanwhile, the spread of a new virus that originated in China threatens to depress retail sales and tourism in Asia, helping to bring a global stock rally to a halt last week.These stresses exacerbate long-term structural problems. The early 2000s and the period immediately following the global financial crisis saw a synchronized acceleration of growth across the world. But advanced economies have slowed and their long-term potential rate of expansion has fallen.The latest IMF estimates released last week have growth in advanced economies stabilizing at 1.6% in 2020-21, compared with 2.3% in 2018 and 0.1 percentage point lower than in its October forecast. Underlying this stagnation is the flagging potency of debt-fueled growth, flat productivity, limited policy options, and unfavorable demographics. Emerging economies cannot rely on historic demand for exports to drive future expansion.Despite the U.S.-China phase one trade agreement, conflicts won’t abate. Sino-American trade tensions alone will cumulatively reduce the level of global GDP by 0.8% by 2020. The Trump administration also has trade disputes with the European Union, Australia, India and Vietnam, among others. France and the U.S. are trying to de-escalate threatened tariffs on champagne and cheese in retaliation for a digital tax affecting Alphabet Inc.’s Google and Amazon.com Inc.Trade volume growth fell to about 1% in 2019, the weakest level since 2012. The retreat from a rules-based trade system and the weaponizing of trade interdependence will damage everyone.In the past 20 years, China, a crucial driver of emerging markets, went from a 10th to two-thirds the size of the U.S. economy, assisted by trade within the WTO framework. Today, China’s blacklisted Huawei Technologies Co. relies on chips designed in America while advanced economies benefit from its cheaper and often cutting-edge 5G technology. Three-quarters of the world’s smartphones, mostly made in emerging markets, use Google’s Android mobile operating system. American restrictions hurt developing nations as well as consumers in advanced economies.In a world of limited demand, irrespective of leadership or ideology, governments everywhere face a mounting anti-globalization backlash. Nationalist agendas and a shift to autarky – closed economies – will persist. A return to strong growth in trade and cross-border capital flows seems unlikely.This affects developing-world economic models. Lower-income nations focused on export-oriented industries, such as textiles and manufacturing, exploiting cheap costs. Now, weak demand and trade disputes limit this option. Higher-income developing countries face technology transfer restrictions that affect improvements in productivity. Meanwhile, automation decreases the advantages of low-skilled, cheap labor and offshoring. Bringing manufacturing home to advanced economies decreases companies’ exposure to disruption, currency fluctuation and political interference. The failure of Prime Minister Narendra Modi’s “Make in India” strategy reflects these shifts. India has failed to produce the 1 million new jobs per month needed to absorb new entrants into the workforce. Indian Railways recently received 23 million applications for 90,000 vacancies.Slower growth creates a dangerous feedback loop. Dissatisfaction with improving ordinary lives can prompt civil unrest. Countries rich in scarce resources, or having large internal markets such as China, India, and Indonesia, may muddle through.Others will struggle. Rising nationalism and protectionism are likely outcomes, and will only deepen the wedge between advanced and emerging economies. It will make an interesting if rough ride ahead for investors. To contact the author of this story: Satyajit Das at firstname.lastname@example.orgTo contact the editor responsible for this story: Patrick McDowell at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Satyajit Das is a former banker and the author, most recently, of "A Banquet of Consequences."For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Companies in the Nasdaq 100 are headed into earnings season with momentum that approaches the unprecedented, their value up by more than $1 trillion since October.Now the world finds out if the rally made any sense.Twenty-six constituents are due to report quarterly results next week, including three of the four biggest U.S. companies, over one blistering 48-hour stretch starting Tuesday. With trillion-dollar-plus market capitalizations and a doubling in Apple Inc. since 2018 to account for, it’s possible investors will be in a less-forgiving mood than usual.As things stand now, Nasdaq stocks are perched at the highest forward valuation since 2007 and investors are getting progressively less patient with failure. Already this reporting season, companies in the broader market whose sales and earnings trailed analyst estimates have seen their shares pummeled the next day by the most in five quarters.“The market isn’t going parabolic, but some of these tech stocks really have,” said Randy Frederick, a vice president of trading and derivatives at Charles Schwab. “If you miss the bar, you’re going to get punished, no question about that.”A four-day week before the landing of big tech earnings saw the Nasdaq 100 slip 0.4% as stocks wavered amid concern over the spread of a virus that started in China. Seven straight weeks of gains have pushed the index to 23 times its forecast earnings, about 30% higher than its 10-year average. That valuations are stretched doesn’t mean stocks can’t rally further. It does raise the drama headed into earnings season.The latest leg of the bull market has come at a time when overall earnings have stopped rising for most industries -- the reason valuations have swelled so much. While the index rose every quarter of 2019 in terms of price, profits fell in two and are now forecast to contract in a third. Given the Nasdaq surged 38%, investors have obviously been OK looking past those numbers. But any indication that 2020’s expectations are optimistic may be taken poorly by stock bulls.That dynamic is writ large in the tech industry, where earnings have dropped 3% or more in each of the past three quarters. Computer and software makers are expected to post a 0.8% profit contraction in the three months through December. Early returns have been encouraging. Texas Instruments, a bellwether for chip stocks, posted results that topped estimates. Intel Corp. reported sales guidance that came in above industry trends.Despite the recent quarterly hiccups, combined net income of five largest tech companies -- Apple, Amazon, Microsoft, Alphabet and Facebook -- totaled $40 billion in the third quarter, 38% above the same period two years ago.“Multiples have expanded, but quarter-over-quarter these companies continue to grow earnings and that’s the whole key,” said Gary Bradshaw, a Texas-based portfolio manager at Hodges Capital Management, who owns shares of Apple, Microsoft, Amazon and Facebook. “It’s one of the areas in the marketplace where you’re seeing good growth. This isn’t 1999 or 2000 when you were valuating those tech stocks on eyeballs.”The cost of falling short has risen as well. A broader gauge of tech, online retail and Internet services stocks dropped 0.9% the day after reporting a miss on second-quarter sales and earnings per share, data compiled by Credit Suisse show. In the third quarter, the average slump was 6.8%.Apple will release quarterly figures on Tuesday, and analysts are focused on how the firm fared during the holiday season and dealt with uncertainty around tariffs. Microsoft, up 62% since the start of 2019, reports Wednesday. Investors will see whether the demand for its cloud-computing programs remains strong. Facebook, which has rallied 66% over that stretch, reports the same day.“I’d expect a little more leadership out of value-oriented sectors, more economically sensitive parts of the market,” Jeff Kleintop, chief global investment strategist at Schwab Center for Financial Research, said by phone. “I think investors seem to be comfortable with sticking with the leaders that got them here, at least for the time being,”\--With assistance from Wendy Soong.To contact the reporters on this story: Elena Popina in Hong Kong at firstname.lastname@example.org;Sarah Ponczek in New York at email@example.comTo contact the editors responsible for this story: Brad Olesen at firstname.lastname@example.org, Chris Nagi, Richard RichtmyerFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- YouTube secured the exclusive rights to broadcast some of the biggest esports leagues, giving Google a boost in its efforts to push into the lucrative world of video games.The deal, signed between Alphabet Inc.’s Google and video game publisher Activision Blizzard Inc., gives YouTube the rights to broadcast the new Call of Duty League and the already-popular Overwatch League, which was broadcast on Amazon.com Inc.’s Twitch for the past two years at a reported cost of $90 million. As part of the agreement, Google will provide cloud infrastructure for Activision’s online games. Financial terms of the multiyear deal were not disclosed.Gaming is a significant new frontier for Google. Last year, it released a game-streaming service called Stadia, which lets people play games through the internet without having to buy a console or high-powered computer. YouTube has always been a major destination for watching people play video games, but the company is trying to take even more territory by poaching well-known game players from Twitch.‘All-Out Talent War’ in Video Gaming Sparked by Ninja Defection“In 2020 Google is going all out to claim a piece of the $120 billion games market,” said Joost van Dreunen, managing director of Nielsen’s video-game research arm. “Google is off to a great start to building strong relationships with content creators which it will need to differentiate as it tries to penetrate the industry via different avenues.”The news isn’t good for Amazon, which hasn’t announced a competitor to Stadia and still faces uncertainty about its in-house gaming studio, van Dreunen said. “The longer Amazon remains on the sidelines of technological shifts in the games business, the harder it will be to capture share down the line,” he said.The deal offers a strong boost to the central thesis of Activision’s esports efforts. The publisher pitched investors on the Overwatch League and the Call of Duty League, which launches later this month, as esports equivalents to traditional sports leagues like the National Basketball Association or National Football League. Selling media rights to companies like YouTube is a central piece of how these leagues make money.Providing hosting services to Activision is also a win for Google’s cloud division, which is trailing Amazon and Microsoft Corp. in that market.(Updates with comment from analyst in the fourth paragraph.)\--With assistance from Eben Novy-Williams.To contact the reporter on this story: Gerrit De Vynck in New York at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Andrew PollackFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Attorneys general from nine states urged a federal judge to toss out Google’s $13 million settlement of a class-action lawsuit blaming its Street View mapping technology for a massive violation of consumer privacy.The proposed accord in a debacle that became known as “Wi-Spy” doesn’t offer compensation for millions of people whose confidential data was captured off their Wi-Fi networks by Street View vehicles. Instead, the deal divvies up funds among a handful of privacy rights organizations, a small number of individual consumers who led the case and their lawyers, the state officials said in a court filing.The lawsuit, filed a decade ago, was once called the biggest U.S. wiretap case ever and threatened the internet giant with billions of dollars in damages. The settlement was reached in July and won preliminary approval in October from U.S. District Judge Charles Breyer in San Francisco, who found it to be “likely fair, reasonable, and adequate.”“Without receiving any of the $13 million cash fund or any meaningful injunctive relief, class members receive no direct benefit from the settlement,” the attorneys general said.An attorney for the consumers and Google’s press office didn’t immediately respond to messages seeking comment.Read More: Why a Dead Kennedys Punk Isn’t Buying Google’s Privacy DealsArizona State Attorney General Mark Brnovich submitted the filing, joined by Alabama, Alaska, Missouri, Ohio, Arkansas, Idaho, Indiana and Louisiana. The states plan to urge Breyer to reject the deal at a Feb. 28 final approval hearing in San Francisco.Google agreed in the settlement to delete all collected data and educate people on how to set up encrypted wireless networks. But the company had already made those promises in a 2013 agreement with 39 attorneys general, according to Mark Brnovich’s filing.Any “injunctive relief is illusory,” the attorneys general said.The Street View suit is a rare instance in privacy litigation where consumers gained the upper hand, notably when the U.S. Court of Appeals in San Francisco in 2013 rejected Google’s argument that it was legal to intercept open Wi-Fi networks because they were akin to AM/FM radio transmissions. The court’s conclusion that the federal Wiretap Act applied meant that if Google went to trial to fight the allegations and lost, it could be hit with $10,000 in damages for every violation.But in July, the plaintiffs’ lawyers said the settlement was justified, in part, because there was a risk that they could still lose the case -- and end up with nothing. They also argued that the accord would deter privacy violations and that the funds designated for privacy-oriented groups will help teach future information technology workers to “to become safeguards of internet privacy rather than exploiters of personal information communicated over the internet.”The case is In re: Google Inc. Street View Electronic Communications, 3:10-md-02184, U.S. District Court, Northern District of California (San Francisco).To contact the reporter on this story: Malathi Nayak in San Francisco at email@example.comTo contact the editors responsible for this story: David Glovin at firstname.lastname@example.org, Peter Blumberg, Joe SchneiderFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Wall Street is betting that the most popular U.S. technology and internet stocks can keep outshining the broader equities market but their latest rally leaves little room for error this earnings season. Investors dashed for the exits after Tuesday's less-than-stellar quarterly report from Netflix - the N in FAANG - an acronym for the group of U.S. tech companies that have been the biggest drivers of the bull market. Hopes remained high for the other FAANGs - Facebook, Apple, Amazon.com and Google parent Alphabet, as well as Microsoft, ahead of their financial reports.
Intel's (INTC) fourth-quarter 2019 results benefit from growth in the data-centric businesses, driven by robust adoption of high-performance products, including Xeon Scalable processors.
Dillard's (DDS) unveils an activewear brand, Antonio Melani Active. This lifestyle brand is likely to help the company grab a share of the fast-growing activewear market.
(Bloomberg) -- Google engineers said a tool Apple Inc. developed to help users avoid web tracking is fundamentally flawed and creates more problems than it solves.The Intelligent Tracking Prevention feature on Apple’s Safari web browser, which is meant to block tracking software used by digital advertisers, can be abused to do the exact opposite, according to a paper released Wednesday by Google researchers. Google told Apple about the problem in August, and in December the iPhone maker published a blog post saying it had fixed the issues and thanking Google for its help.But Wednesday’s paper concluded that the problems go beyond the issues that Apple addressed. Instead of making a big list of cookies to block, Apple’s ITP continuously learns what websites users visit and which kinds of cookies try to hitch a ride. Over time, this creates unique cookie-blocking algorithms for each web surfer that can be used to identify and track them, according to the paper.“I can assure you that they still haven’t fixed these issues,” Justin Schuh, engineering director for Google’s Chrome browser, said on Twitter. Apple’s December blog post “didn’t disclose the vulnerabilities or appropriately credit the researchers,” he added. Apple said the bugs mentioned in the report were patched in December, but declined to comment further. “Our core security research team has worked closely and collaboratively with Apple on this issue,” a spokesman for Google said. This isn’t the first time the two tech giants have clashed over privacy. Apple Chief Executive Officer Tim Cook has criticized internet companies for collecting too much personal information, and last year Google researchers reported a two-year long vulnerability in the iPhone maker’s software.Google’s Chrome and Apple’s Safari are two of the most popular web browsers, with Chrome used by more people overall but Safari dominating on iPhones. Apple has been touting Safari privacy features to persuade more consumers to use it. Apple first introduced Intelligent Tracking Prevention in 2017. The tool targets cookies, bits of code that let marketers follow people around the web and send them targeted ads.Google refused to block cookies for years, arguing that targeted ads help publishers and keep the internet free. But last week, the internet giant said it would eventually phase them out, setting off a race among advertisers to adapt. Privacy advocates have lauded Apple’s approach to tracking, and criticized Google for taking so long to do the same. But the paper suggests Apple may have to go back to the drawing board to find a new way to block tracking.“This bug is quite counter-intuitive, but rather very serious,” said Lukasz Olejnik, an independent cybersecurity researcher.(Updates with Google statement in fourth paragraph.)To contact the reporter on this story: Gerrit De Vynck in New York at email@example.comTo contact the editors responsible for this story: Alistair Barr at firstname.lastname@example.org, Jillian WardFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Robust adoption of Advanced Micro Devices (AMD) graphics cards and EPYC deal wins are expected to have driven top-line growth in fourth-quarter 2019.
J&J (JNJ) announces mixed Q4 results. Roche's (RHHBY) lymphoma drug, Polivy and Novartis' (NVS) Mayzent for secondary progressive multiple sclerosis (SPMS) get approval in Europe.
ServiceNow's (NOW) fourth-quarter 2019 results are likely to benefit from expansion in global footprint and clientele, both private and public.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Having just persuaded France to hold off on a digital tax that would hurt its biggest technology firms, the U.S. is facing a similar threat from another part of Europe.The Czech Republic is debating plans to impose one of the world’s highest levies on global internet companies -- albeit as a stop-gap measure -- brushing aside possible U.S. retaliation.The initiative comes as transatlantic trade tensions once again bubble over. Shortly after agreeing on the truce with France, President Donald Trump’s tone changed as he complained that Europeans are “more difficult to do business with than China.”Cars are another bone of contention. Commerce Secretary Wilbur Ross said this week at the World Economic Forum in Davos, Switzerland, that the U.S. was still considering slapping levies on European auto imports, even as it hopes for a “peaceful resolution” of differences.Czech Foreign Minister Tomas Petricek said Thursday that he’s aware of the risks in imposing the 7% levy, which would target local revenue because the majority of profits are booked and taxed in other jurisdictions.“I understand the United States perceives this negatively,” he said in televised comments. “We’re trying to explain that this step is only temporary until an international solution is found.”Petricek met U.S. Ambassador Stephen King after the envoy wrote a newspaper opinion piece saying America may respond with proportional countermeasures against the Czech Republic.The local unit of Google last year reported a net income of 15.9 million koruna ($697,000) and paid 8.8 million koruna in tax, while the Czech arm of Amazon made a profit of 19 million koruna and paid 9.7 million koruna of tax, according to regulatory filings.That’s a fraction of the income recorded and taxes paid by the U.S. companies’ local competitors, which include search engine and online media group Seznam.cz and internet retailer Alza.cz.Billionaire Czech Prime Minister Andrej Babis is trying to impose the digital tax alongside higher levies on gambling, alcohol and tobacco to boost public-sector wages and fund welfare spending. He’s previously enjoyed warm relations with Trump.Other European countries that have introduced a similar tax or are planning to do so include the U.K., Italy and Austria.France agreed this week to delay collecting its 3% digital levy until the end of the year to avoid the threat of higher U.S. tariffs. The two countries said they’d made progress toward a global pact on the taxation of digital services.(Updates with local internet companies in ninth paragraph.)\--With assistance from Lenka Ponikelska.To contact the reporter on this story: Krystof Chamonikolas in Prague at email@example.comTo contact the editors responsible for this story: Blaise Robinson at firstname.lastname@example.org, Andrew Langley, Michael WinfreyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Microsoft's (MSFT) fiscal second-quarter results are likely to reflect gains from strength in Azure and robust adoption of business productivity offerings.
Popular mobile video app TikTok said on Friday it has hired attorney Erich Andersen from Microsoft to serve as the company's global general counsel, reporting to president Alex Zhu. Andersen was most recently Microsoft's chief intellectual property counsel, bringing expertise in an area of key concern to TikTok as it builds out its music offerings. TikTok, owned by Chinese tech company ByteDance, allows users to create and share short videos that can be set to snippets of songs from its music library.