Week in review: everything has both dark and light

The week revealed contrasting fortunes in the technology world, glimmers of recovery in the Eurozone and the start of a new era in Japan.

Not so easy as ABC

Alphabet’s (known as Google to most of us) first-quarter results fell short of the mark, sending its shares plummeting over 8% at one point. Google’s advertising revenue growth slowed significantly over the first three months of 2019. Management blamed a strong US dollar, and also a timing issue that meant revenue from enhancements to its advertising services couldn’t be included in the figures. Confused by this opaque explanation and fearful that advertisers might have started shifting their business to rivals such as Facebook and Amazon, investors were quick to punish the tech giant.

Back on top

Apple beat what turned out to be conservative market forecasts. A US$75 billion share buyback and 5% dividend increase masked flagging iPhone sales, which fell 17% compared with the first quarter of 2018. Management acknowledged it is having to cut prices to stabilise demand – not a sustainable long-term strategy for earnings growth. Even so, the shares rallied. Although this helped propel US markets to fresh record highs at one point, the S&P 500 Index lost 0.76% over the week to close on Thursday.

Hope springs

Leaders in Spain, France and Italy may have a spring their step this week. French economic growth for first-quarter 2019 was stable and in line with forecasts. Growth in both Italy and Spain was better than expected, with Italy escaping from a six-month-long recession. Overall, the Eurozone economy grew by 0.4% in the quarter, exceeding forecasts and kindling hopes that the worst may be over for the region. Germany’s growth figures, to be released in May, are keenly awaited to see if they show a similar rebound.

The FTSE World Europe ex UK Index ended 0.48% lower over the week up to Thursday’s close.

Softly, softly

The Bank of England raised its UK growth forecast, citing the slightly brighter outlook for the global economy. As expected, the Bank left interest rates unchanged, its cautious approach reflecting ongoing uncertainty over Brexit.

The UK economy has slowed since the country voted to leave the European Union in June 2016. In particular, business investment has continued to fall. The Bank said that, while Brexit-related stockpiling has been giving the UK economy a short-term boost, it expects the global economy will be a more important driver of UK growth this year.

Certainly, global growth is a far more important driver of the UK stock market, given that 70% of UK-listed firms’ revenues come from overseas.

The FTSE All-Share Index fell 0.97% over the week to close on Thursday.

Changing of the guard

Japan swapped emperors this week. Emperor Akihito abdicated on 30 April, the first Japanese emperor to do so in 200 years, handing over to his 59-year-old son Naruhito. The new emperor has pledged to be a symbol of peace and national unity, continuing the ethos of his father’s 30-year reign. Japan’s Golden Week public holiday has been extended to celebrate the ascension of the new emperor, so Japanese markets are closed this week.

In a similar vein, but with no pomp and ceremony, there was some guard-swapping in the UK too. Prime Minister Theresa May fired her defence secretary over allegations he leaked sensitive information to the press. The information related to Chinese telecoms equipment provider Huawei and whether it should be involved in building the UK’s 5G network, given security concerns. The prime minister is still locked in negotiations with the opposition Labour party to try and garner support for her Brexit deal. These latest conflicts within the government are likely to embolden Labour leader Jeremy Corbyn to call for a general election – another source of political uncertainty the UK could do without.

And finally…
Paws for thought

News broke this week that, while on a trekking expedition in Nepal, Indian army mountaineers stumbled upon outsize footprints in the snow. The soldiers were in no doubt as to the origin of the tracks, which measured 32 x 15 inches (81 x 38 centimetres).

“For the first time, an Indian Army Mountaineering Expedition has sited Mysterious footprints of Mythical Beast ‘Yeti’…” the soldiers tweeted with childlike wonderment, attaching pictures as proof.

Predictably, the proclamation inspired scorn and sniggers, rather than awe. In place of plaudits, the troops came in for a proper drubbing for bringing the Indian army into disrepute. Others tittered over the creature’s apparent one-leggedness, while the Indian government stifled its mirth to send a tongue-in-cheek tweet, saluting them for their Himalayan achievement.

American scholar and recognised authority on the Yeti mystery, Daniel C. Taylor commented that, for the dimensions of the footprint to be correct, the animal would need to be the size of a dinosaur. He added that, for sure, there were no dinosaurs in the region.

For decades, people have reported seeing a wild, hairy beast roaming the mountainous region between Nepal and China. Despite numerous expeditions, including one led by Sir Edmund Hillary, no proof of the creature has ever been produced. An international research project in 2017 concluded the creature was most likely a bear. In 2008, two men in the US believed they had discovered the remains of a half-man/half-ape. However, this was later found to be a rubber gorilla suit. An abominable mistake?

RISK WARNING
The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested.

The views and conclusions expressed in this communication are for general interest only and should not be taken as investment advice or as an invitation to purchase or sell any specific security.

Any data contained herein which is attributed to a third party ("Third Party Data") is the property of (a) third party supplier(s) (the "Owner") and is licensed for use by Standard Life Aberdeen**. Third Party Data may not be copied or distributed. Third Party Data is provided "as is" and is not warranted to be accurate, complete or timely.

To the extent permitted by applicable law, none of the Owner, Standard Life Aberdeen** or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Past performance is no guarantee of future results. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates.

**Standard Life Aberdeen means the relevant member of Standard Life Aberdeen group, being Standard Life Aberdeen plc together with its subsidiaries, subsidiary undertakings and associated companies (whether direct or indirect) from time to time.

Risk warning

Risk Warning

The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested.