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China concerns weigh ahead of earnings season

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IFRS 9 Impairment How It Impacts Your Corporation And How We Can Help


China concerns weigh ahead of earnings season

"I think that there are a heck of a lot of U.S. companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded next year until we get a deal with China," Kevin Hassett, chairman of the White House Council of Economic Advisers, said in an interview with CNN on Jan. 3.

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Source: Associated Press

Hassett's grave proclamation came after Apple Inc. shocked markets by reducing its forecast for first-quarter revenue, citing weaker iPhone sales in China. Although officials from both governments are meeting the week beginning Jan. 7 in an attempt to find a compromise beyond the 90-day détente that began Dec. 1, 2018, it looks like many companies in the consumer space will feel the effects of China's issues, both domestic and international, as earnings season rolls around once more.

Particular attention should be paid to luxury goods companies. The likes of LVMH Moët Hennessy Louis Vuitton SE Kering SA and Hermès International Société en commandite par actions rely heavily on China's middle class and could prove a key barometer of the current state of affairs. These businesses suffered during the final three months of 2018, as the MSCI Europe Textiles, Apparel and Luxury Goods Index's drop of more than 20% showed. Cartier-owner Compagnie Financière Richemont SA is the first to report, on Jan. 11.

Elsewhere, for those businesses without significant direct exposure to China, the combination of slowing growth and a prolonged quarrel with the U.S. is sending jitters through the market. For that reason, all eyes will be on China in the coming weeks.

Chart of the week

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Automotive

Analyst: Tesla's price cut signals demand concerns

A senior research analyst with Cowen said there could be a "demand peak" with Tesla in the United States.

Auto union sues General Motors over breach of contract

The United Auto Workers union sued General Motors over a breach of contract relating to the rights of certain employees who have been laid off.

Fiat Chrysler US sales up 14% YOY in December 2018

The carmaker's Jeep brand sales increased 17% in December 2018 year over year.

Tesla's Model 3 will drive into Chinese market in March

The automaker estimates late March as the delivery time for Tesla consumers in China.

Retail

Big luxury companies could face Chinese headwinds in 2019

The likes of LVMH, Richemont and Kering could come under increasing pressure in 2019 as a result of a slowing China market, a weaker yuan and a U.S.-China trade dispute.

White House economic adviser: Expect weak earnings reports from China trade spat

Kevin Hassett, the chairman of the White House Council of Economic Advisers, told CNN that a "heck of a lot" of American companies may be next to slash their earnings forecasts due to the ongoing trade spat with China.

Amazon should add gas stations to its physical store portfolio, analyst says

Amazon Prime memberships and retention could increase if the e-commerce giant ventures into gas stations, according to D.A. Davidson analysts.

CES 2019 preview: A connected future

Recent years have seen a shift at the world's largest technology conference away from gadgetry and toward interconnectivity.

Reis: US retail vacancy flat overall in Q4'18

A senior economist at the firm interpreted the minimal movement in vacancy rates as a sign of the industry's ability to absorb significant structural change.

Food, beverage and tobacco

China National Tobacco plans to list international unit in Hong Kong

The disclosure came Jan. 2 in a preliminary filing to the Hong Kong Stock Exchange that offered little information on the planned initial public offering of China Tobacco International (HK) Co. Ltd.

Nestlé welcomes Supreme Court ruling in Maggi case against Indian government

India's National Consumer Disputes Redressal Commission in 2015 sought approximately 6.40 billion rupees in damages on behalf of Indian consumers, alleging that Nestlé India publicly sold Maggi noodles "without product approval."

FDA chief hints dialogue with e-cigarette CEOs over teenage vaping

In a series of tweets, U.S. Food and Drug Administration Commissioner Scott Gottlieb suggested that some companies appear to be backing away from the commitments they have made to the FDA in relation to the prevention of underage use of e-cigarettes.

GM's self-driving unit Cruise ties up with DoorDash to trial autonomous delivery

The companies said they expect to develop safety measures and operational improvements based on the results of the pilot.

Consumer Edge is a weekly collection of critical developments across the automotive; retail; and food, beverage, and tobacco industries that draws on exclusive analysis and value-added content from the Consumer News team at S&P Global Market Intelligence.