2.10 - Italy shakes European markets
Economic news from around the world – different shakes, different result, more turbulence.
Yesterday we talked about a new NAFTA-Like deal for United States, Mexico and Canada. With so many new trade opportunities for the countries and the way their national currencies jumped as soon as the news broke tells us about the good relations between the economies of the countries. But there are several downsides to the whole ordeal. Of course, trade tension in the region disappearing and dollar getting stronger along with CAD and MXN are indisputably good things. But in the long run this new deal is one more hit towards the Chinese.
Maybe other people do not see a certain pattern with the recent behavior of the United States but for us it is fairly obvious – with so many new trade agreements Trump is getting ready to strike China harder than ever. Think for yourself – trade deal with South Korea, that came out of nowhere, last-minute signing of NAFTA deal after months and months of threatening to nor go through with it, setting up negotiations with Japan. All of that is just a display of power to China – we can do just fine without you.
That is also an indicator that Trump is willing to go through the point of no-return when it comes to relationship of his America with China. Just a couple of months ago there were no countries among former US partners that would be left unturned in trade agreements. But right now China is the only suffering from American tariffs.
We would probably never know what happened behind the curtains of Chinese-American relations that made Trump hate the Chinese so much. But right now we are to think about our own trading future. and the pattern that we see here is not the most perfect for those, involved in Chinese trading. Although it might be too soon to tell, but it seems to us that the rollercoaster for the Chinese economy is far from over at this point. We are looking at Trump’s behavior and can only predict coming fall of the Chinese currency and further fall of Chinese economy.
Right now Trump is focused on not letting Chinese to go to the American markets. With Chinese tariffs in mind he stroke a deal with Canada, regarding American manufacturing if the automobiles and their representation in Canadian market. All of his actions right now are going to be aimed at not letting the Chinese to be represented in American market at all and at hitting as many Chinese companies as possible.
So, watch out when it comes to Chinese trading and investing into the Chinese companies as this is a two-edged sword right now. Of course, in order to compensate for the losses. Chinese companies are going to be looking for the new ways to attract investors and trying to strike the new deals with international partners, but the United States do have the strongest economy in the world and their influence will be much stronger than virtually any deal that the Chinese might be able to strike in the nearest future.
The beginning of last months marked an introduction of the three new iPhone models which were introduced by Apple. But in the long run was it a good idea? After all level of the sales wasn’t nearly as high as it was expected by Apple, just like it happened a year ago with iPhone X sales. Of course, the real marker for the level of the sales is Christmas time, but it seems to us that even in the Christmas time the sales are going to be underwhelming.
In its turn Apple’s rival Samsung is going into another direction, even though Apple’s smartphones are very popular and all of the celebrities own them, providing an excellent advertisement for Apple’s products, Samsung is more people’s oriented with affordable prices and broad variety of models to choose out from. As it can be seen in the last quarter, the profits of the company have jumped to almost historic level due to overwhelming performance of chips sales. Revenue of the last quarter is surging by 3.7 percent and the operative profit went up by 18 percent - $15.5 billion.
With sales for memory chips as well as Samsung smartphones still climbing it is only natural that the futures for the shares of Samsung would be set and Apple’s would be doomed. But no. here the trading scene is playing an evil joke on the both of the companies.
You see, Apple is an American company, which is protected simply by the fact that it is American. No one would dare touch it and the profits from the sales might be low, but the certainty of the investors in the company will never fade. Samsung on the other hand is a South Korean manufacturer and even though there is a new trade deal between the United States and South Korea that doesn’t change the fact that because of China investors prefer to stay as far away from the Asian segment of the market as possible.
Irony – underperforming company is safe just because the country it is located in is a big international bully.
The main difference between Apple and Samsung is the price for the products with Samsung more oriented on the people. but unfortunately, Trump’s policies get into its profits as well with yearly performance of Apple’s stock only getting it down.
Here we go again. We have to stop and look at Eurozone pretty carefully once again as there is the same storm coming from the South of Europe as it was just a couple of weeks ago. Italy is once again raising a lot of eyebrows with its fiscal decisions for the future of the whole country and there is nothing that can be said to justify the recent actions of the government of the country.
Right now Italian government behaves like a cat with the open door in front of it. It cannot make up its mind about the place it wants to be. While some governmental officials state that it would be better for the future of the country to go out of Eurozone and go back to their own currency, some of them make official statement that Italy is not looking into the possibility of going solo on this economic trip.
But which one is better?
Well, for Eurozone it would of course be better for Italy to go out of the zone until all of the economic problems and controversial economic decisions settle or go away completely. After all the well-being of the alliance depends on how many strong countries participate in it. Germany has been giving enough credits for the time being and it really needs the money to settle the problems inside its own borders as well as settle Brexit with Great Britain.
France will not support Italy and its poor just for the same reasons as Germany. And Italy cannot support itself, as was proven by the recent economic shakes as well as several years of economic crisis in the country that is only now starting to go away.
For Italy it is of course better to stay inside Eurozone with a lot of possibilities for free trade and job possibilities for its citizens – after all the privileges that the countries-participants of the EU have cannot be beaten by the economic independence that can only bring to more problems, especially in Italy’s case.
All of the discussions can immediately be seen on today’s euro performance. The fall is due to the lack of decisiveness from Italy and Brussels’ disapproving of it.
Will euro stabilize? It is possible that tomorrow everything will go back to normal again as there is an official statement from the Italian government, saying that Italy will stay a peart of Eurozone.
- by Anna K.