Equity markets extend yesterday’s gains, Maersk warning has big implications for economic outlook and Apple endures longest slide in sales in 22 years

“It’s encouraging to see equity markets continue to move higher following yesterday’s big rally driven by the Fed’s decision to hold rates once again. The fact markets across the US, Europe and Asia remained in an up-trend suggests investors are gaining confidence that we’ve finally reached the much-anticipated pivot in central bank policy,” says AJ Bell Investment Director Russ Mould.

“The breadth of sectors moving higher on Friday on the UK market wasn’t as wide as yesterday, following the Bank of England’s decision also to hold rates, but still encouraging as the three areas which did slip back (technology, industrials, energy) only did so by a small amount.

“The big economic event of the day is US non-farm payrolls, where the consensus is looking for 180,000 additions in October, approximately half the amount achieved in the previous month as the jobs market cools.

“Fundsmith fund manager Terry Smith will be looking a bit red-faced after an ill-timed investment into cybersecurity group Fortinet. Having just disclosed the new position in the Fundsmith Equity Fund, Smith must now stomach the news that Fortinet’s share price has fallen out of bed once again.

“Fortinet’s share price fell 25% in after-hours trading following disappointing sales in firewalls. It’s the second time since the summer that the stock has experienced a sharp fall, having dropped by a quarter on 4 August after warning about slowing sales.”

Maersk

“If you want an economic bellwether, look no further than Maersk, as its status as one of the world’s largest container shipping companies makes it a fair proxy for global growth.

“Transportation demand will be strong if the economy is going well, but the opposite will apply if there are clouds on the horizon. Maersk’s 9% share price slump on its latest results would suggest the global economy is losing speed.

“The group has warned its earnings will be at the lower end of previous guidance, flagging subdued demand, declining prices and ongoing cost pressures.

“To make matters worse, normal industry dynamics in such a situation aren’t playing out as expected. Traditionally when demand falls, more ships are idled but Maersk says such activity isn’t accelerating in the transportation sector. That means overcapacity – great if you are the person paying to move goods from A to B as it should enable you to barter for a lower price, terrible if you’re the one owning and operating the ships.

“Naturally, Maersk is looking to slash more jobs to save money, having already made a large round of redundancies earlier this year.”

Apple

“About a decade ago, after the initial iPhone and iPad-driven surge had started to wear off, people started to argue the days of Apple being considered a growth stock were over. The shares dropped below $15 and the-then recently appointed CEO Tim Cook was under pressure.

“Today the shares trade at more than 10 times that level, but its growth credentials are under the microscope once again as its sales drop for a fourth straight quarter, the longest slide in more than two decades. Notably, there is no expectation Apple is going to break its losing streak in the final three months of the year either – although that’s in part because the period will be foreshortened.

“There were still some positive things in the latest update – the services business is performing well and the iPhone, more than 16 years after its initial release, has returned to growth.

“However, Chinese sales were markedly below expectations and the political risks in that market are undoubtedly becoming more of a headache for Apple.

“Any difficulties the business is having should be kept in perspective but, with household finances battered by two years of higher borrowing costs and rampant inflation, selling more of the kind of expensive consumer electronic kit in which Apple is specialist is always going to be a tall order.

“It may have to lean more on its services arm, benefiting from a huge installed base of devices, and the next big innovation from the company could well come from this part of the business rather than a shiny new piece of hardware.”

These articles are for information purposes only and are not a personal recommendation or advice.