China PBoC Gov Yi Gang: Domestic economic growth has neared its potential; downward pressure is increasing - Overcapacity has significantly eased
US slowdown or Amazon effect? Investors divided over index fall
The Dow Transports is seen as a barometer of the economy, but this time may be different
To the list of areas where Amazon is wreaking disruption, from retail to cloud computing, add another candidate: a stock market index that has been watched by investors as a barometer of the US economy.
The Dow Jones Transportation Average, the less well-known sibling of the Dow Jones Industrial Average, includes railroad operators, airlines and shipping companies whose fortunes are tied closely to economic activity.
The transport index has fallen more than 9 per cent since the start of December compared with between 3 and 4 per cent for other equity market benchmarks. That is exactly the kind of divergence that gives support to bears, who worry about trade wars and see slowing global growth.
“I do not think we are heading for a recession, but we are seeing a global economic slowdown and the Transports are reflecting that,” said Michael Underhill, chief investor officer at Capital Innovations.
But Mr Underhill and other market participants point out that idiosyncratic factors are pressuring some influential index members. That potentially reduces the signalling power of the Transports index.
Shares of FedEx, which has the biggest weighting in the index, have lost more than 17 per cent since the start of the month, in part due to concerns about Amazon Air, the ecommerce giant’s in-house freight delivery service. Amazon has been expanding its own shipping operations, both on the ground and in the air, to cut freight costs and speed up deliveries of its customers’ orders.
In early December, Morgan Stanley warned that investors “may be missing the risk” Amazon Air posed to growth at FedEx and rival UPS.
In a note to clients, Morgan Stanley said Amazon Air’s growth represents 2 per cent of potential revenue lost for UPS and FedEx in 2018 and at least 10 per cent by 2025, based on an analysis of Amazon Air’s overlap with the shipping companies.
Unlike the S&P 500, an index that reflects the market capitalisation of its members, the Dow Jones Transportation and Industrials indices are calculated on the basis of each member’s share price, which means a company with a high share price exerts a big influence even if its market cap is small.
FedEx accounts for about a quarter of the month-to-date loss in the Transports index, according to S&P Dow Jones Indices. Add in UPS, whose shares are down 12 per cent this month, and the two stocks threatened by Amazon Air account for about 3 percentage points of the index fall.
Those who think that the underperformance of the Transports could be the canary in the coal mine signalling an economic slowdown are not deterred, however.
“FedEx does skew the reading on the Transports index, but does not wash it out entirely,” said Nicholas Colas, co-founder of DataTrek.
It is particularly notable that the transport index is falling sharply even as oil prices have been going down, something that should be giving transport stocks a lift.
“Energy is typically a big part of their cost structure — they should be doing better than they are,” Mr Colas said. “The Transport index performance mirrors what other financial markets like the flattening of the Treasury yield curve are telling you: slower growth. It is just one more brick in the wall.”
Lyft has eaten into Uber’s U.S. market share, new data suggests
Uber controls the majority of U.S. ride-hailing but Lyft is growing twice as fast. And both plan to go public in early 2019.
Last Thursday, it looked as though Lyft would be the first ride-hailing unicorn to go public, after it confidentially filed a draft form for an IPO. But its bigger competitor, Uber, eliminated Lyft’s lead the following day when its own plans to go public were reported. Both are expected to hit the public markets as soon as the first quarter of 2019.
So where do they stand?
As of October, Uber and Lyft combined owned nearly 98 percent of the U.S. consumer ride-sharing market, according to new data from Second Measure, a company that analyzes billions of anonymized credit and debit card purchases. Uber held 69.2 percent (3 percentage points lower than in October 2017) according to Second Measure, while Lyft controlled 28.4 percent (3 percentage points higher than last year). Juno, Gett and Via split up the remaining 2.4 percent.
Second Measure’s Lyft estimates (28.4 percent) are a bit lower than the 35 percent market share the company claimed earlier this year, though Lyft’s numbers would include Canadian sales as well as corporate spending on rides. Uber doesn’t disclose market share numbers. Lyft and Uber both declined to comment on the data.
Both companies grew their revenue since last year, according to Second Measure, but Lyft’s grew 32 percent — twice as fast as Uber did when you compare October 2017 to October 2018.
According to Uber, its third-quarter revenue — which includes revenue from Uber Eats, its international business and payments from business accounts — increased a much higher 38 percent year over year to $2.95 billion. Second Measure’s numbers, which don’t include Uber Eats — Uber’s fastest-growing business — and are for U.S. consumers only, show 17 percent growth in that time.
A report from The Information, citing a person familiar with Lyft’s figures, said that Lyft’s U.S. and Canada revenue more than doubled in the first half of 2018 to $909 million. According to Second Measure’s data, Lyft’s U.S.-only revenue rose 71 percent in that time.
Note that Second Measure’s estimates of Uber’s ride-sharing sales included revenue from Uber Eats until May 2017, when the measurement company was able to separate the two. That made Uber’s ride-sharing market share slightly higher than it should have been prior to that timeframe.
Apple to build new $1bn campus in Austin, add thousands of jobs across the US
Apple today announced plans to build a new campus in North Austin, representing a $1 billion investment. It will also add thousands of new jobs across the United States by 2023, with new offices set up in Seattle, San Diego, and Culver City.
It also announced plans to expand its presence in Pittsburgh, New York, and Colorado.
Apple says it added 6,000 US jobs in 2018 alone and employs 90,000 across all 50 states (most are retail employees).
Apple will create 20,000 jobs in the United States by 2023 with a significant swelling in Austin thanks to the new campus. Today, Apple currently employs 6,200 workers in Austin.
The Austin campus will be located within a mile of Apple’s existing Austin facilities, and will initially hold 5,000 employees with capacity to grow to 15,000 over time.
The new campus will of course be powered by 100 percent renewable energy, and will feature 50 acres of preserved open space. The campus will support engineering, R&D, operating, finance, sales and customer support.
In a statement, Apple CEO Tim Cook said Apple is ‘proud to bring new opportunity to cities across the United States and to significantly deepen our quarter-century partnership with the city and people of Austin’.
Design plans and timelines for the Austin campus are yet to be announced. Apple’s most recent major new campus, Apple Park, was started in 2011 and originally scheduled to be completed in 2015. However, various delays meant employees only began moving in in late 2017.
In states like Seattle, San Diego, and Culver City, Apple says it will grow to over 1,000 employees over the next three years. It will add ‘hundreds’ of new jobs in Pittsburgh, New York, Boulder, Boston, Portland, and Oregon.
As far as data centers are concerned, Apple will continue its strong domestic investment in that area as well. It plans to invest $10 billion in US data centers over the next five years. It is adding a new site in Waukee soon, and is expanding its data centers in North Carolina, Arizon and Nevada.