China is now #2 in iOS revenue, behind the U.S.
Earlier this year, app store analytics firm App Annie predicted that China could overtake both the U.S. and Japan in terms of revenue generated from iOS applications as soon as this year. The year isn’t yet half over, but that prediction appears to be on its way to coming true: China has just moved past Japan to take the number two position for iOS revenue – up from third place back in January.
The country was already the leader in terms of iOS downloads, a spot it acquired in Q1 2015 following growth in the market influenced by adoption of Apple’s larger-screened devices, the iPhone 6 and 6 Plus. Prior to that, in 2014, China had been the second-largest country for iOS downloads.
But getting apps onto users’ devices and generating revenue from those apps are two totally different things. That’s obvious, too, when you compare iOS downloads and revenue with those from Google Play, for example. Last year, Google Play downloads were 1.5 times that of iOS downloads, but Apple’s App Store still leads in revenue.
According to App Annie, China’s iOS revenue growth grew nearly 2.2 times from Q1 2015 to Q2 2015. This growth is being contributed to in-app purchases, however, not paid app downloads. It’s also almost entirely driven by games – and not just games in general, but several very specific titles, says App Annie.
A handful of core games are helping to contribute to the revenue growth, including Fantasy Westward Journey, Westward Journey Online, Hero Moba, and The Legend of Mir 2.
However, while games are driving the growth for the time being, App Annie notes that games are often a signal of larger trends to come.
That said, because of the revenue these and other titles are generating, China also passed Japan in iOS Games revenue in addition to Overall iOS revenue.
So how close is China to grabbing the number one spot for iOS revenue? App Annie says the U.S.’s lead is still wide – a sizable 30 percent, in fact. But if China’s App Store revenue continues to grow at the same pace, it’s on track to pass the U.S. in the “coming quarters.” This year, perhaps.
Swiss Re could merge Corporate Solutions with rival; buys outside core business possible - Neue Zuercher Zeitung
Swiss Re, a Swiss reinsurance group, could consider merging its Corporate Solutions unit with a rival, Neue Zuercher Zeitung reported. Walter Kielholz, the president of the Swiss Re administrative board, told the German language newspaper that the flexibility of the group’s holding structure would, for instance, allow the aforementioned Corporate Solutions division to “team up with someone”. Kielholz described Swiss Re’s Corporate Solutions unit as a dwarf that is merely the 25th largest business of its kind.
On a different note, Kielholz said in the report that Swiss Re could consider “inorganic growth” for divisions that do not pertain to its core business of reinsurance. He added that he sees no reason for any transactions in the group’s core business.
The newspaper pointed out that Swiss Re’s Corporate Solutions unit currently has more than 2,000 employees. Swiss Re has a market cap of CHF 34.476bn.
Neue Zuercher Zeitung
Virgin America suitor JetBlue emerged months after Alaska
JetBlue Airways (NASDAQ:JBLU) became involved in Virgin America’s (NASDAQ:VA) sale process in 2016, a source close to the situation said. While other potential buyers also looked at the airline, JetBlue was the only major party involved in addition to Alaska Air Group (NYSE:ALK), the source added.
Last week, Seattle-based Alaska announced plans to acquire San Francisco-based Virgin for USD 4bn, including assumption of debt. The deal is projected to close by the end of the year.
Speaking on a conference call discussing the deal, Alaska executives said they had engaged in fierce bidding against rival JetBlue to acquire Virgin. Alaska initially contacted Virgin last fall, CEO Brad Tilden said on the call.
A source familiar with the matter said that Alaska moved for Virgin significantly earlier than JetBlue. This source declined to detail a timeline of the Long Island City, New York-based airline’s involvement but emphasized there was an opportunity for Alaska and JetBlue to explore their views on valuation.
Two days ahead of the 4 April deal announcement, the Wall Street Journal reported that Alaska was expected to emerge as victor for Virgin after beating “a rival bid” by JetBlue.
According to the source familiar, the Virgin process heated up in the days ahead of the final bid date of 31 March.
Each of the sources and a sector adviser said they did not expect an alternative offer to surface for Virgin for various reasons including valuation, prospective antitrust concerns or limited synergies.
Alaska’s proposed transaction represents a 47% premium to Virgin’s stock price before press reports on the expected deal leaked.
Reflecting on the steep price, the sector adviser noted the value of incumbency at real estate-constrained airports. “These days it’s a lot cheaper to buy your competitor than spend billions of dollars trying to drive them out,” he said.
The combined company is projected to achieve USD 225m annually in total net synergies at full integration. One of the sources dubbed this figure conservative.
The proposed Virgin/Alaska combination is not a cost cutting story, said the source familiar. “It’s about the use of operations and measures of productivity,” said the same source, underscoring that these two airlines share a similar approach on their use of technology.
“There is a strategic vision for making Seattle and San Francisco hubs.”
BofA Merrill Lynch, UBS and Cowen & Company advised Alaska on the deal, while Virgin America worked with Evercore. The companies and their investment banks either declined to comment or did not return requests for comment.
ThyssenKrupp does not expect swift consolidation of European steel market
ThyssenKrupp, a German steel group, does not believe the European steel market will consolidate swiftly, Boersen-Zeitung reported. In answer to recent rumours that ThyssenKrupp is considering a merger with Indian rival Tata Steel, Hiesinger told the German language newspaper that the situation is not as advanced as the public believes. He added in the article that it remains completely unclear if and when there will be a consolidation of the European steel market. The report noted that Salzgitter, a German steel company, and ArcelorMittal, a Luxembourg-based rival, have also been named as potential merger partners for ThyssenKrupp in the recent past.
Hiesinger stressed that he does not believe that one European steel group will take over another, but that the consolidation process will most probably result in a merger that allows ThyssenKrupp to remain invested in the steel industry via a minority stake in the merged entity.
ThyssenKrupp has a market cap of EUR 11.604bn.
Boersen-Zeitung
Rhoen-Klinikum does not expect takeover bid; to invest in Medtec start-ups - Boersen-ZeitungRhoen-Klinikum, a German hospital group, does not expect to receive a takeover bid anytime soon, Boersen-Zeitung reported. The German language newspaper quoted Jens-Peter Neumann, the chief financial officer of Rhoen-Klinikum. The article pointed out that the Rhoen-Klinikum share price currently stands at a record high of approximately EUR 28, meaning that the group is valued at approximately EUR 1.9bn.The report repeated that Asklepios, a German hospital group that already owns a significant stake in Rhoen-Klinikum, has been named as a potential bidder in the past. However, two sources close to the situation told the newspaper that Rhoen-Klinikum is currently too expensive for Asklepios. The latter could only finance a bid when the Rhoen-Klinikum share price drops below EUR 22.On a different note, Neumann revealed in the article that Rhoen-Klinikum intends to invest a low two-digit million Euro sum in Medtec start-ups this year. The aim is to improve the networking infrastructure of hospitals and gain access to new medical technologies. Neumann said that Rhoen-Klinikum is close to investing in a new cardio device. He explained that Rhoen-Klinikum is willing to acquire up to 30% in start-ups.Boersen-Zeitung
Rhoen-Klinikum does not expect takeover bid; to invest in Medtec start-ups - Boersen-Zeitung
Rhoen-Klinikum, a German hospital group, does not expect to receive a takeover bid anytime soon, Boersen-Zeitung reported. The German language newspaper quoted Jens-Peter Neumann, the chief financial officer of Rhoen-Klinikum. The article pointed out that the Rhoen-Klinikum share price currently stands at a record high of approximately EUR 28, meaning that the group is valued at approximately EUR 1.9bn.
The report repeated that Asklepios, a German hospital group that already owns a significant stake in Rhoen-Klinikum, has been named as a potential bidder in the past. However, two sources close to the situation told the newspaper that Rhoen-Klinikum is currently too expensive for Asklepios. The latter could only finance a bid when the Rhoen-Klinikum share price drops below EUR 22.
On a different note, Neumann revealed in the article that Rhoen-Klinikum intends to invest a low two-digit million Euro sum in Medtec start-ups this year. The aim is to improve the networking infrastructure of hospitals and gain access to new medical technologies. Neumann said that Rhoen-Klinikum is close to investing in a new cardio device. He explained that Rhoen-Klinikum is willing to acquire up to 30% in start-ups.
Boersen-Zeitung
Weekly Market Update: Investor Optimism Grows on Hopes China Bottomed and the Fed Will Remain Patient
Global equity markets have more or less filled the gap from the moves lower seen in the first two months of the year. Fears about Chinese growth and the US manufacturing industry may be slowly receding, while the Fed continues to push out rate hike expectations. The US economic data generally supported various Fed officials' calls that the prudent stance remains that the FOMC stay patient in normalizing rates. Earnings season began this week with a disappointing report from Alcoa, but some slightly better-than-expected bank earnings. The next several weeks will see whether the rest of corporate America can beat greatly diminished expectations for what everyone agrees was a crappy first quarter. US Treasury yields were ultimately little changed on the week. An early week back-up in rates gave way to buying, following particularly strong 10-year and 30-year reopenings on Wed and Thursday. For the week, the DJIA added %1.8, the S&P500 gained 1.6% and the Nasdaq rose 1.8%.
March US inflation data saw a continued deceleration in pricing trends, further complicating the outlook for Fed monetary policy. Core PPI fell for the 49th month in a row and slipped into negative territory on a m/m basis, while core CPI inflation cooled off a bit in March, with both the m/m and y/y rates lower than expected and lower than both January and February. Analysts blamed the weaker dollar in part for the lower inflation levels, and cited pricing softness in apparel, shelter, and health care. The reports suggest that the PCE data, the Fed's favored measure of inflation, will be barely positive for March. Atlanta Fed President Lockhart (a non-voter in this cycle) said that he had changed his mind and would not advocate for a rate hike in April, given the continued lag in inflation. Meanwhile, notorious Fed critic Jeffrey Gundlach said there were no good chances for rate hikes in June, September or December, and predicted there was at best one Fed hike this year
The raft of Chinese data for the month of March out on Friday indicated big improvements from the weakness in the first two months of the year. March industrial production, retail sales, fixed asset investment, and new yuan loans reports all beat estimates. Industrial production figures hit a nine-month high, urban real estate buying recovered, and construction spending YTD surged 19% y/y, and retail sales were up more than 10% y/y. China Q1 GDP perfectly met expectations at +6.7%, right in the middle of the party's guidance for 2016 and an exact match the IMF's own 2016 forecast for China.
Data out of Japan strongly suggested that the BoJ's negative interest rate policy is backfiring. The March lending report showed bank credit fell to 2.5 year lows, for the second straight month of lower lending activity. The yen entered the week around 107.75, its strongest level against the dollar in 21 months, but softened notably in the wake of the lending data, with USD/JPY moving back up toward 110 in the latter half of the week. The BoJ's Kuroda applauded the softer yen, welcoming the correction in the "excessive" yen gains, while Finance Minister Aso rattled his saber, warning the government would not hesitate to intervene in FX markets if conditions became disorderly.
The loonie pushed to a nine-month high against the dollar on Wednesday after the Bank of Canada held rates steady at a scheduled policy meeting. USD/CAD dropped to 1.2745 after the decision, but this marked the high water mark for CAD, capping three months of steady gains, as the pair turned around for the latter half of the week and backed out to 1.2890. BoC Governor Poloz offered cautious comments, calling recent CAD strength mostly an artifact of shifts in expectations for US monetary policy. The greenback dropped to its weakest level against the euro on Wednesday, with EUR/USD at 1.1465, although the pair consolidated below 1.1300 heading into week's end. The Bank of England decision was a real snooze, with no changes and not much movement in GBP/USD, which remains right in the middle of the range seen since mid-January, around 1.4200.
The halting recovery in crude prices continues to run into upside resistance. Saudi Arabia and Russia appeared to have reached a consensus this week that the oil production freeze will not depend on Iran's participation, removing the only barrier remaining to an OPEC/non-OPEC deal. Meanwhile, there was lots of talk that whatever sort of pact emerges from the freeze talks will hardly be very strict, taking the form of a gentleman's agreement rather than a binding deal. Separately, both Iran and Iraq posted surprisingly strong production figures for March, and in Iraq, crude output rose to a record high of 4.55M bpd in the month. WTI prices briefly traded above $42 at one-month highs and then moved lower, mirroring the price action seen in mid-March. Brent saw stronger gains, but did not manage to break $45. Both contracts were more or less flat on the week.
The IMF cut its global economic forecast for the fourth time in the last 12 months, further trimming 2016 and 2017 GDP forecasts. The IMF lowered its call for every major economy in its World Economic Outlook (WEO), except for China, which got a small bump higher. The IMF cut 2016 global growth from +3.4% to +3.2%, and cut its 2017 forecast from +3.6% to +3.5%. The IMF warned that a return of last year's financial market turmoil was still a big potential downside risk. The organization specifically called out Beijing, warning about the potential global impact of unwinding prior excesses in China's economy as it transitions to a more balanced growth path.
The FDIC and Federal Reserve called out five big banks for failing to submit effective plans for winding down operations in the event of a bankruptcy. The five "too big to fail" banks - BofA, JPMorgan, Bank of New York, State Street and Wells Fargo - did not submit acceptable living wills. The firms have until October to fix their plans, and the Fed and FDIC could start imposing strict prudential remedies if they are still found to be deficient at that time. If after two years they do not have a proper plan, the regulators could force the banks to divest certain assets and scale back the size of the institutions. Note that the FDIC rejected Goldman Sachs' plan, while the Fed alone found Morgan Stanley's plan deficient. Citigroup was the only big bank to have its plan approved by both regulators.
The March quarter earnings season began with a poor report from Alcoa. While ex-items earnings beat expectations slightly, sales were a miss. The company also added 1K to anticipated job cuts, lowered its FY16 aluminum demand growth outlook to +5% from +6%, and revised its three-year revenue targets lower. The banks reporting this week generally beat greatly diminished expectations, given that the analyst community has predicted the worst for banks in what is usually their best quarter of the year. Both Citigroup and JPMorgan beat top- and bottom-line expectations, although both profits and revenues were lower y/y at the two banks. Bank of America missed expectations, while Wells Fargo was the only big bank reporting this week to eke out revenue growth. Delta's profits soared 30% y/y while revenue was right in line. The airline spent one-third less on fuel than it did a year earlier, and indicated they were willing to cut capacity if profitability measures don't improve. On Friday, Japanese press reports indicated Apple plans to maintain its reduced production of iPhones into the April-June quarter, citing soft 6S and 6S Plus sales, which put pressure on the tech giant and its suppliers' shares into the end of the week.
Canada's Mitel Networks has reached a deal to buy fellow voice and telephony equipment manufacturer Polycom for about $1.96 billion in cash and stock. Polycom's holders will get $3.12 in cash and 1.31 Mitel shares for each of their shares. Canadian Pacific ended its $25 billion bid for its US counterpart Norfolk Southern, the latest giant merger deal to fall apart over recent weeks. CP began its pursuit of NSC last fall, under pressure from activist investor Bill Ackman's Pershing Square. This is the second failed deal attempt for CP, after its bid for CSX fell apart in 2015. Separately, there were press reports about growing opposition in Germany to Deutsche Borse's planned $20B merger with the London Stock Exchange, partly because of growing concern about the consequences for the merged entity should Britain leave the EU.
Closing Market Summary: Energy Lags While Financials Break Winning StreakThe major averages ended an upbeat week on a lower note as a week-long rally in the heavily-weighted financial sector (-0.3%) came to an end. Other focal points for today's trade included some below-consensus domestic economic data, a slide in crude oil, and the underperformance of the heavily-weighted technology (-0.5%) space. The Nasdaq Composite (-0.2%) ended its day in-line with the Dow Jones Industrial Average (-0.2%) and behind the S&P 500 (-0.1%).
Equities stumbled at the start of the session as implications from some above-consensus economic data out of China weighed on expectations for continued easing from the People's Bank of China. Meanwhile, economic readings at home did little to bolster investors' risk appetite as Industrial Production (-0.6%; consensus +0.0%) for March, Capacity Utilization (74.8%; consensus 75.5%) for March, and the preliminary University of Michigan Consumer Sentiment Survey (89.7; consensus 92.0) for April all missed expectations.
A downturn in crude oil also pressured the broader market as the energy component pared gains ahead of this weekend's summit between oil producers in Doha, Qatar. OPEC and non-OPEC members will meet to discuss a possible production cap agreement meant to combat the ongoing supply glut. To be fair though, expectations for an agreement are mixed and the impact of such an agreement is difficult to gauge. WTI crude ended its day lower by 2.5% at $40.40/bbl, but gained 1.6% since last Friday.
The major averages carved out fresh lows in the afternoon after heavily-weighted technology (-0.5%) joined energy (-1.3%), financials (-0.3%), and health care (UNCH) on the bottom of the leaderboard.
The economically-sensitive financial sector (-0.3%) spent its day pulling back from larger weekly gains. On that note, money center banks broke their recent winning streak as Bank of America (BAC 14.00, -0.14) and JPMorgan Chase (JPM 61.87, -0.72) ended the day with losses of 1.0% and 1.2%, respectively. Elsewhere, Citigroup (C 44.92, -0.06) reported a bottom-line beat in the first quarter, but surrendered a 3.5% gain to end beneath its flat line. However, Citigroup ended the week higher by 11.0%, compared to a 4.0% gain in the broader sector.
In the heavily-weighted financial sector (-0.5%), large cap constituent Apple (AAPL 109.85, -2.25) slipped 2.0% after Nikkei reported that the company will extend its iPhone production cut into the second quarter. Elsewhere, the PHLX Semiconductor Index (-0.9%) finished lower as suppliers for the smartphone underperformed.
Six sectors ended the day above their flat lines with utilities (+0.7%), consumer staples (+0.6%), materials (+0.4%), and consumer discretionary (+0.3%) outperforming.
Retailers outperformed in the consumer discretionary space (+0.3%), evidenced by the 0.8% gain in the SPDR S&P Retail ETF (XRT 45.34, +0.35). The sub-group was rebounding from larger losses in the prior week. To that point, the ETF gained 3.4% on a week to date basis, after sliding 4.7% following last week's disappointing same-store sales readings.
The Treasury complex ended its day off its high as the safe haven group pulled back when equities trimmed their loss in the final hour. The yield on the 10-yr note finished at 1.75% (-4 bps). This represents a decline of three basis points from last Friday's settlement.
Today's participation was above the recent average as more than one billion shares have changed hands on the NYSE floor. The increased participation was due to April options expiration.
Today's economic data included Empire Manufacturing for April, Industrial Production and Capacity Utilization for March, and the preliminary University of Michigan Consumer Sentiment Survey for April:
- The Empire Manufacturing Survey jumped to 9.6 for April from 0.6 for March. The dividing line between expansion and contraction is 0.0.
- The April reading is the highest in more than a year and was led by increases in the new orders, prices paid, and prices received indexes. Notably, the six-month outlook improved for the third month in a row.
- The Industrial Production and Capacity Utilization report for March disappointed with total production down 0.6% (consensus 0.0%) and total industry capacity utilization at just 74.8% (consensus 75.5%). One can glean from this report that first quarter GDP isn't going to be anything special.
- March was the second straight month that industrial production declined 0.6% after February was revised down from an originally reported 0.5% decline. On a year-over-year basis, industrial production is down 2.0%.
- A significant portion of the decrease in March can be traced to the indexes for mining and utilities, which fell 2.9% and 1.2%, respectively. The drop in mining output was the largest since September 2008.
- Manufacturing output was down 0.3% following a downwardly revised 0.1% decline (from +0.1%) in February. The production of durables was down 0.4% in March while the output of nondurable manufacturing edged lower following a 0.5% decrease in February.
- The Federal Reserve released its annual revision to the index of industrial production and capacity utilization on April 1. With the revision, the February reading for capacity utilization, which was previously reported to be 76.7%, was revised to 75.4%. It was marked down again to 75.3% with the March report.
- The manufacturing capacity utilization rate of 75.1% is 3.4 percentage points below its long-run average; meanwhile, the utilization rate of 73.7% for both mining and utilities is the lowest over the histories for each of those series.
- The preliminary reading for the University of Michigan Consumer Sentiment Survey for April dropped to 89.7 (consensus 92.0) from 91.0 in March and 95.9 in the same period a year ago.
- The lower reading for April marks the fourth straight monthly decline. Notably, the downturn was driven more by the Index of Consumer Expectations, which fell to 79.6 from 81.5, than it was by the Current Economic Conditions Index, which dipped to 105.4 from 105.6.
- The report summary indicates that consumers reported a slowdown in expected wage gains, weakening inflation adjusted income expectations, and growing concerns that slowing economic growth would reduce the pace of job creation.
- Based on the indication from the data, it was said that inflation-adjusted personal consumption expenditures will increase 2.5% in 2016.
Monday's economic data will be limited to the NAHB Housing Market Index for April (consensus 59).
- Nasdaq Composite -1.4%
- Russell 2000 -0.4% YTD
- S&P 500: +1.8% YTD
- Dow Jones +2.7%