5 Things you need to know before the markets open in Australia and around the world.

1.Wall Street Slashes Apple Valuation by $106 Billion

Apple this week published warnings of a reduced revenue forecast for the year, following weaker than expected Chinese demand for the iPhone. In a letter to shareholders on Wednesday, Apple CEO Tim Cook said revenue is expected to be at $US84 billion for the quarter, $US7 billion lower than expected.

The news reinforced fears of a weakening Chinese market and the growing impact of trade tensions. This triggered a wider stock sell-off, with the Dow Jones Industrial Average dropping 660 points, and the broader S&P 500 index falling 2.5 per cent.

Apple’s stock dropped by 10 per cent, losing more than $US74 billion ($106 billion) in market value. Other technology companies, along with heavy-machinery companies, also saw heavy losses this week.

The US-China trade dispute is putting pressure on multinational companies’ intricate supply chains whilst also depressing demand for their products. Companies such as General Motors, Daimler and Caterpillar have all recently stated that their business has been damaged by these factors.

US government bond prices increased, pushing yields down to their lowest levels in almost a year. Investors also sought to put their money into other perceived safe-havens, such as gold and utilities.

2. Nancy Pelosi Elected as Speaker of Historically Diverse U.S. House of Representatives

California Democrat Nancy Pelosi has once again been elected as Speaker of the U.S. House of Representatives. The appointment to the third-most important role in U.S. politics came as the Democrats took control of the House after mid-term election gains.

The election comes at a time where the U.S. government remains partially shut down in a row over funds for President Donald Trump’s border wall. The new speaker has said she wants to end the shutdown, but will not support the wall.

Ms Pelosi, 78, took on the role as the House welcomed a more diverse lawmaking membership than ever before, including record numbers of women. As of Thursday, 102 women serve in the House, including a record 43 women of color.

The vast majority of these are Democrats, including the first Muslim congresswomen – Michigan’s Rashida Tlaib and Minnesota’s Ilhan Omar – and the first Native American women lawmakers – New Mexico’s Debra Haaland and Kansas’ Sharice Davids.

Mr Trump congratulated Ms Pelosi, saying: “It’s a very, very great achievement and hopefully we’re going to work together.”

The first challenge will likely be the resolution of the current U.S. government shutdown. Speaking on Thursday, Ms Pelosi stated that the Democrats would quickly pass budget legislation to provide funds to end the shutdown, but that there would be “no funding for the wall”.

3. Oil Prices Face Headwinds from Chinese Slowdown

Apple’s revenue warning this week, based in China’s economic slowdown, points to economic clouds that could affect other sectors such as oil. As the world’s largest oil importer, China’s slowdown in manufacturing could heighten investor concern about the pace of the global economy.

So far the issue seems to have been staved off, with oil prices rising on Thursday. Yet pressure will likely increase on OPEC producers to take supply out of the market in order to control price levels.

Attempts to do so will likely be met with resistance from President Trump, who has been pressuring for prices to be kept low. A potential weapon in his armory could be to threaten OPEC with antitrust legislation.

Trump has been taking credit for the recent decline in oil prices. Whether he feels he can maintain a grip on OPEC as revenues in the industry decline is a matter yet to be seen.

 

4. Trump Due for Border Wall Talks with Congress Leaders

As the partial U.S. government shutdown passed the two-week mark, President Donald Trump was scheduled to meet congressional leaders on Friday to discuss his demands for a border wall.

Approximately 800,000 federal employees, making up around one-quarter of the federal government, have been affected by the closure. Trump is withholding support for new funding until he secures US$5 billion to start building a wall on the Mexican border.

The affected federal agencies include the Justice Department, Commerce Department, and departments of Agriculture, Interior, Labor and Treasury. Visitors to many of the nation’s federal parks and some of the country’s most popular tourist attractions have been turned away.

The Democrats have argued that the wall is not a cost-effective measure of security, stating that more federal law enforcement agents are needed to intercept illegal drugs at U.S. ports of entry. Democrat support has also been shown for beefing up Coast Guard presence in the Arctic in order to deter Russia and China’s desire for the region’s natural resources.

5. China Luna Rover Lands on Far Side of the Moon, State Media Announce

In a step towards positioning itself as a leading space power, China has landed a rover on the far side of the moon. State media announced the historic first on Thursday, with the general designer of the probe Change’e 4, Sun Zezhou, announcing a “bull’s-eye” landing.

State media reported that the rover transmitted back the world’s first close-range image of the far side of the moon. Several hours after landing, the rover began its mission of exploring the surface.

The far side of the moon never faces the Earth due to the moon’s rotation. As a result, it is free from radio frequencies and required a dedicated Chinese satellite to be launched in order to relay information back to Earth. This represents a landmark in human space exploration.

The mission hopes to better understand whether plants will grow in a low-gravity environment, test for water and other resources at the poles, and study the interaction between solar winds and the moons surface.

Beijing has targeted a launch for its first Mars probe by around 2020. Focusing firstly on orbital and rover exploration, a second mission will aim to collect surface samples from the Red Planet.

Andrew Mortimer
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