Nikkei reports on the matter
Huawei is said to have told suppliers to delay production for its newest flagship smartphone as the company weighs potential supply chain disruptions from an escalating US crackdown, according to sources familiar with the situation.
Adding that Huawei has also also halted production for some components of its Mate series of phones and trimmed orders for parts in the coming quarters.
The full report can be found here
Not so good news for Huawei and tech in general but if anything, you can take this as a sign that China wouldn’t be too happy about recent US actions and will only add to tensions between the two if they are to try and resolve other issues moving forward.
How likely is deal?
Bloomberg reported that AstraZeneca contacted Gilead last month about a potential $232 bln pharma powerhouse merger. According to Jefferie analysts the merger is unlikely:
While Gilead may look cheap with its price-to-earnings ratio of 12 times and AstraZeneca may be attracted by the potential cost-cutting and decent free cashflow, Jefferies analysts said they do not view a deal as likely. “We think Gilead believes its HIV business is very underappreciated,” they said in a note, adding that the company “would prefer to build value over time and do its own tuck-in deals
Overnight oil news with a report that Russia’s Energy Minister Alexander Novak met with domestic major oil companies on Tuesday
- Discussions centred on implementing oil production curbs
- possible extension of the current level of cuts beyond June
Reuters reported the info citing unnamed sources, said no final decision was reached.
Kommersant daily, citing three sources in oil industry, said Russia may keep the current level of cuts until September
I posted a couple of days ago on measures in Russia to try to ease the impact of cuts:
- Russian President Putin has ordered bail out measures for Russia’s oil industry
Russian energy head honcho Novak:
Bloomberg report that China has dropped its economic growth target completely – there is no target set for the year.
Bloomberg citing a report to the National People’s Congress it has sighted.
In 2019 the target was 6 – 6.5% for GDP, which was hit (coming in at 6.1%)
Jibun Bank / Markit preliminary PMIs for May
Joe Hayes, Economist at IHS Markit:
- “Latest PMI data provide yet another shocking insight into the devastating impact of the COVID-19 outbreak. While the rate of decline in services activity has eased very slightly, plummeting demand for goods is finally catching up with the manufacturing sector, which posted an accelerated decline in production during May.
- “Taking the April and May PMI surveys together, we see that both are indicative of GDP falling at an annual rate in excess of 10%. It is clear that the economy is going to contract for a third successive quarter, with the hit to Q2 likely to be potentially as large as 20% on the previous year.
- “Nevertheless, the dynamics in the economy are clearly evolving. As Japan eases the state of emergency measures, the services economy can begin its gradual recovery. However, the damage to the manufacturing sector could continue to worsen as global trade conditions deteriorate and the global economic recovery is slow.”
Reuters report on their monthly Tanakn survey for May 2020:
- slump in Japan business mood deepens, hits decade lows again on coronavirus woes
Manufacturers index -44 in May vs -30 in April, falls to lowest level since June 2009
- non-manufacturers index -36 vs -23 … lowest level since Dec 2009
Manufacturers august index seen at -51
The BOJ easy money policy is firmly entrenched, such a dire outlook in Japan. The extent you use central bank policy to assist your currency view, bearish yen.
Bloomberg reports on the matter
The report says that Chinese oil demand is all but back to levels last seen before nationwide lockdown measures were imposed to curb the spread of the coronavirus outbreak, according to people with inside knowledge of the country’s energy industry.
Adding that consumption of gasoline and diesel has fully recovered as factories reopen and commuters drive rather than use public transport.
The exact level of oil demand in real time – according to executives and traders who monitor the country’s consumption – is said to be about 13 million bpd, which is just shy of the 13.4 million bpd seen around May 2019 and the 13.7 million bpd seen in December 2019.
For some context, the apparent drop in Chinese oil demand was seen at around 20%:
However true the figures are from this report, it is certainly giving hope to oil bulls that the market can recover from the severe imbalance – and perhaps more quickly than thought – that we are seeing currently. WTI crude is now up by over 8% on the day to $31.85.
Comments by Huawei rotating CEO, Guo Ping
- Still working out a response to US chip restrictions
- Business will be significantly affected by the curbs
- But confident of finding solutions soon
In case you missed it, the Huawei issue from last Friday dragged the market lower initially before equities staged yet another late comeback towards the end of the week.
This is going to be a long and drawn out saga between the two countries, so expect more measures and countermeasures to be enacted in the coming weeks/months in response.
Latest data released by Markit – 6 May 2020
Construction activity in the UK crashes to an all-time low last month as clients freeze spending plans amid the fallout from the virus outbreak and business shutdowns. The real worry here is that this could lead to long-term disruptions and cause construction activity to be more subdued for a longer period than the drop seen in April. Markit notes that:
“The rapid plunge in UK construction output during April stands out even in a month of record low PMI data for the manufacturing and service sectors. Widespread site closures and business shutdowns across the supply chain meant that vast swathes of the construction sector halted all activity in response to the COVID-19 pandemic.
“Around 86% of survey respondents reported a fall in business activity since March, while only 3% signalled an expansion. House building and commercial work were unsurprisingly the hardest hit, but civil engineering activity also fell at by far the fastest pace since the survey began in April 1997.
“A drop in construction activity of historic proportions in April looks set to be followed by a gradual reopening of sites in the coming weeks, subject to strict reviews of safety measures.
“However, the prospect of severe disruption across the supply chain will continue over the longer-term and widespread use of the government job retention scheme has been needed to cushion the impact on employment. Looking ahead, construction companies widely commented on worries about cash flow, rising operating costs and severely reduced productivity, as well as a slump in demand for new construction projects.”